The Housing Bubble

Yesterday we were discussing the Irish bailout in terms of its GDP. I figure this is as good a time as any to refresh people’s memories about this map which shows the US states labeled with countries of similar GDPs.

http://bigthink.com/ideas/21182

The map shows Ireland has a similar GDP to the state of Nevada.

I really like this map - it helps to put the problems of EU countries into perspective.

Life sucks then you get a bailout.

Check this out. In Brazil when you buy a whole chicken at about $1.35 a pound, in the giblet bag they also include the chicken feet and the head is still attached to the neck. What’s up with that? Some housing news:

From England:
Hometrack: House prices fall for fifth consecutive month in November
http://www.financemarkets.co.uk/2010/11/29/hometrack-house-prices-fall-for-fifth-consecutive-month-in-november/

According to housing intelligence group, Hometrack, house prices in England and Wales fell for the fifth consecutive month in November.

According to Hometrack, house prices fell by 0.8% on the month in November to £155,000.

China: Housing bubble risk intensifies in Hong Kong
http://www.ibtimes.com/articles/85525/20101124/housing-bubble-risk-hong-kong.htm

When asked why the government tightened its fight of the housing bubble by adding taxes, officials said that the property speculation has intensified in Hong Kong, and the administration does not rule out tabling more measures to cool the housing market….The situation has been deteriorated suddenly,…”The abundant liquidity worldwide has led to overheated speculative activities,”

From Northeast Louisiana:
Local housing market flourishes
Home values increase from last year
http://www.thenewsstar.com/article/20101129/NEWS01/11290307

“Our home values have risen each year except 2008, and even then there was only a slight decline,” said Darryl Beasley, chief executive of Coldwell Banker Group One Realty, the market’s largest residential real estate company….Ouachita Parish’s housing market was ranked in the top 10 buyers’ markets in the United States for 2010 by Housing Predictor.

2009 average home price: $143, 422
2010 average home price: $144,258
2009 average days on the market: 126
2010 average days on the market: 125

Canada: No sign Canada has a housing bubble — Flaherty (Reuters) -
http://www.reuters.com/article/idUSOLANME65120101123

There is no sign that Canada has a housing bubble, Finance Minister Jim Flaherty said on Tuesday, dismissing the idea the country was facing the same kind of property crisis as Ireland.

“The evidence is not there that Canada has a housing bubble. In fact, the evidence with respect to affordability of mortgages in Canada is solid and we have a stable market,” he told the House of Commons finance committee.

“It’s a long, long stretch to compare our housing market with that of Ireland,”

Posted yesterday:

Iceland Is No Ireland as State Free of Bank Debt, Grimsson Says

http://www.bloomberg.com/news/2010-11-26/iceland-faring-much-better-after-permitting-banks-to-fail-grimsson-says.html

Iceland’s President Olafur R. Grimsson said his country is better off than Ireland thanks to the government’s decision to allow the banks to fail two years ago and because the krona could be devalued.

“The difference is that in Iceland we allowed the banks to fail,” Grimsson said in an interview with Bloomberg Television’s Mark Barton today. “These were private banks and we didn’t pump money into them in order to keep them going; the state did not shoulder the responsibility of the failed private banks.”

“How far can we ask ordinary people — farmers and fishermen and teachers and doctors and nurses — to shoulder the responsibility of failed private banks,” said Grimsson. “That question, which has been at the core of the Icesave issue, will now be the burning issue in many European countries.”

Accept Losses

Good Morning & back to work
Anyone have on- the- ground RE info on Kansas City Northland (Parkville, Kearney etc)

Foreclosures/Shorts/employment info?

Thanks!

Some Arizona homeowners still owe after short sale
Some former homeowners unaware that debt may linger

by Catherine Reagor - Nov. 26, 2010 12:00 AM
The Arizona Republic

Short sales allow people to sell their homes for less then they owe on their mortgage to avoid foreclosure. In Arizona, though, some former homeowners are finding they are still in debt to their lenders, even after completing a short sale.

Short sales, unlike foreclosures, are not typically covered by Arizona’s anti-deficiency law.

That law protects most distressed homeowners if lenders foreclose. It bars lenders from seeking payment from the borrower if the home doesn’t sell for as much as the amount owed on the mortgage.

Some lenders apply the same protection to borrowers who complete a short sale.

But a growing number of former homeowners in metro Phoenix are receiving unwelcome calls and letters from lenders or collection agencies telling them they still owe on mortgages for houses they no longer own.

http://www.azcentral.com/arizonarepublic/news/articles/2010/11/26/20101126arizona-homeowners-short-sale.html - 68k

Hey Fwank, Hey Dodd what happened to AFFORDABLE HOUSING?

Washington area housing costs eat up burdensome share of resident budgets

By Carol Morello and Dan Keating
Washington Post Staff Writers
Sunday, November 28, 2010; 12:47 AM

One in five renters and one in seven homeowners in the Washington area spend more than half their income on housing, according to census figures, a proportion that housing experts consider a severe burden.

http://www.washingtonpost.com/wp-dyn/content/article/2010/11/27/AR2010112702782.html -

Twin Cities metro area experiencing largest home sales slump in nation

By Brad Allen | Published Wed, Nov 24 2010 10:31 am

The Twin Cities’ 40.7 percent drop in existing home sales for October gives it the unwelcome distinction of posting the largest year-over-year volume drop among major metropolitan areas, according to the National Association of Realtors.

http://www.minnpost.com/bradallen/2010/11/24/23677/twin_cities_metro_area_experiencing_largest_

The Global DOW seemed headed for 2K, but then was beaten back. Could it be due to the Korean tensions, Irish bailout, or never-ending global real estate market bust?

Who knows?

Couple lose out on home; Realtors face ethics case

By JAMES ELI SHIFFER, Star Tribune
Last update: November 27, 2010 - 12:30 PM

From the moment Erica and Mike Lenzen saw a foreclosed twin home for sale in Brooklyn Park, they thought it should be theirs. They even put in a no-strings-attached offer $8,000 above the asking price.

But the home was sold to someone else.

The Lenzens got suspicious when they learned the house sold for $2,000 less than their offer. When Mike Lenzen tracked down the bank representative in charge of selling the property, she told him she had no record of receiving the couple’s offer.

Despite all the regulation and disclosure, buying a home can be a secretive process. Buyers are largely at the mercy of what sellers and their agents tell them. It’s especially mysterious these days, as foreclosed homes flood the market and the banks that own them make sales decisions that sometimes defy explanation.

http://www.startribune.com/investigators/110890349.html - 102k -

Residents Call on Wells Fargo to Freeze Foreclosures

Half the homes in Richmond’s 94801 zip code are in foreclosure, or getting there

By Julia Landau, Richmond Confidential on November 22, 2010 - 12:21 p.m. PST

RICHMOND–Local community activists gathered in front of Wells Fargo on Macdonald Avenue on Friday to protest that bank’s complicity in the national and local mortgage morass.

As security guards looked on, 25 Richmond residents stood on the sidewalk, chanting “Wells Fargo, stop stealing our homes!” and holding signs that said “55,000 thefts and counting.”

http://www.baycitizen.org/housing/story/residents-call-wells-fargo-freeze/ - 52k -

West Brighton woman says Bank of America ‘turned the tables’ on loan modification
Published: Sunday, November 28, 2010, 9:18 AM Updated: Sunday, November 28, 2010, 9:24 AM

STATEN ISLAND, N.Y. — Facing a burdensome mortgage and state foreclosure proceedings, a New Brighton woman believed a federal loan modification program was the answer to her prayers.

The Home Affordable Modification Program (HAMP) made Marie Freeman’s monthly payments on her $418,000 mortgage more manageable, and gave her hope that she could keep her home.

But in a class-action suit recently filed in Brooklyn federal court, Ms. Freeman and others allege the Bank of America turned the tables on them.

Despite making the appropriate trial payments, the bank’s subsidiary denied her a permanent loan modification, Ms. Freeman contends. That violated HAMP rules and put her back at square one.

Now, Ms. Freeman says she is living in limbo, and fears her home of more than 10 years will be sold at foreclosure.

“Our client did everything by the book, only to have her modification improperly denied after her file was transferred from one Bank of America [loan] servicing subsidiary to another,” said Stephen Rodd, a private lawyer, working pro bono for Ms. Freeman.

“We believe she may be one of thousands of homeowners across the United States who have fallen victim to Bank of America’s deceptive practices.”

At least 12 class-action cases making similar allegations have been filed against Bank of America nationwide, said Adam H. Cohen, a lawyer for the non-profit MFY Legal Services Inc., which also is representing Ms. Freeman.
…

Some “bank guarantees” are no guarantee after all!

Luckily, it’s “turtles all the way down” in the Eurozone.

The Irish Times - Monday, November 29, 2010
From bank guaranteeto EU-IMF deal: two years of economic crisis

A timeline of events

2008

SEPT 30th: Government introduces the bank guarantee covering liabilities of €440 billion across the Irish banks and building societies – Allied Irish Banks, Bank of Ireland, Anglo Irish Bank, Irish Life Permanent, the Educational Building Society and Irish Nationwide Building Society.

DEC 21st: Government agrees to inject €5.5 billion into the three main banks – Allied Irish Banks, Bank of Ireland and Anglo Irish Bank – but no funds are provided.
…

Promising development noted in the San Diego housing market:

Home prices are no longer going down; rather, affordability, and prices, are increasing.

San Diego housing affordability up slightly in 3rd quarter
But area still ranks as 12th least-affordable market, builders group says

By Roger Showley, UNION-TRIBUNE

Thursday, November 25, 2010 at 10:39 a.m.

Low interest rates and stable incomes improved San Diego housing affordability in the third quarter, even with a slight uptick in prices, according to National Association of Home Builders.
…

Palm Beach County spending $9 million on new vehicles, despite budget crunch

By Andy Reid
Sun Sentinel
Posted: 11:01 p.m. Sunday, Nov. 28, 2010

Budget woes that prompted back-to-back years of increased property tax rates haven’t stopped Palm Beach County government from going car shopping.

The county plans to spend about $9 million over the next year to update its fleet of vehicles and heavy equipment, which includes everything from sedans and SUVs to bulldozers and lawn mowers.

Plans call for buying 208 vehicles, most of those to replace cars, trucks and work vehicles county officials contend are past their prime. That total doesn’t include the Sheriff’s Office and Fire-Rescue, which purchase vehicles more often because of heavy use

Love THE COMMENTS

Hey still waiting for the Post to do an in depth article on the number of mega-SUVs and sedans being driven to and from work by the civilian employees at the Palm Beach County Sheriff’s Office.
BillyBob
11:59 PM, 11/28/2010

..and now we see why PBC needed those tax increases that they stuck us with the last two years.

What a bunch of pigs!
Eric
8:03 AM, 11/29/2010 REPORT ABUSE Would someone please

pass the vaseline!!!!
L Grover
7:59 AM, 11/29/2010

For Tottering States, Bankruptcy Could Be the Answer

It’s no mystery why these state governments — and those of New York and New Jersey, as well — are in such bad fiscal shape. These are the parts of America where the public employee unions have been calling the shots, insisting on expanded payrolls, ever higher pay, hugely generous fringe benefits and utterly unsustainable pension promises.

The prospect is that the bond market will quit financing California and Illinois long before the federal government. It may already be happening. Earlier this month, California could sell only $6 billion of $10 billion revenue anticipation notes it put on the market.

So it’s entirely possible that some state government — California and Illinois, facing $25 billion and $15 billion deficits, are likely suspects — will be coming to Washington some time in the next two years in search of a bailout. The Obama administration may be sympathetic. It’s channeled stimulus money to states and TARP money to General Motors and Chrysler in large part to bail out its labor union allies.

How to avoid this scenario? University of Pennsylvania law professor David Skeel, writing in The Weekly Standard, suggests that Congress pass a law allowing states to go bankrupt.

Skeel, a bankruptcy expert, notes that a Depression-era statute allows local governments to go into bankruptcy. Some have done so: Orange County, Calif., in 1994, Vallejo, Calif., in 2008. Others — perhaps a dozen small municipalities in Michigan — are headed that way.

———-

While in the shower this morning I pondered the similarities between our own social-political-economic system and Orwell’s Ingsoc/Oceania:

1) We are fighting an endless war in Asia
2) We have a boogeyman (Bin Laden vs. Goldstein)
3) The government fudges the economic numbers.
4) That standard of living for the proles and the “outside party members” continues to deteriorate while the government insists everything is dandy.
5) We eat unhealthy synthetic food.
6) We are steadily losing our privacy
7) Doublethink is persuavsive (Patriot Act, Debt is Wealth, etc.)

Any others?

Since 2006 when President Felipe Calerdon took office in Mexico, more than 30,000 people have been murdered or killed in the deadly drug war that wages just across America’s southern border.

That figure is staggering, but it’s not news. The “big surprise” could actually come next year says, Chris Edmonds, managing partner at Enerecap Partners, an energy-focused boutique research and banking firm. “U.S. troops [might be] committed to Mexico to try to help” quell the raging violence.

Most of the country has escaped the bloodshed except for considerable swaths of Northern Mexico, notably the areas closest to the U.S., where lawlessness is now the law of the land. A recent Wall Street Journal article details how three mayors have fled to Texas and are governing from afar.

Politicians are not the only ones escaping to the U.S., “leading families [are] fleeing extortion and threats of kidnapping,” The Wall Street Journal explains.

Take a look at your future America, where wealth and power are concentrated and everyone else get’s to eat cake. Drugs are just the tip of the iceberg.

It’s almost 2011. The housing bubble was a long time ago.

And still, the reprecussions are driving the economy all over the world, with the Irish crisis the latest manifestation. It seems to go on forever.

When do you think the housing bust and its consequences will finally be over?

Sheriff resigns, confessing online sales to help stave off foreclosure Solano admits theft
Geoff Grammer and Bruce Krasnow | The New Mexican
Posted: Wednesday, November 24, 2010

Stating he is “like many Americans, caught up in financial crisis and facing foreclosure on his home, Santa Fe County Sheriff Greg Solano on Wednesday owned up to stealing county property and selling items on eBay for personal profit.

http://www.santafenewmexican.com/Local%20News/Sheriff-Solano-resigns–admits-he-misused-office-

Suppose public employee pension benefits were granted which turned out to be so generous their cost sunk a city’s operating budget. Could such benefits later be legally revoked?

I’m wondering which Wall Street banks would take the hit if San Diego declared bankruptcy?

San Diego’s bankruptcy debate mirrored in South
Despite push for Chapter 9 reorganization, San Diego officials won’t go there

By Craig Gustafson

Originally published November 28, 2010 at 9:15 p.m., updated November 28, 2010 at 9:17 p.m.

City leaders approve significant pay and benefit increases for workers without identifying a way to pay for them. A mayor leaves office under duress. A switch to a strong-mayor form of government. A crushing pension deficit that threatens to overwhelm city finances.

All of the above describe the city of San Diego’s fiscal crisis, but they also describe the circumstances that befell Prichard, a suburb of Mobile, Ala.

The end of Prichard’s tale hasn’t yet been written although the city has filed for bankruptcy twice in a 10-year period. The city’s latest move is of particular interest to some in San Diego because Prichard officials are trying to do something that has never been done anywhere in the United States: Reduce vested pension benefits through municipal bankruptcy.

Nearly every article written about San Diego’s pension woes leads at least a few readers to question why the city doesn’t declare bankruptcy and strip workers of benefits that many residents consider to be too generous.
…
Many states, including California, have laws that prohibit the revocation of pension benefits, but that may not matter in a federal bankruptcy proceeding. In the case of Vallejo, a San Francisco Bay-area city that filed for bankruptcy in 2008, a judge ruled that union contracts could be changed during the proceedings because the benefits of bankruptcy outweigh state law.

Pat Shea, a lawyer who worked on Orange County’s 1994 bankruptcy case, said he’s disappointed that San Diego isn’t seriously considering bankruptcy as an option.

“You can’t approach the problem by saying I need to see someone else do it first,” said Shea, who ran for mayor in 2005 on a pro-bankruptcy platform. “The reality is that when you have these big issues that you have to deal with, sometimes you have to go first.”

Former City Attorney Michael Aguirre is advocating for bankruptcy because he says the city could eliminate roughly $900 million in pension benefits by entering municipal bankruptcy. While in office, Aguirre challenged those benefits, which he said were granted illegally by city leaders, but lost in court.

“If we submit a reorganization plan to the bankruptcy court, we do not have to give away any of our assets and it shifts the burden to the employee and the pensioners to show that they’re entitled to the illegal benefits,” Aguirre said. “It immediately solves your problem because you don’t have to make the full pension payment next year.”

San Diego has a $73 million budget deficit for the year that begins July 1 and pension costs are the key driver of the city’s financial woes.

The annual pension payment — which is mostly paid for out of the city’s $1.1 billion operating budget — is expected to balloon from $229 million this year to $318 million in 2015 to $512 million by 2025. Those payments pay down the overall pension debt.
…
MUNICIPAL BANKRUPTCY

Requirement: The city must be insolvent and unable to agree to deals with creditors.

How it works: The city would likely hire an outside legal team to handle the case. A reorganization plan would be developed by the city that would get finances out of the red. It would likely include what is called “shared sacrifice” under which creditors would get some but not all of the money owed. In many cases, creditors agree to terms with the city to ensure they don’t lose all of what is owed. A judge would decide disputes between the city and a creditor.

What won’t happen: The city can’t be forced to liquidate assets and the judge is prohibited from interfering with the city’s day-to-day business.

“When do you think the housing bust and its consequences will finally be over/”

When, if ever, the greedy financial, corporate and political PTB overlArds decide to allow All-American j6pac to go back to work in THIS country at a decent wage, manufacturing or producing something of use, need or value to be sold at a reasonable price with a reasonable profit that doesn’t have china or India stamped on IT!.

In other words…Don’t hold your breath because it probably won’t happen in our lifetime.

Scam Diego
Proposition D Thumbed Down Overwhelmingly
By Don Bauder | Posted November 2, 2010, 11:57 p.m.

With half the vote counted, the no vote on Proposition D, the proposal to raise the sales tax, was 62.33% last night (Nov. 2). The yes vote was 37.67%. Clearly, San Diegans are having nothing of the proposal.
…
Former City Attorney Mike Aguirre has come out with specific plans, focusing particularly on excessive pensions. Driving the $7.2 billion pension debt are the Deferred Retirement Option Plan (DROP), the double-dipping taxpayer ripoff; free pension credits, and retroactive benefits. Aguirre would end DROP, eliminate free pension benefits and remove retroactive benefits. He believes citizens should have a right to vote on the pension debt lawsuit that he pushed when in office, and the City should use the bankruptcy court’s power to adjust debt.

Shares in Ireland’s banks rose sharply as markets were encouraged by the bailout’s immediate focus on injecting euro10 billion into the cash-strapped lenders out of a total of euro67.5 billion ($89 billion) in loans.

But the Irish were shocked by a key condition for the rescue — that the government use euro17.5 billion of its own cash and pension reserves to shore up its public finances, which have been overwhelmed by recession and exceptional costs of a runaway bank-bailout effort.

Opposition leaders and economists warned that the EU-IMF credit line’s average interest rate of 5.8 percent would be too high to repay. They also questioned why senior bondholders of Ireland’s struggling banks — chiefly other banks in Britain, Germany and the U.S. — still weren’t being asked to bear some costs.

Cheap dollar policy shouldn’t effect Americans as they buy and sell in dollars……….

“Oil’s return to $100 has become the biggest bet in the crude options market.

The price of options to buy December 2011 futures at $100 a barrel jumped 14 percent on Nov. 24, the largest one-day gain in three months, according to data compiled by Bloomberg. So-called open interest for the contract has risen 51 percent this year to 45,424 lots, the highest for any crude option on the New York Mercantile Exchange.

“The tug-of-war in oil prices continues as the short-term debt market concerns obscure improving oil-market fundamentals,” Lawrence Eagles, global head of commodities research at JPMorgan Chase & Co. in New York, said in a Nov. 26 report.

While oil has climbed this year, it has lagged behind the 59 percent increase in the Standard & Poor’s GSCI Index of 24 commodities. A gain to $100 would also trail the record $147.27 a barrel reached on July 11, 2008.

Even if the U.S. recovery falters, investors are banking on China sustaining crude prices. The world’s fastest-growing oil user will consume 9.6 million barrels a day in 2011, second only to the 19.1 million barrels a day to be used in the U.S., according to the Paris-based International Energy Agency. China’s oil demand will rise 4.2 percent next year while that of the U.S. will decline 0.2 percent, the IEA said.

“Global oil demand is set to hit a new record in 2011,” said Francisco Blanch, New York-based head of commodities at Bank of America Merrill Lynch. “The underlying economic picture is still positive. We are still looking for economic growth because of quantitative easing and accelerating growth in emerging markets.”

“In terms oil markets, I believe the age of cheap oil is over,” IEA Chief Economist Fatih Birol said at a conference in Budapest on Nov. 26. “There may be zigzags in the future according to the economy, this and that, but the general trend is we will see higher oil prices.”

Listen! That sound you hear in the background is the sound of the European Union and Euro collapsing.

That is not a good thing for us either.

Used home prices here will continue going down however. Too much supply. A good thing for renters.

People are not focused enough on the rise in commodity prices…and what that does in emerging-market economies,” says Ruchir Sharma, head of global emerging-markets equities at Morgan Stanley Investment Management. “Beyond a certain point, a rise in commodity prices is not conducive to emerging markets.”

In particular, Mr. Sharma is concerned about oil prices, which finished last week just south of $84 a barrel. “If the price of oil were to get back up to $90 per barrel, I would be turning more cautious,” he says.

One conundrum for investors is how more aggressive tightening would play out in the currency markets. Most investors have been operating on the assumption that with the Fed keeping interest rates at zero for the foreseeable future, any moves by emerging-market countries to raise interest rates would attract even more money from yield-hungry investors.

This is an especially important question for investors who have been piling in to emerging-market bonds priced in local currencies. Many argue it’s a no-lose situation, where even if bond prices fall because of inflation pressures, rising emerging-market currencies will still provide them a profit.

But since China tightened in October, the dollar has been on the upswing, albeit with help from concerns about the European debt crisis. In the current market environment, however, higher interest rates in China have been equated with risk aversion, and thus a stronger dollar. The U.S. dollar index is up roughly 4% since mid-October.

Traders say that until expectations for emerging-market rate increases become more widespread, they could continue to prompt safe-haven buying of U.S. dollars.

(Hwy watched a parade of the “new shiny” Fire-SUV vehicles getting the “Supreme-Clean” treatment at an upscale car wash last week in “The OC”, you’d think with all those strung together 24+24+24 O.T. hour @ x1.5 or x2 (low pay scale) salary shifts, they find the time to wash their own vehicles, but if you have 150 million $$$$$$$$$ sitting in a taxpayer provided cash fund, using $39.00 (per vehicle) of taxpayer money might seem to be much ado about nothing…)

Some O.C. firefighters live out of state

By SALVADOR HERNANDEZ
THE ORANGE COUNTY REGISTER

“OCFA Engineer Lloyd Pinel, for example, would have to wait for the next available flight from Third Lake, Ill., The 21-year veteran’s home is a 30-minute drive from Lake Michigan, but more than a three-hour flight from his station in Buena Park.

Four of them, however, earned more than $50,000 in overtime, ranking among the top 100 of OT . They included Engineers Lloyd Pinel and Jeffrey Pederson, and Captains Timothy Gogerty and Jeffrey Hoey.”

With $150 million in the bank, why is fire authority axing firefighters?:
April 2nd, 2009, by Teri Sforza, Register staff writer

Yes. Ok. Well. (Gulp.)

That, however, is a story for another time.

Obama proposes two-year pay freeze for federal workers

The pay freeze, which does not apply to the military, is part of Obama’s effort to contain the $1.3-trillion federal deficit, the White House says.

By Christi Parsons and Lisa Mascaro, Tribune Washington Bureau
November 29, 2010|9:13 a.m.

WASHINGTON — President Obama on Monday morning said that he wants to freeze pay for federal employees for the next two years, a move the administration says would save more than $5 billion between now and 2012.

The freeze would not apply to military personnel but rather to all other civilian employees on the federal payroll. Congress would have to approve the proposal in order for it to take effect.

The plan is part of Obama’s effort to contain the $1.3-trillion federal deficit, and will be followed by more proposals for spending reductions over the next few months, White House communications director Dan Pfeiffer said Monday morning.

The president’s announcement lands as a pre-emptive strike on congressional Republicans, who are preparing a plan to slash federal pay and workforce next year. It comes in advance of a meeting between the Democratic president and GOP leaders at the White House on Tuesday.
…

I just love a VP of a temp agency (who is on salary) talking in a video about a “flexible workforce” and its benefits to the employer’s strategy, while he has a nice fat weekly paycheck with bennies, and is secure (for now). Does this p o s have an ounce of morals, and has he even been displaced? Does he believe his words? I say, put him out on the streets and see how he feels. 30 somethings with a corporate attitude bug me. I think he’s dead weight too. Just needed to vent.

Fannie Mae: Americans Increasingly Negative on Housing Market
By Michael Kraus on November 29, 2010

The Third Quarter 2010 Fannie Mae National Housing Survey was released last week. The results showed that many Americans “are less certain that the housing market has bottomed, and continue to be wary of buying a home”. With a steady stream of negative news about the housing market, this should not be particularly surprising. From the survey:

“Fewer Americans think it is a good time to buy a home (68 percent, down 2 percentage points since June) and more Americans think it is a bad time to buy (29 percent, up 3 percentage points). Similar to the last survey, an overwhelming majority of Americans believe it is a bad time to sell a home (85 percent, up 2 percentage points since June)”.

…

“Tiny house movement thrives amid real estate bust”

“GRATON, Calif. – As Americans downsize in the aftermath of a colossal real estate bust, at least one tiny corner of the housing market appears to be thriving.

To save money or simplify their lives, a small but growing number of Americans are buying or building homes that could fit inside many people’s living rooms, according to entrepreneurs in the small house industry.”

http://news.yahoo.com/s/ap/us_tiny_houses;_ylt=A0LEarO3AfRMUt8AcVqs0NUE;_ylu=X3oDMTNpZXNjam1oBGFzc2V0A2FwLzIwMTAxMTI5L3VzX3RpbnlfaG91c2VzBGNjb2RlA21vc3Rwb3B1bGFyBGNwb3MDOARwb3MDNQRwdANob21lX2Nva2UEc2VjA3luX2hlYWRsaW5lX2xpc3QEc2xrA3Rpbnlob3VzZW1vdg–

by Danial Gross

Over the weekend, Ireland, the European Union and the International Monetary Fund hammered out an expensive bailout for the erstwhile Celtic Tiger. The EU, the European Commission, and the IMF would each kick in $29.8 billion in loans, funds which would allow Ireland to continue to pay interest on government debt and on bonds issued by failed banks, which Irish taxpayers now support. The bailout came at a heavy price. The loans carry a blended interest rate of about 5.8 percent, and as a condition for receiving the funds, Ireland had to commit “to use 17.5 billion euros ($23 billion) of its own cash and pension reserves to shore up its public finances,” as the Associated Press reported. That’s on top of 15 billion euros in austerity efforts introduced last week.

The parties also laid down new makers. Starting in 2013, a permanent bailout fund would permit bankrupt countries to restructure their debts, a scenario in which bondholders might be forced to accept less than face value for their investments. This provision is seen as a victory for Germany and its Chancellor, Angela Merkel. The largest economy in Europe has been a reluctant and frequently obstreperous backer of the bailouts of Greece and Ireland. Its citizenry has been aghast at the thought of having to help fund the financial profligacy of others. As Merkel put it on October 31, “We must keep in mind the feelings of our people, who have a justified desire to see that private investors are also on the hook, and not just taxpayers.”

Germany has come through the Great Recession of 2008-2009 in much better shape than many of its neighbors, due to smart fiscal and labor policies (German companies had employees share jobs when demand dried up rather than firing them en masse), and due to the fact that its economy relies more on high-value exports than it does on domestic consumption. Now Germany finds itself in a strange place. Its usually cautious corporate chieftains are highly optimistic about the future, its political leadership occupies the moral high ground, and it is asserting itself as the leader of Europe.

Which has me wondering: How do you say hypocrisy in German?

During the boom years, Germany’s banking system was hardly a model of mittel-European probity. The country endured several expensive bank failures and bailouts , including West LB, IKB, Hypo Real Estate, and Sachsen LB. Now, Chancellor Merkel, Germany’s banking system, and the German citizens are among the most significant beneficiaries of the bailout of Ireland — and of the potential bailouts to come of Portugal and Spain.

Holder Confirms Justice Department Investigating Wall Street
By Sara Forden and Jeff Bliss - Nov 29, 2010 11:52 AM PT

U.S. Attorney General Eric Holder confirmed today that the Justice Department is conducting a criminal investigation related to trading on Wall Street.

In response to questions about the probe of insider trading, Holder said an “investigation is ongoing” and described it as “very serious.” Holder was questioned at a news conference at the Justice Department in Washington.

“I don’t want to get into the details,” he said. The investigation is being conducted by the U.S. attorney’s office in New York, he said.
…

The Bank of International Settlements is a great repository of data on who owes what to whom. This chart documents precisely how much exposure banks in different countries have to the public and private debt of other countries. With the biggest economy in the Eurozone, it’s not surprising that Germany’s banks are intricately involved with their neighbors’ economies. In fact, it’s clear that many of the biggest beneficiaries of the deals through which Greece and Ireland accessed international lines of credit to ensure that bondholders wouldn’t suffer unduly are. . .German. (Here’s historical data on German banks’ exposure to debt of other countries.)

So in December of 2009, Germany had $45 billion in exposure to Greek debt; that number fell to about $36 billion in June 2010. Germany’s exposure to Irish debt has fallen from $193 billion in September 2009 to $139 billion in June 2010. That’s second only to the U.K., whose banks own $148 billion in Irish debt. U.S. banks, by contrast, had $68.7 billion in Irish debt in June. German banks, it turns out, are also huge lenders to Spain ($182 billion as of June 2010). In total, Germany’s exposure to the troubled so-called PIGS (Portugal, Ireland, Greece, and Spain) is $394 billion, or about 13 percent of the banking system’s $3.1 trillion in foreign exposure. That’s larger in absolute and relative terms than the amount of debt held in the PIGS by France ($308 billion, or 9.3 percent of the total foreign exposure), the U.K. ($292 billion, or 7.6 percent), or the U.S. ($126.5 billion, or 4.5 percent).

The cash being provided by Irish taxpayers, the IMF, and European monetary authorities isn’t bailing out bank shareholders, and it’s not being used to help Irish citizens who took out mortgages they can no longer afford. Rather, those Euros will be deployed to help spare senior bondholders on Irish debt from suffering harm. Were Ireland (or Greece) to restructure its debt rather than seek international bailouts, the German banks that own a disproportionate share of those bonds would have to write down the value of their assets, raise new capital or, in a pinch, seek help from their own government.

For Merkel and the German political establishment, it’s the best of both worlds. They build domestic credibility by talking tough about bailouts to Euro-strugglers while insulating their banks (and the electorate) from further pain.

I picked the wrong day to quit drinkin’!

Reuters Breakingviews
Europe’s Crisis of Liquidity
By HUGO DIXON
Published: November 29, 2010
…
It is about time policy makers did something about financing structures that invite liquidity problems. And they have: the new Basel III bank rules do, finally, address the issue as well as toughen up solvency standards. But no action is required until 2018 — and, yes, that year is not a typo.

Some governments, notably Britain, France and Germany, are planning to impose higher taxes on banks that rely more heavily on short-term “hot” money to finance themselves. This is a good idea, as it gives banks an incentive to secure more stable financing. The snag is that this initiative has been diluted because it will not be global. A White House plan for such a levy in the United States seems to have been killed by Congress.

In the meantime, there will be more crises and bailouts. And banks, governments and their creditors will draw the logical conclusion: it still pays to be foolish.

Dumb question of the day:

Will 2011 be the year America collectively leaves the denial phase of the housing bubble stages of grief and moves on to the anger phase?

(This is my personal hunch…)

I don’t know man…….most of the people I know are still in denial.

A lot of people in Japan believed they were winning the war, right up to the time the B-29s started dropping incendiaries…..

Could this be the main point of the big chill — to make sure Wall Street always keeps the upper hand on its regulators?

I sorta doubt it, as bankster pay is astronomically higher than gubmint pay. Hence I suspect paying gubmint financial regulators marginally less can’t have much of a marginal effect on recruiting trends.

Bull/Bear Report
Nov 29 2010
Obama’s Pay-Freeze Proposal Could Ice Regulator Recruiting
By Kyle Stock

President Obama’s plan to freeze government salaries for two years could hamstring the efforts of the SEC and other regulators trying to lure top talent from Wall Street.
…

oops

NEW YORK (AP) — The Kardashian sisters are seeking to cut ties with a venture that sold prepaid debit cards under their name after coming under attack for the card’s high fees.

The card, which launched three weeks ago, was aimed at young adults, the same group that watches the sisters’ hit cable TV show “Keeping Up With the Kardashians.”

Just to buy the card and use it costs $59.95 for six months, or $99.95 for 12 months. That does not include any money on the card. The person buying the card must add money onto it.

The initial feels were just the start. After those six or 12 months are up, it costs $7.95 a month to keep using the card. Users have to pay $1.50 to withdraw cash from an ATM, and $1 to check their balance. Talking to a customer representative on the phone costs $1.50 for each call, and canceling the card costs $6.

Losing the card results in a charge of $9.95. If the loss is reported within two days, then losses are limited to $50. But if the loss or theft is not reported, and the issuer believes the user knew it was lost or stolen, then losses could be as high as $500, according to the terms and conditions on the Kardashian Kard website.

It sounds like Wikileaks is going to release documents related to a large U.S. bank sometime early next year.

But nobody is saying which bank is involved - I can just imagine the scrambling behind the scenes at all of the large banks while they try and figure out whether they are the target of the leaks…

First WikiLeaks spilled the guts of government. Next up: The private sector, starting with one major American bank.

In an exclusive interview earlier this month, WikiLeaks founder Julian Assange told Forbes that his whistleblower site will release tens of thousands of documents from a major U.S. financial firm in early 2011. Assange wouldn’t say exactly what date, what bank, or what documents, but he compared the coming release to the emails that emerged in the Enron trial, a comprehensive look at a corporation’s bad behavior.

“It will give a true and representative insight into how banks behave at the executive level in a way that will stimulate investigations and reforms,

I have a new economic “model” — ya ready?

REAL ESTATE ALWAYS GOES UP.

* ECONOMY
* NOVEMBER 30, 2010

Economists’ Grail: A Post-Crash Model
By MARK WHITEHOUSE

Physicist Doyne Farmer thinks we should analyze the economy the way we do epidemics and traffic.

Psychoanalyst David Tuckett believes the key to markets’ gyrations can be found in the works of Sigmund Freud.

Economist Roman Frydman thinks we can never forecast the economy with any accuracy.

Disparate as their ideas may seem, all three are grappling with a riddle that they hope will catalyze a revolution in economics: How can we understand a world that has proven far more complex than the most advanced economic models assumed?

The question is far from academic. For decades, most economists, including the world’s most powerful central bankers, have supposed that people are rational enough, and the working of markets smooth enough, that the whole economy can be reduced to a handful of equations. They assemble the equations into mathematical models that attempt to mimic the behavior of the economy. From Washington to Frankfurt to Tokyo, the models inform crucial decisions about everything from the right level of interest rates to how to regulate banks.

In the wake of a financial crisis and punishing recession that the models failed to capture, a growing number of economists are beginning to question the intellectual foundations on which the models are built. Researchers, some of whom spent years on the academic margins, are offering up a barrage of ideas that they hope could form the building blocks of a new paradigm.

“We’re in the ‘let a thousand flowers bloom’ stage,” says Robert Johnson, president of the Institute for New Economic Thinking, launched last year with $50 million from financier George Soros, a big donor to liberal causes who has long been a vocal critic of mainstream economics. The institute so far has approved funding for more than 27 projects, including efforts by Messrs. Farmer and Tuckett aimed at developing new ways to model the economy.
…

Gravity is generally more on for the Global DOW when the U.S. market is closed than otherwise.

Fund tsunami
Toil and trouble
QE bakes
Another bubble.

Mark Hulbert

Nov. 29, 2010, 11:01 p.m. EST
Is the tide turning?
Commentary: 99-week streak of bond fund inflows has come to end
By Mark Hulbert, MarketWatch

CHAPEL HILL, NC (MarketWatch) — Is the Great Bond Bull Market finally coming to an end?

Countless commentators (myself included) in recent months have concluded that it has, though in retrospect we’ve at best been premature — if not outright wrong.

But there is the distinct possibility that this time may be different: The tide appears to be turning in the huge flow of funds into bond mutual funds and ETFs.

That fund inflow — better described as a tsunami — has been widely noted over the past couple of years, of course, during which investors exhibited an insatiable appetite for bond funds, consistently transferring more money into those funds than they withdrew.

In fact, according to TrimTabs Investment Research, a quantitative research firm, the sustained period of fund inflows into bond funds began nearly two years ago, in mid-December of 2008. The only other occasion in recent stock market history that even comes close to matching this, according to Vincent Deluard, Executive Vice President at Trim Tabs, is the sustained period of fund flows into stock mutual funds in the late 1990s leading up to the bursting of the Internet bubble.

That’s an ominous parallel, of course.
…

I don’t know if it has been widely distributed, but the wage/house price ratios in Metro DC are still insane.

Next budget ceiling vote comes up in February. Wonder what will happen if Congress just sez NO?

Last week Prez O announced a 2 year Federal wage freeze. That will of course reverberate through the contractor community. We’ll probably go one better: THREE years to demonstrate our alliegiance and support for the hand that feeds us. O joy!

Don’t get me wrong, I’m glad I have a jobbe at ALL. Much less something that’s relatively decent and thinky. Gladder yet that I got rid of debt overhang. But my margins are being squeezed, as they say.

Interesting times.

Is it true that San Diego foreclosure auctions have slowed to a “trickle” of 300 a day? On an annual basis, that would be, like, 300*50*5 = 75,000 homes auctioned. Given that the MLS for San Diego county only shows 10,010 homes at the moment (according to Redfin dot com), and turnover is slower than paint dries, is it safe to say that courthouse step auctions are where the current action is in the market?

Foreclosure Fiasco
Foreclosure scandal impact: Sales dry up
By Les Christie, staff writer
November 29, 2010: 5:12 AM ET

NEW YORK (CNNMoney dot com) — Big banks are having trouble restarting the foreclosure process after this fall’s “robo-signing” scandal, and the once booming market for foreclosed homes has been hit hard as a result.

According to ForeclosureRadar, the number of properties coming to auction in hard-hit western states — Arizona, California and Nevada — has dropped more than 30%.

In San Diego, according to broker Scott Cheng of Cheng Realty, who puts investors together with foreclosed properties, the number of auctions scheduled has fallen from 500 a day, to 300. “That part of my business has dried up,” Cheng said. “A lot of my investors have stopped looking.”

Cheng used to be able to find about three or four suitable homes a month for investors looking for a bargain. Now, he hasn’t done one of these deals since August.

“The ones who are really upset are the investors, who buy on the courthouse steps,” said Kevin Berman, a broker with Bankers Realty Services in Fort Lauderdale, Fla. “There used to be sometimes 700 sales a day. Now there are like, seven.”

In September, several banks — including Ally, Bank of America, and JPMorgan Chase — acknowledged problems with their foreclosure procedures. Employees had been signing as many as several hundred documents a day in which they sometimes attested to facts that they had no personal knowledge of, calling into question the legitimacy of the foreclosures. (See “I was a Robo-signer“)
…

Foreclosure Fiasco
I was a robo-signer
By Tami Luhby, senior writerOctober 28, 2010: 8:47 PM ET

NEW YORK (CNNMoney.com) — It only took him a second to sign each foreclosure document.

That’s how good Tam Doan got at his job in Bank of America’s pre-sale foreclosure department in Southern California.

Of course, he didn’t have time to actually read the paperwork he was signing, he said, and in some cases, he didn’t even know what documents he was putting his pen to.

“I had no idea what I was signing,” said Doan. “Either you were in or you were out.”

The recent revelation that loan servicers had employees sign thousands of documents a month without verifying the information has thrown the foreclosure system into chaos. Judges are increasingly questioning whether the servicers have their paperwork in order.

Several of the largest servicers, including Bank of America and JPMorgan Chase, have halted foreclosures while they review their paperwork and processes. They want to ensure that the documents at the heart of the concerns — proof of the note, or debt — were signed properly.

Doan approached CNNMoney after the so-called robo-signing scandal came to light last month. After 18 months at Bank of America, he was terminated in early September for failing to follow policy, according to the servicer.

He said he was fired for how he calculated the value on homes destined for foreclosure sale.

If a property was missing a certification that the bank had done all it could to help the borrower, Doan said he would set the home’s value at 100% of the debt owed. The bank’s policy, however, was to set it at 85%, he said.

Doan said he hoped the higher price would make it harder for the bank to sell the house at auction, and thus prompt Bank of America to work things out with the borrower.
…
—————————————————————————–
Quiz
Foreclosure Fiasco
Befuddled by foreclosures?
Foreclosures have become a complicated mess for homeowners nationwide. Can you cut through the confusion? Take the CNNMoney foreclosure quiz.
By Jessica Dickler

Done
Final score: 6 of 6 points
You got 6 of 6 questions correct.

Great job! You’ve just secured yourself a spot with the Federal Housing Administration.

Foreclosure Scandal Is More Than Robo Signatures
Press misses the premeditated criminal context
By Danny Schechter Created: Oct 14, 2010 Last Updated: Nov 21, 2010

A man speaks with a bank consultant to restructure his mortgage at the nation’s largest loan modification event, at the Los Angeles Convention Center, on Sept. 30. (Mark Ralston/AFP/Getty Images)
Danny Schechter News Dissector

The other day, during an interview on Al Jazeera, I was asked if I was frustrated because my warnings and worries about the financial meltdown and foreclosure crisis, first aired in 2006, have been ignored so long.

Duh!

The excruciating lesson I learned is that it takes time for a problem to turn into an issue and then, an issue to get attention, to move from the business section to the news section, from the back of the paper to page one.

It is always hard to predict which story will grab the attention of a news media that has not paid sufficient attention to these issues for years. What connects for editors is usually a small matter and a symbolic one, a story that’s not just new but dripping with the appearance of injustice or hypocrisy.
…

WSJ Blogs
Developments
Real estate news and analysis from The Wall Street Journal

* Study: More Investors Short-Selling Home Builders
* Real Estate News: 10 Things Your Landlord Won’t Tell You
* November 29, 2010, 10:06 AM ET

What Happened to the Government’s Short Sales Program?
By Nick Timiraos

In April, the Obama administration formally rolled out a new program, called Home Affordable Foreclosure Alternatives, that was designed to spur more short sales, where banks allow homeowners to sell their homes for less than the mortgage debt outstanding.

Like other foreclosure-prevention initiatives, this one appears to be off to a slow start — just 342 sales have been completed through September.

HAFA was designed as a cousin to the Obama administration’s Home Affordable Modification Program, HAMP, whose woes have been well documented. HAFA works like this: Servicers are supposed to consider short sales for borrowers who aren’t able to receive a HAMP modification. Because some 700,000 HAMP applicants have been ejected from that program, there’s a potentially large pool of borrowers who might be evaluated for HAFA.

Initially announced in May 2009, HAFA was also designed to help reduce wait times by streamlining the short sale process through standardized documents and approaches for short sales. Under the program, the government offers incentive payments to mortgage-servicing companies, investors and even the borrowers that accept a short sale under prescribed guidelines.

For example, second-lien mortgages receive 6% of the unpaid loan balance in a short sale, up to a maximum of $6,000, but they must agree to relinquish all claims against a borrower. (Our story on Saturday illustrated why seconds pose problems in short sales.) The program also provides $3,000 in “move-out assistance” to borrowers.

Many real-estate agents say banks have largely ignored the program and that they are applying it unevenly. “Banks are initiating the HAFA transaction and then after three weeks they say, ‘Naw, sorry, you didn’t qualify,’” says Greg Markov, a Phoenix real-estate agent. “That three weeks is a huge pain. You wasted all this time.”
…

Mortgage implosion bagholder identification process continues.

“Just Eat It!“

Banks in U.S. Resisting Calls to Repurchase Fannie Mae, Freddie Mac Loans
By Lorraine Woellert and Clea Benson - Nov 29, 2010 9:00 PM PT

The Fannie Mae headquarters building stands in Washington, D.C., U.S. Photographer: Andrew Harrer/Bloomberg

Fannie Mae and Freddie Mac are facing growing resistance as they attempt to push failed home loans off their books and onto the balance sheets of banks including Bank of America Corp. and JPMorgan Chase & Co.

The two government-owned mortgage companies are enforcing contracts that require lenders to buy back loans that didn’t meet underwriting standards. At the end of September, the companies reported, banks hadn’t responded to $13 billion in buyback requests. A third of those were at least four months old and Freddie Mac has begun to assess penalties for the delays.

Lenders say they are resisting buybacks because McLean, Virginia-based Freddie Mac and Washington-based Fannie Mae are unfairly second-guessing old appraisals, accusing originators of failing to verify income, or pinning failed loans on minor technical errors. Larger banks say they can handle the potential losses. Some smaller lenders say the strain could sink them.

About 40 percent of repurchase requests are rescinded after lenders provide additional paperwork, said John A. Courson, chief executive officer of the Mortgage Bankers Association, a Washington trade group.

“We’re burning a lot of stockholder resources, and clearly a lot of Fannie and Freddie resources, to have 40 percent of these things rescinded,” Courson said in an interview. “It hurts the banks and frankly we’re wasting government resources, too.”
…

Bank foreclosure mix-up escalates
Tuesday, November 30, 2010
Lisa Coryell
SPECIAL TO THE TIMES

TRENTON — A city woman who claims more than $150,000 in jewelry was stolen from her while she was locked out of her home in a bank foreclosure mix-up last year has sued Bank of America.

Nina Morra, 58, of Division Street was denied access to her home for three days in December 2009 when a misguided bank contractor changed the locks as part of a foreclosure process.

When she was finally allowed back into her home, Morra’s suit alleges, she found it had been ransacked and that money, a brand new laptop and a safe containing more than $150,000 in jewelry had been stolen.

“It wasn’t just stressful. It felt like I had been killed,” said Morra, a native of Poland who speaks broken English. “Everything I had in my life was gone; my case with jewelry, my computer, some money and my documents.”

Bank of America later admitted it had caused the snafu by failing to notify the sub-contractor in charge of winterizing foreclosed homes for the banking giant that Morra, who was behind or her mortgage, had entered into a repayment plan and was no longer in danger of losing her home.

In court papers filed in civil court recently, Morra’s attorney accused Bank of America, its subsidiaries and private contractors of entering her home, shutting off the utilities, changing the locks and slapping a foreclosure notice on the door without a court order and without Morra’s knowledge and consent.

“The actions of the defendants in entering the plaintiff’s residence without any authority and rummaging through her belongings, taking personal belongings and locking her out of her own home were willful and wanton misconduct and constitute gross negligence,” the suit alleges. “As a direct and proximate result of the defendants’ gross negligence and willful and wanton misconduct, plaintiff has suffered significant monetary losses in excess of $150,000 plus emotional distress and public embarrassment.”

Her attorney, Robert Rubinstein said Morra has suffered emotionally from her ordeal.

“You feel violated when someone comes into your home, rummages through your things, leaves them lying around and neighbors see a sign that says your house is in foreclosure when it’s not,” he said.
…

Foreclosure foul-ups
Banks have made the turmoil in the housing market worse.
12:00 a.m. EST, November 30, 2010

Mess is too mild a word to describe the situation created by mortgage industry foul-ups in the foreclosure process. Mayhem is more like it.

The collapse of the housing bubble, and month after month of high unemployment, have fueled a sustained surge in foreclosures nationwide. Florida has been among the hardest-hit states.

Some buyers irresponsibly bought more house than they could afford, counting on real-estate values to rise indefinitely. Others were lured into mortgages they didn’t understand and couldn’t repay, often by unscrupulous mortgage brokers. Others found they couldn’t keep up with their payments after losing their jobs.

But the mortgage industry has made the turmoil worse. Some bank call centers haven’t been capable of properly handling requests for loan modifications from qualified borrowers. And some lenders have hired law firms that rushed through large volumes of paperwork using “robo-signers” instead of carrying out their legal obligation to verify the documents.

This week the Sentinel reported on the story of Clare Sheaffer, a former St. Cloud City Council member who applied to her bank, Chase Home Lending, to modify the terms of her home loan after she was laid off. The relief she was promised didn’t come through, she said, because of mistakes by Chase’s call center.

Ms. Sheaffer wound up being threatened with foreclosure and harassed by bill collectors. Her original modification application has expired, forcing her to reapply and keep bill collectors at bay while she works two jobs.
…

I suppose 50 cats in a foreclosure home are better than a much smaller number of pigs?

More than 50 cats found abandoned in foreclosed home in Fort Collins
By Associated Press
4:42 p.m. MST, November 29, 2010

FORT COLLINS, Colo. (AP) — A Larimer County animal shelter is looking for help with more than 50 cats found abandoned in a house that was foreclosed on in Fort Collins.

The sheriff’s office tells Denver’s KMGH-TV that animal control officers found dozens of cats and kittens living in what they called “deplorable” conditions. The front yard was littered with furniture and debris from the home, apparently put there during the foreclosure process.
…

House Flippers: The Forgotten “Victims” Of The Real Estate Implosion
Posted: November 29, 2010 at 11:15 am

Ask not for whom the foreclosure bell tolls, house flippers. It tolls for thee.

With profuse apologies to Ernest Hemingway, that butchered metaphor sums up the predicament facing many real estate investors caught in a legal Noman’s land caused by the robo-signing scandal which has left them with properties which they are no longer sure they own. If they want to get their money back, they may have to prove that the bank knew it was conning them, something that may be difficult to do. They also may face legal action from people evicted from their homes because of faulty paperwork.
…
But what about the people who bought these homes? That’s where things get a little dicey. Clearly, their rights were violated as well. But in the legal tsunami created by the robo-signed documents, they should be last in the pecking order. Many of them, particularly sophisticated investors looking for a quick flip, probably knew or should have known that something was amiss. How is it that the foreclosure process — which is purposely cumbersome to protect the rights of homeowners — suddenly became streamlined? What about the same people’s names appearing in hundreds of documents? That did raise any red flags either.

“The ones who are really upset are the investors, who buy on the courthouse steps,” said Kevin Berman, a broker with Bankers Realty Services in Fort Lauderdale, Fla, told CNNMoney. “There used to be sometimes 700 sales a day. Now there are like, seven.”

Adds to this the lower prices that new homes are fetching and it becomes even harder for flippers to make a profit on an existing dwelling that has been extensively fixed up. It’s human nature to prefer something new over something old if they are priced about the same.

Still, there are thousands of people in this country who believe they have what it takes to become the next Donald Trump. They get plenty of encouragement from cable television shows such as A&E’s “Flip This House” and Bravo’s “Flipping Out” and TLC’s “The Property Ladder.” Though these programs do illustrate the downside of flipping — potentially losing boatloads of cash — they make it seem like a grand adventure. These shows offer as realistic view of real estate as “Gray’s Anatomy” does for medicine. Untold millions watch the flipping shows, though, and figure that if those bozos on TV can do it, so can I.

This sort of delusional or magical thinking is evidence of what economists call a moral hazard. Essentially, it means that the government shouldn’t reward people for making stupid decisions. Though the idea was turned on its head during the recent bailouts of industry, it is still a worthwhile idea. It shows ` there are consequences to actions. People who acquired homes that they should have known they couldn’t afford crossed the moral hazard threshold. They deserve some help, particularly if they can prove they were victims of fraud. Otherwise, their rights should come secondary to the victims of fraudulent mortgage documents. Flippers are private businesspeople who should have known the risks they were getting into before they entered a deal. Few if any deserve government help.
…