The Housing Bubble

Another day older and deeper in debt.

-what song is that from?

I see carson palmer bought a lot n san diego from the city of delmar for 4 million.A fool and his money are soon parted.

No wonder nfl games are so expensive.I’m actually getting bored with football for some reason.Havent figured out the reason yet but seems like the games are not as exciting anymore.

Obama to sign historic settlement to black farmers

The Associated Press
Posted: 10:20 p.m. Friday, Dec. 3, 2010

WASHINGTON — Decades-old claims from African American farmers and native Americans that the government mistreated and swindled them out of billions of dollars can finally be settled starting Wednesday.

President Barack Obama is set to sign the bill authorizing payment of $4.6 billion to settle claims that arose in class-action lawsuits.

The White House said the president would sign the Claims Resolution Act of 2010 and make remarks at the ceremony next week, but offered no further details.

The House passed the bill on Tuesday. The package would award some $3.4 billion to American Indians for royalties for resources like oil, gas and timber. Another $1.2 billion would go to African American farmers who claim they were unfairly denied federal loans and other assistance.

July 27, 2010 - by Zombie
I’m confused.

If there are only 39,697 African-American farmers grand total in the entire country, then how can over 86,000 of them claim discrimination at the hands of the USDA? Where did the other 46,303 come from?

Now, if you’re confused over what the heck I’m even talking about, let’s go back to the beginning of the story:

Pigford v. Glickman

In 1997, 400 African-American farmers sued the United States Department of Agriculture, alleging that they had been unfairly denied USDA loans due to racial discrimination during the period 1983 to 1997. The farmers won the case, known as Pigford v. Glickman, and in 1999 the government agreed to pay $50,000 each to any farmer who had been wrongly denied an agricultural loan. By then it had grown into a class action case, and any black farmer who had filed a complaint between 1983 and 1997 would be given at least $50,000 — not limited to the original 400 plaintiffs. It was estimated at that time that there might be as many as 2,000 beneficiaries granted $50,000 each.

In the 1999 case Pigford v. Glickman, the USDA agreed to pay 16,000 black farmers $1 billion after a judge held the federal government responsible for the decline in black farmers. Critics argued that more than 70,000 farmers were shut out of the lawsuit. In 2008, then-Sen. Barack Obama and Republican Sen. Chuck Grassley got a law passed to reopen the case, and the settlement talks moved forward.

The U.S. Senate and Shirley Sherrod

Which brings us up to today, when two current events suddenly thrust this otherwise little-known case into the spotlight. First, the Senate stripped funding for the settlement out of an unrelated war appropriations bill, as they had done several times in the past. Second, it was revealed today that “A farm collective founded by Shirley Sherrod and her husband that was forced out of business by the discriminatory practices received a $13 million settlement as part of Pigford last year, just before she was hired by the USDA.”

UPDATE II:

Total number of African-American farmers in the United States, by year:

1987: 22,954
1992: 18,816
1997: 18,451

Even if there was a 100% turnover, and every single farmer went out of business every five years and was replaced by a new farmer (extremely unlikely), there still wouldn’t be enough black farmers throughout the entire period combined to account for the number of claimants.

It seems, no matter how you look at it, that a substantial number of the 86,000 claims must necessarily be fraudulent.

AP Enterprise: Calif. lawmakers keep vehicle perk

California lawmakers enjoy a perk that seems like a luxurious amenity in a state that has been slashing billions of dollars from its budget: taxpayer-provided cars.

The state purchases cars for lawmakers to drive around their districts and the capital under a decades-old program, spending more than $5 million for the latest suite of vehicles that includes a $55,000 Cadillac sedan and a $52,000 Lexus hybrid.

The Legislature’s vehicle program dates to the 1950s, when lawmakers decided it was cheaper to buy cars and gasoline than to be reimbursed by the mile.

The Legislature said it could not provide information about how many miles each vehicle was driven or where lawmakers drive their vehicles because it does not keep track.

At a reimbursement rate of 50 cents a mile, lawmakers would have to drive a collective 10 million miles to reach the $5 million taken from the general fund to buy the vehicles — equal to more than 3,000 cross-country trips. The net cost to the state is unknown because the amount of lawmakers’ leases and the resale values will vary.

Though I love this editorial, I disagree with the writer’s point about the effect of eliminating the MID on home prices, for several reasons:

3) They started phasing in Social Security retirement ages past 65 back in the late 1980s, and now they are still talking about doing it some more. Similarly, the MID could be phased out in baby steps: Put in place a schedule for a modest amount of reduction over, say, the next five years, but then at that point, announce further reductions. Repeat until the MID is no more.

The Mortgage Deduction Should Be Done Away With–But It Won’t
Dec 3 2010, 4:21 PM ET 61

Having recently entered into homeownership, I am now in the unhappy state of having to advocate against my own interest. As someone whose freelance expenses make it worthwhile to itemize, I plan to take the mortgage interest tax deduction until they phase the damn thing out, or I pay off the house, whichever comes first. But as an economics journalist, I retain my deep hatred for the thing.
…
The arguments for keeping that deduction are several:

1. Homeowners invest more in their homes, and in their neighborhoods, then renters do.

2. Homeownership breeds middle class values about saving and civic engagement.

3. Homeownership has been the primary vehicle for saving for several generations of Americans, and poor people who do not have access to this precious vehicle are shut out of the American dream

I must admit that since buying a home, I have become considerably more reluctant to, say, pad down to the corner store in my pajamas and an overcoat when we’re out of milk–what would the neighbors think? But in the wake of the housing bubble, these arguments nonetheless seem ludicrous. For millions, houses were a route to excess, and eventually penury. And I’m just talking about the mortgage brokers. Don’t even get me started on the poor homeowners who fell for this malarky.

The thing is, economists knew these arguments were high-test twaddle before the bubble popped. Adam Ozimek summarizes a recent paper which outlines just how terrible a deduction the mortgage interest allowance is:

Using national data from 1984 to 2007 they found that the MID did not increase overall homeownership. In areas with light land use regulation they found that homeownership among higher income families was increased, and in tightly regulated housing markets homeownership was decreased for all income groups except the lowest. The effects, both positive and negative, generally range from 3% to 5%. Regardless of the regulatory environment, homeownership among the lowest income group was not affected at all by the MID.

The authors estimate that it each additional homeowner created by the mortgage interest deduction costs the government $53,590, a number they rightly call “staggering”.

An important implication of the findings is that in urban areas, where land use regulations are typically more restrictive, homeownership is likely to be negatively impacted.

We spend around $100 billion a year on this subsidy, and to the extent that it’s defenders are correct and homeownership does have positive externalities, it is actually making urban areas worse off.

The problem is that while homeownership wouldn’t be affected by getting rid of the deduction, homeowners would be. Some people who relied on the deduction to make their house affordable would be caught in a budget squeeze–though you can solve this problem pretty easily by grandfathering in existing homeowners, or sunsetting the deduction after five or ten years.

However, this would still have a pretty nasty effect on housing prices. Even people with little or no mortgage would be adversely affected by a price drop in their largest asset.
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Good luck to the REIC propagandists who are busily spreading disinformation about the dire effects of eliminating the mortgage interest deduction. The word is out there now that this policy is a boondoggle and a tax giveaway to the rich.

Sheila Crowley
President, National Low Income Housing Coalition
Posted: December 3, 2010 05:23 PM
One Thing the Deficit Commission Got Right — There’s a Better Way to Subsidize Housing

Although President Obama’s bipartisan debt-reduction commission did not reach agreement today, their report has made clear to all that major changes in public policy are needed to solve our country’s fiscal problems. Many of the proposed changes are considered too extreme by people on both ends of the political spectrum. But there has been remarkable accord among tax and policy experts from the left, right, and middle about one provision: reforming the tax deduction for mortgage interest.

The mortgage interest deduction in its current form is extremely expensive and does little good, the definition of a wasteful government program. Despite the popularity of the deduction among taxpayers and its ferocious defense by the housing industry, this is one public policy whose day of reckoning is long overdue.

To review, the mortgage interest deduction currently provides a tax incentive to borrow up to $1.1 million in mortgage debt when buying a home (or two). The family or individual who takes out a home mortgage pays interest to the lenders, which the lenders keep. The federal government then gives some of the interest back to some of the homeowners. The amount is between 15 cents (for those in the lowest tax bracket) and 35 cents (for those in the highest) for every dollar of interest paid.

Because this program is a tax expenditure, most Americans do not understand its cost. The interest goes to the banks and the benefit is paid by the government, so the deduction is really government spending on a mortgage subsidy program. In 2011, the program will cost $104.6 billion, two and a half times the money Congress appropriates for the US Department of Housing and Urban Development (HUD). Unlike HUD programs, the mortgage interest deduction provides the biggest subsidies to the highest income borrowers who take out the most expensive loans.

Moreover, many Americans with mortgages do not benefit from the deduction. Forty-six percent of homeowners do not get the deduction because they have paid off their mortgages, they do not itemize on their tax returns, or they are very low income. Since still more households own their homes free and clear or are renters, 76% of all taxpayers do not benefit from the mortgage interest deduction at all.

Not only is the mortgage interest deduction regressive and costly, it encourages Americans to mortgage their homes to the hilt. What’s worse, its value to prospective homebuyers is largely capitalized into the price of housing, making home buying more expensive than it would be otherwise. This price effect is particularly strong where markets are tighter and middle class people must take out bigger mortgages in order to purchase homes. It also puts lower tax bracket households at a disadvantage since they have to pay the same market prices and the same or higher interest rates, but receive fewer cents on the dollar from their deduction.
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Papa was a rolling stone
Wherever he laid his hat was his home.
But when he died
All he ever left us was a loan.

The question is, are you too-big-to-fail, or what?
…
You ain’t too-big-to-fail — you ain’t nothin’!

Op-Ed Contributor
Too Big to Succeed
By THOMAS M. HOENIG
Published: December 1, 2010
Kansas City, Mo.

THE world has experienced a severe financial crisis and economic recession. The Treasury and the Federal Reserve took actions that saved businesses and jobs and may very well have saved the economy itself from ruin. Still, the public seems ungrateful, expressing anger at these institutions that saved the day. Why?

Americans are angry in part because they sense that the government was as much a cause of the crisis as its cure. They realize that more must be done to address a threat that remains increasingly a part of our economy: financial institutions that are “too big to fail.”
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As long as there is at least one honest man left standing with access to the media, I won’t give up hope.

Fed’s Hoenig: “too big to fail” hurts small banks
By Carey Gillam
OVERLAND PARK, Kansas | Mon Aug 23, 2010 12:57pm EDT

OVERLAND PARK, Kansas (Reuters) - Kansas City Federal Reserve Bank President Thomas Hoenig warned on Monday that landmark financial reforms may not end market perceptions that taxpayers will rescue the largest banks and cautioned against speculative investments in housing.

Hoenig, testifying at a field hearing of the U.S. House of Representatives Subcommittee on Oversight and Investigations, said larger banks perceived as “too big to fail” have a lower cost of capital, putting smaller banks at a competitive disadvantage and threatening their business model.

The Dodd-Frank Wall Street Reform and Consumer Protection Act intended to end Wall Street bailouts by giving regulators a mechanism to seize and shut down failing large institutions in much the same manner as the Federal Deposit Insurance Corp. can shut down smaller banks.

Hoenig said it was not yet clear whether the reform act would put big and small banks on an equal footing.

“That can only happen if markets are absolutely convinced that too big to fail has finally been ended and only time will tell. It’s an open question,” he told the hearing in suburban Kansas City.

HOUSING SPECULATION “A MISTAKE”

Hoenig, the Fed’s lone policy dissenter in recent months, did not address the U.S. central bank’s outlook on the economy nor monetary policy matters. He voted against the Fed’s decision earlier this month to reinvest funds from maturing mortgage-backed securities into Treasury debt to help push down mortgage interest rates further, citing a gradual improvement in the economy.

He also told the House panel that housing was not suitable for speculative investments by consumers.

“If the American people are looking for the housing market to be their investment opportunity, I think they’re making a mistake,” Hoenig said. “I don’t think the economics of the housing industry … is really designed for that. Right now the facts are we have an excess supply.”
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Google is going to be a CRE FB!

Google signed a contract to buy its New York office building for about $1.8 billion, according to a person with knowledge of the agreement….

“You can’t get a stronger vote of confidence for the strength of the New York office market,” Fasulo said. “When one of the most prestigious modern corporations makes a bet on your marketplace, it’s not just a bet on your real estate, but in New York as a place to retain and attract the best talent.”

Anyone from NYC know where the Google building is located?

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/12/03/BULI1GLHN7.DTL

Keep talking about your bullies, Demon. Who is it who took billions in bailout money from the American treasury, then perpetrated a robo-signing foreclosure rampage to kick helpless, hapless Main Street American families out of their homes?

How the World Works
Wednesday, Dec 1, 2010 16:47 ET
How can America’s smartest banker be so dumb?
The New York Times tells us, again, that JP Morgan CEO Jamie Dimon feels “bullied.” He needs to get out more
By Andrew Leonard

If I were Jamie Dimon, CEO of JP Morgan Chase, I’m not sure what I would think of the headline placed on Roger Lowenstein’s endless Sunday New York Times Magazine profile, “America’s Least-Hated Banker.” Talk about damning with faint praise! How should we read that? The best thing we can say about Jamie Dimon is that he is not reviled as much as the rest of the “fat-cat banksters” that ran wild on Wall Street and crashed the economy?

Though, really, the question is begged: Least-hated by whom? I don’t think the general public makes the same fine distinctions in this arena as do business journalists, who, like Lowenstein, routinely laud Dimon for his smarts and for his ability to manage risk while others lose their shirts. Jamie Dimon is clearly better at this job than other Wall Street CEOs, but that still puts him squarely in the middle of a class that is fundamentally unpopular.

The funny thing is, you’d think a smart guy like Dimon would be, well, smarter, about the way the country works. Lowenstein tells us that Dimon was a big supporter of Obama but ended up turning against him after becoming upset at the personal insults that started coming his way from the White House.

The day before, “60 Minutes” broadcast an interview with Obama in which he referred derisively to “fat cat” bankers. To Dimon, who earned $16 million for 2009 — all but $1 million of it in long-term stock incentives — the slap was the sort of broad-brush slur he was hearing too much of on all sides. He reminded the president: “President Lincoln could have denigrated all Southerners. He didn’t.”

… Judy Dimon says the crisis took a toll on him. He used to stand up to bullies who threatened his smaller twin; now he felt as if he, and bankers in general, were being bullied.

Wow. I thought CEOs were made of tougher stuff. Pretty much everybody who pays at least passing attention to politics knows exactly why Obama made that comment. His administration was perceived, for very good reasons, as being too lenient on Wall Street, and he was trying to rally some political support. If you supported Obama’s larger agenda, which Dimon apparently did, you might be expected to shrug off the name-calling. That’s politics. But, instead, Dimon felt bullied. That’s the sign of a thin-skinned man who doesn’t have his priorities straight.
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The Fed’s “WikiLeaks” moment
Dec 1st 2010, 23:28 by G.I. | WASHINGTON, DC

A POWERFUL government agency has just had a trove of its most sensitive interactions with key counterparties around the world thrown open to the public. I’m not talking about the State Department but the publication today of who got help from the Federal Reserve’s emergency lending programmes during the crisis.
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The details are interesting, even titillating, but not terribly surprising. The biggest banks tended to be the biggest borrowers. The data are a bit tricky to interpret: each loan is reported separately even when it represents the rollover of a maturing loan. Bank of America, Wells Fargo, Citibank and JPMorgan Chase all borrowed at least $15 billion each via the Fed’s Term Auction Facility; the total outstanding at any one moment exceeded $45 billion in the case of Bank of America and Wells Fargo, according to Bloomberg. One of the more intriguing revelations is how much support the Fed gave to Europe’s banks: an American unit of Belgium’s Dexia had at least $14 billion outstanding at one point; RBS Citizens, a unit of Royal Bank of Scotland, at least $14.5 billion, and Bank of Scotland (part of Lloyds), $12 billion. Is it a coincidence that the parents of all these banks had to be bailed out by their host governments? (The European Central Bank was also far and away the largest users of dollar swap lines from the Fed, at one point borrowing $171 billion. It then lent those dollars to euro-zone banks.)

Investment banks also became big borrowers when the discount window was opened to them. Bear Stearns borrowed up to $28 billion (no surprise there) as it fended off collapse in March of 2008. But the others did not borrow in size until that fall. Lehman borrowed $28 billion the day of its bankruptcy. (Why it didn’t borrow sooner is a bit puzzling. Was it too scared of looking like it needed the help? And should the Fed have lent to a dealer whose holding company had just sought bankruptcy protection?) Merrill Lynch borrowed up to $33 billion, Morgan Stanley $47 billion, and Goldman Sachs $18 billion.

These revelations reinforce what we already knew: that the Fed helped reinforce all these firms’ “too big to fail” status by lending them huge amounts when they needed it. Yes, this is moral hazard, but…

Hoenig for Fed Chair.

Would it be possible to modify the U.S. Constitution to make this an elected position?

Fed President Hoenig Eyes Return of Glass-Steagall
Glass-Steagall’s separation of banks from more risky brokerage businesses would ‘restore the integrity of the financial system’
Advisor One | December 2, 2010 | By Kathleen McBride, AdvisorOne

Federal Reserve Bank of Kansas City President Thomas M. Hoenig called for diversifying the U.S. financial system by bringing back Glass-Steagall-type provisions for financial services giants.
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The Wall Street Journal is editorializing against the too-big-to-fail banking thugs. Life is schweet!!!

* The Wall Street Journal
* REVIEW & OUTLOOK
* DECEMBER 2, 2010

The Fed’s Bailout Files
Which banks were too big to fail? All of them.

Lender of last resort indeed. The Federal Reserve pulled back the curtain yesterday on its emergency lending during the financial panic of 2008 and 2009, and the game to play at home with the kids is: Who didn’t get a bailout?

If you can find a big financial player who declined the Fed’s cash, you’re doing better than we did yesterday afternoon.

The documents aren’t another WikiLeaks dump but are due to Vermont Senator Bernie Sanders, who insisted that the Dodd-Frank financial bill require more transparency about how the Fed allocated capital during the panic. The release of this data on some 21,000 Fed transactions over the last three years is one of the rare useful provisions in Dodd-Frank, but kudos to our favorite Socialist for demanding it.

We learn, for example, that the cream of Wall Street received even more multibillion-dollar assistance than previously advertised by either the banks or the Fed. Goldman Sachs used the Primary Dealer Credit Facility 85 times to the tune of nearly $600 billion. Even in Washington, that’s still a lot of money. Morgan Stanley used the same overnight lending program 212 times from March 2008 to March 2009. This news makes it impossible to argue that either bank would have survived the storm without the Fed’s cash.
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This is interesting: count an FBI agent among the FBs…

“An FBI employee who handled background investigations for the agency in San Francisco has been charged in federal court with lying about the amount of money she owed on her properties, court records show.

Rachelle Thomas-Zuill, 39, of Pittsburg claimed on a financial disclosure form that she owned three properties with an outstanding mortgage debt of $866,000, when in fact she owned six properties and had a debt of more than $2.2 million, according to the charging document filed Thursday in U.S. District Court in San Jose.

Thomas-Zuill, who joined the FBI 13 years ago, was charged with making false statements to a government agency, a felony. She could not be reached for comment Friday.

Thomas-Zuill worked from 2003 until July of this year as a personnel security specialist for the FBI. Her responsibilities included overseeing and administering background investigations for agents’ security clearances.

Because she had a special security clearance, Thomas-Zuill was required to file a financial disclosure form each year.

The case was investigated by the Justice Department’s Office of the Inspector General.”

BofA -10 Tips For A Successful Short Sale -Agent Flyer (I would never go this route myself, as a buyer.)
http://realestateagent.bankofamerica.com/content/documents/10Tips.pdf

How to blow $10 million on bling in a decade….

It is a far cry from the life that Mr. Martin and his family enjoyed until recently at their Adirondacks waterfront camp at Tupper Lake, N.Y. Their garage held three stylish cars, including a yellow Aston Martin; they owned three horses, one that cost $173,000; and Mr. Martin treated his wife, Kate, to a birthday weekend at the Waldorf-Astoria, with dinner at the “21″ Club and a $7,000 mink coat.

That luxurious world was fueled by a check Mr. Martin received in 1998 for $14 million, his share of the $600 million sale of Martin Media, an outdoor advertising business begun by his father in California in the 1950s. After taxes, he kept about $10 million.

http://finance.yahoo.com/banking-budgeting/article/111434/familys-fall-from-affluence-is-swift-and-hard

Shattered dreams of home ownership

http://www.tampabay.com/opinion/columns/shattered-dreams-of-home-ownership/1138013

from John Mauldin ’s free weekly letter

“Will the Germans still finance the Greeks in 2013 when they have not whittled down their deficit and the Greeks still want to retire at 50 on full pensions? Will the Irish decide that it is in their best interests to take on massive debt so that French and German and UK banks are paid back? Can the solution to a debt problem be more debt?

Will Texas singlehandedly bail out California so their prison guards can continue to make $100,000 a year? Tough questions.

“Feds Warrantlessly Tracking Americans’ Credit Cards in Real Time”

http://www.wired.com/threatlevel/2010/12/realtime/

Maybe the Feds should warrantlessly track TBTF banks in real time.

Tired of paying off your unaffordable mortgage but not in the mood for moving? Consider investing in a pet pit bull.

* HOMES
* DECEMBER 4, 2010

The 25-Year ‘Foreclosure From Hell’
By ROBBIE WHELAN

OKEECHOBEE COUNTY, Fla.—Patsy Campbell could tell you a thing or two about fighting foreclosure. She’s been fighting hers for 25 years.

The 71-year-old retired insurance saleswoman has been living in her house, a two-story on a half acre in a tidy middle-class neighborhood here in central Florida, since 1978. The last time she made a mortgage payment was October 1985.

And yet Ms. Campbell has been able to keep her house, protected by a 105-pound pit bull named Dodger and a locked, rusty gate advising visitors to beware of the dog.

“They’re not going to take this house,” says Ms. Campbell. “I intend to stay in this house and maintain it as my residence until I die.”

Ms. Campbell’s foreclosure case has outlasted two marriages, three recessions and four presidents. She has seen seven great-grandchildren born, plum real-estate markets come and go and the ownership of her mortgage change six times. Many Florida real-estate lawyers say it is the longest-lasting foreclosure case they have ever heard of.

The story of how Ms. Campbell has managed to avoid both paying her mortgage and losing her home, which is currently assessed at more than $203,000, is a cautionary tale for lenders that cut corners and followed sloppy practices when originating, processing and servicing mortgages. Lenders are especially vulnerable in the 23 states, including Florida, that require foreclosures to be approved by a judge.

Ms. Campbell has challenged her foreclosure on the grounds that her mortgage was improperly transferred between banks and federal agencies, that lawyers for the bank had waited too long to prosecute the case, that a Florida law shields her from all her creditors, and for dozens of other reasons. Once, she questioned whether there really was a debt at all, saying the lender improperly separated the note from the mortgage contract.
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Foreclosure sales down 25 percent
Columbia Daily Tribune
Saturday, December 4, 2010

LOS ANGELES (AP) — The worst summer for home sales in decades also put a chill on foreclosure sales, even as the average discounts on the distressed properties got bigger compared with other types of homes.

Foreclosure sales plunged 25 percent in the July-September quarter versus the April-June period and tumbled 31 percent from the third quarter last year, foreclosure listing firm RealtyTrac Inc. said Thursday.

Sales of non-foreclosed properties fell 29 percent sequentially and nearly 31 percent from the third quarter last year, the firm said.

The decline in sales of bank-owned properties and other homes in some stage of foreclosure is in line with an overall housing market slowdown that took hold after federal homebuyer tax credits expired in April.

The fallout over foreclosure processing errors that prompted some lenders to temporarily halt sales of bank-owned homes wasn’t a significant factor in the sharp third-quarter drop in foreclosure sales, said Daren Blomquist, a RealtyTrac spokesman.

“We could expect probably in the fourth quarter to see that percentage of foreclosure sales dip because buyers are a bit skittish about purchasing foreclosure properties, given the questions surrounding the foreclosure process,” Blomquist said.
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Why can’t MSM financial journalists for once acknowledge the financial prudence of those who don’t foolishly catch themselves falling knives without a moment’s hesitation, rather than suggesting that fear is the driving force in their decisions? Maybe if these journalists instead focused on pointing out the foolishness of rushing to buy unaffordable homes on credit, then a lot fewer American households would be hundreds of thousands of dollars under water on their mortgages.

House hunters are too scared to buy despite low prices
The Johansons were afraid to buy despite affordable prices and low interest rates.

By Les Christie, staff writer
December 2, 2010: 10:46 AM ET

NEW YORK (CNNMoney.com) — Despite some of the best home-buying conditions in years — affordable prices, low interest rates and lots of choices — fear of buying has infected the market.

It has paralyzed house hunters, making them unable to pull the trigger even on attractive deals. Some are worried about making the payments, while others are convinced they’ll save even more if they wait.

It’s perfectly natural that they should feel that way in the wake of the housing bust, said Lawrence Yun, the chief economist for the National Association of Realtors. “It’s like when the stock market is crashing,” he said. “People are waiting to see if deals will get better.”

In fact, home sales are down by about 25% from last year, which means a lot of people are sitting on the sidelines. And real estate agents are having to get used to the fear of buying trend.

Anne Williams, an agent with Wallace & Wallace in Knoxville, Tenn., said, “I have several buyers that fit this category. I have learned not to be too pushy. Buying a home is a big decision and if they aren’t convinced that now is the time, I back off.”
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There are many important omissions from the article below:

4. You can refinance into a lower rate mortgage if interest rates fall, but you cannot refinance into lower principle if market values (comps) decline — just ask all the FB’s out there right now wondering why they can’t get a loan mod if you don’t want to take my word for it. Buy now, and lock in high principle forever!

* December 4, 2010, 8:53 AM ET

Number or the Week: Tiny Benefit of QE2 for Mortgage Holders
By Mark Whitehouse

$20: The typical mortgage holder’s potential monthly savings as a result of the Federal Reserve’s latest effort to bring down long-term interest rates.

The country’s 53 million mortgage holders shouldn’t expect too much from the Fed’s latest bond-buying spree.

Interest rates on mortgages are one of the channels through which the Fed’s second round of quantitative easing — in which the central bank aims to spend some $600 billion on Treasury bonds — is supposed to boost the economy. By pushing down rates, the stimulus makes buying a home more attractive, and also allows homeowners to improve their finances by replacing their existing mortgages with new, cheaper loans.

But while $600 billion sounds like a lot of money, the added benefit for mortgage holders will likely be tiny. That’s in part because many of them can’t or won’t take advantage of the lower rates, and in part because the savings for those who do will be minimal.

Most people who are able to refinance their mortgages have long had the opportunity to do so. In the three months before the Fed first signaled its latest round of stimulus, the interest rate on a 30-year fixed-rate mortgage averaged 4.61%. That’s one percentage point below the rate about 56% of the nation’s mortgage holders are currently paying, according to mortgage-data provider LPS Applied Analytics.

The Fed’s efforts won’t do much to expand the pool of people able to refinance. Economists at Goldman Sachs estimate that the bond buying will keep long-term interest rates, including mortgage rates, about 0.15 percentage point lower than they otherwise would be. All else equal, that would make refinancing attractive to an additional population of about 3 million homeowners, or 6% of all mortgage holders.

Like millions of other homeowners, many of those will not take advantage of the lower rates. Some simply aren’t paying attention. Others can’t get a new loan because they’re out of a job, have poor credit or owe more than their homes are worth.

To be sure, the lower rates still provide an added incentive for people looking to buy a home. But even there it’s pretty small. A 0.15-percentage-point difference in long-term interest rates would knock about $20 off the monthly payment on a typical new mortgage. That’s a welcome break, but not a game-changer.
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JPMorgan, Ratings Firms Must Face Mortgage-Bonds Suits
December 03, 2010, 8:34 PM EST
By David McLaughlin

(Updates with claims in 10th and 11th paragraphs.)

Dec. 3 (Bloomberg) — JPMorgan Chase & Co. and credit- ratings companies lost a bid to throw out lawsuits over the sale of $2.8 billion of mortgage-backed securities to the Federal Home Loan Bank of Pittsburgh.

Pennsylvania state Judge R. Stanton Wettick Jr. in Pittsburgh said some claims could proceed against JPMorgan and ratings companies Moody’s Corp., Fitch Group Inc. and McGraw- Hill Cos., which owns Standard & Poor’s Financial Services LLC, according to a Nov. 29 court order. The judge dismissed other claims against the companies.

“We are very pleased with the judge’s ruling and we look forward to stating our viewpoints as the case goes forward in court,” Neil Cotiaux, a spokesman for the Federal Home Loan Bank of Pittsburgh, said today in a phone interview.
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I’m confused by this article; it says there are 3 types of mortgage lenders, then only mentions one: Big Banks.

Beyond Fannie Mae And Freddie Mac: The 3 Types Of Mortgage Lenders

It’s said that a home is one of the biggest purchases that you’ll ever make–and there’s a corollary to that, which is that a mortgage loan is probably one of the biggest loans you’ll ever take out. It’s one of the most confusing too, with phrases like “secondary market” and “portfolio lender” suddenly showing up on the scene. One way to think about it may be to think of three different types of lenders you can go to for your loan:

Big Banks.

The trend has been towards consolidation in the mortgage industry. In 2007, three banks–Wells Fargo, Bank of America, and J.P. Morgan Chase–did about one-third of the new mortgage lending in the country; for the first half of 2010, they did more than one-half, according to industry statistics quoted in the Wall Street Journal. Together with the #4 and #5 lenders, GMAC and Citigroup, you’ve got a group of “big banks.”
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The Dream Coming To An End: Record Low Mortgage Rates Are On The Rise
By Susan Thompson on December 4, 2010, 4:16 pm

Mortgage rates are rising even though the housing market remains weak. Typically, rates rise as home prices and borrowing activity increases.Sixty per cent of those buying a property said they would have to make sacrifices to do so – 84 per cent said they would cut back on spending, 50 per cent would miss out on an overseas trip and 35 per cent would purchase a less expensive property than desired.
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The story is that the strengthening economy explains rising mortgage rates. But doesn’t yesterday’s unemployment figure suggest otherwise? What about the alternative explanation that the Fed stepping up to help bail out EU sovereign debtors is driving up rates, by diverting supply in the market for loanable funds? Because monies used to help bail out European countries are clearly not going to be loaned to U.S. home buyers or owners, are they?

* HOMES
* DECEMBER 3, 2010

Mortgage Rates Rise for 3rd Week
By AMY HOAK

Rates on fixed-rate home mortgages rose for the third week in a row, following bond yields higher after economic data suggested that the economy might be stronger this quarter, Freddie Mac said.

The rate on the 30-year fixed-rate mortgage averaged 4.46% for the week ended Dec. 2, up from 4.40% last week, according to Freddie Mac’s weekly survey of conforming mortgage rates. The mortgage averaged 4.71% a year ago.

Fifteen-year fixed-rate mortgages averaged 3.81%, up from 3.77% last week. The mortgage averaged 4.27% a year ago.

Adjustable-rate mortgages also rose, with the five-year Treasury-indexed hybrid ARM averaging 3.49%, up from last week’s 3.45%. The ARM averaged 4.19% a year ago. One-year Treasury-indexed ARMs averaged 3.25%, up from 3.23% last week; it was 4.25% a year ago.

To obtain the rates, the 30-year fixed-rate mortgage required payment of an average 0.8 point, the 15-year fixed-rate mortgage required an average 0.7 point and both ARMs required an average 0.6 point. A point is 1% of the mortgage amount, charged as prepaid interest.

“Mortgage rates followed bond yields higher this week as recently released economic data suggest the economy may be stronger this quarter than the previous,” said Frank Nothaft, vice president and chief economist of Freddie Mac, in a news release.
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3 reasons why the mortgage tax break isn’t a break
Posted by Nin-Hai Tseng, writer-reporter
December 3, 2010 12:13 pm

The plan to eliminate the mortgage tax deduction was widely criticized, but the industry overreacted to the proposal. Turns out it’s not that great for most of us.

mortgage deductionPresident Obama’s deficit commission came up short of votes to command quick action in Congress of a bipartisan plan that recommended eliminating or reducing long-standing credits, including the popular home mortgage interest deduction. This isn’t much of a surprise. While lawmakers acknowledge that the nation faces an incredibly worrisome debt problem and that a dramatic slash in spending needs to happen, the plan was politically unpopular from the start.

Real estate and mortgage industry experts argued the elimination of the mortgage deduction would put more pressure on an already fragile housing market. That might be the case, but if we look deeper, many of their arguments are exaggerated. If anything, once the housing market gains some strength three or so years from now, slimming the deduction down some might actually not be such a bad thing and it could save the US government billions of dollars. Here are three reasons why:

It doesn’t benefit the vast majority of American homeowners anyway.
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End the unfair tax break for homeowners
By Dorothy A. Brown, Special to CNN
December 3, 2010 11:57 a.m. EST

STORY HIGHLIGHTS

* Dorothy Brown: It’s unusual to get a tax break for a personal choice such as buying a home
* Renting is not deductible, she says, even though about one-third of Americans are renters
* Brown: Tax break meant to “encourage homeownership,” but people buy homes anyway
* Tax break is a $200 billion subsidy every year for those with higher incomes, she says

Editor’s note: Dorothy Brown is a professor of law at Emory University. She is the author of numerous law review articles about the race and class implications of federal tax policy.

(CNN) — The National Commission on Fiscal Responsibility and Reform did not go far enough when it proposed the repeal of certain provisions of the mortgage interest deduction. The deduction for mortgage interest should be repealed in its entirety.

Most people know that owning a home comes with tax advantages such as the deduction for mortgage interest, but they don’t know how much of an anomaly that is. Most personal, family or living expenses are not tax deductible. They are the result of choices.

Your decisions on what to wear to work or whether to pay cash or credit are your personal choices. You don’t get a tax deduction. That’s why rent is not deductible, even though roughly one-third of Americans are renters — which includes the majority of blacks and Latinos. Where you live is considered to be the result of a personal choice.

The deduction for mortgage interest is a huge exception to the general rule, because what could be more personal than the decision to buy a home?

In 1986, an exception was made for home mortgage interest as a way to “encourage homeownership.” That’s the good news for homeowners.

The bad news for renters is that the 2010 estimated revenue loss of the tax subsidy for homeownership is greater than $200 billion. By comparison, the entire Housing and Urban Development budget is less than $50 billion. That is a pretty high price to pay to “encourage homeownership.” But as long as it actually encourages people to buy homes, it could be money well spent.

Yet economists generally believe that the mortgage interest deduction does virtually nothing to encourage people to buy homes. During the past 40 years, while tax rates have changed dramatically (making the value of the tax benefits fluctuate), the homeownership rate has been quite stable. The biggest increase in homeownership rates happened after World War II and came after innovations in mortgage financing.
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In the Region | New Jersey
For Home Buyers, a Season for Deep Discounts
Suzanne DeChillo/The New York Times

A foreclosed six-bedroom house on Highwood Avenue in Leonia was on the market for $535,000 last year.

By ANTOINETTE MARTIN
Published: December 2, 2010

LOOKING for a deal in a down market? As winter sets in, the fruits of desperation — foreclosure sales, short sales, auction sales and deep discounts — are appearing in bountiful number, if anyone out there is hungry for a bargain.

Consider one example, a spacious six-bedroom colonial at 203 Highwood Avenue in Leonia, now on the market for $390,000.

The 90-year-old house, which has two and a half baths, has the obvious drawbacks of normal wear and tear, and an annual tax bill over $11,000. But it is in a community known for fine schools; last year it was on the market for $535,000. A potential buyer’s offer of $490,000 was rejected as too low, according to Reetesh Sood of Exit Platinum Realty, who is now handling the bank sale of the house.

Last summer, before foreclosure, the house became available as a short sale, in which a lender allows the owner to sell the house for less than the amount owed on the mortgage. The asking price then was $460,000. In September, after the bank took over and the owners departed, Mr. Sood listed the property at $420,000; last month he reduced the price twice more.

Mr. Sood said he was still getting calls. One was from the buyer who last offered $490,000; another was from a neighbor down the street, who actually made an offer the bank accepted, but then withdrew it out of “guilt” over taking advantage of a former friend’s misfortune.

The house on Highwood is one of 61 bank-owned properties for sale for less than $500,000 in Bergen County, according to multiple listing figures cited by Sharon Gill of Prudential New Jersey Properties. There are also 11 listed for more than $500,000.

“True, true bargains are available at every price level,” said Ms. Gill, who is based in Montclair, and is marketing several bank-owned properties in Essex County. One is 3 Brentwood Drive in North Caldwell, a custom-built five-bedroom six-bath French provincial listed at $949,000. (It was sold for $1.9 million in August 2006.) The backyard has a free-form pool with its own island.
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A House of Cards, Part 1
An Interview With Nye Lavalle

“Sixteen years ago, he began investigating mortgage fraud when a bank attempted to wrongfully foreclose on a family property. Many of the issues he uncovered more than a decade ago, like robosigning, are just being recognized today…

…EMC Mortgage, which was a unit of Bear Stearns. EMC initiated foreclosure, and we initiated a defense to that, and over the years they spent $2.5 million and 7 years in litigation on a $100,000 loan…

I was the first to unravel what you’re seeing now. The emperor had no clothes. They didn’t own the note, they churned these properties, they double-pledged their notes sometimes. They had no right to the note, they had no right to foreclose, and they were cooking the books, all those things…

To me, the most important thing that nobody has really covered is how much of this junk was sold to our respective mutual, trusts, insurance, and pension funds, the institutional investors…”