Policy Land Mines In Uncharted Territory
Readers suggested a topic on government policy and house prices. “Is the government trying to keep house prices inflated, or are they simply trying to prevent over correction.”
A reply, “Sounds great until you take the perspective of a prospective buyer, who gets to look forward to no reward going forward for taking the risk of buying at a point when shadow inventory numbers in the millions and nobody knows where the bottom lies because everyone knows prices are propped up.”
And another. “I’ve observed strategic reaction and well orchestrated push-back by outside forces when discrediting and shaming the Housing Crime Syndicate on blogs, forums and news outlets. Frankly, most of you have no idea how deeply entrenched and powerful the HCS is and I only see a fraction of it. It’s a war fought through the media and there are paid PR firms operating on the net EVERYDAY at the behest of the HCS.”
“My speculation? The Fed reserve funds it all to keep every one spending and borrowing. Their proxies are the entrenched power structures: NAR, MBA, other banks, 401k industry, revolving credit operators. You’re asserting that prices have normalized and it’s a false assertion as is an interpolation from CS baseline. Secondly you extrapolate using a variable (interest rate). We’re going to find out over the next decades just how grossly inflated housing prices are. Enjoy the ride.”
One had this, “Yes if the pool of buyers have about the same income as when the home prices were lower. What also needs to be considered are the tax/insurance costs compared to the past and the quality of the housing stock today compared to what it was during the ‘historically normal’ valuations at 37% lower. Bigger? Better? Maintained? ‘Are these houses better off than they were 10 years ago?’”
“A way to prevent an over correction would be to work to inflate. We’re in uncharted territory on this governmental housing intervention thing.”
Another said, “You are attributing too much intention to the policy. They are trying to stabilize prices. In some places this is stopping an over correction. In some places this is keeping overpriced housing from coming down to a sustainable level. In some places, the two results can happen within 10 miles of each other.”
“What they are actually trying to do is keep housing prices from falling anymore no matter where prices currently are. This is because they see falling prices as an issue in the health of the banking and financial sector. The Fed doesn’t own all the bad assets. They are still out there in bank portfolios, insurance company reserves, pension funds ’safe’ assets, etc. As a side issue only, they think that keeping house prices from falling further will keep more people from voluntarily defaulting which puts an administrative burden on the legal system that it *cannot* handle without gobs more money that it can’t get.”
One take, “I think the interest rate policy has much more to do with propping up wall street then it does the housing market.”
And finally, “Related question: Is price fixing legal, so long as it only concerns housing? Is there any chance some U.S. presidential candidate will take the bold step to suggest that household finance decisions are private, and hence not appropriate to address by massive federal government intervention, especially the kind that involves deliberate price fixing?”
From Forbes. “The U.S. Federal Reserve and the Treasury Department have been mulling over a plan that would obliterate all market signals from the mortgage industry. The plan demonstrates once again Washington’s perverse belief that the cure for decades’ worth of government distortion of the housing market is … more government distortion.”
“The government’s reasoning is obvious, if wrongheaded. It wants to keep housing prices from falling further, which would drive homeowners into foreclosure and push banks and investors into deeper distress. To achieve this, the government has to scare up new home buyers, many of whom feel skeptical that prices have hit bottom. So the Fed hopes to lure buyers with dirt-cheap mortgages, just as they were priced during the housing bubble. The gambit could work–for a while. But in the long run, the federal plan will just make things worse.”
From PBS NewsHour. “Jeffrey Brown: Florida may be known as the Sunshine State, but like much of the country, conditions remain poor when it comes to the housing market. To date, Republican presidential candidates have largely avoided spelling out specific policies on housing, mainly arguing that fixing the broader economy is the most logical solution. In October, Mitt Romney said in an interview in Las Vegas that it was best to — quote — ‘let the foreclosure process run its course and hit the bottom.’”
“Most of the focus of the last week, though, has been on the government-owned mortgage giants, Fannie Mae and Freddie Mac. Texas Representative Ron Paul and former Senator Rick Santorum both said Fannie and Freddie should be phased out.”
“For his part, the president used his State of the Union address to call for new legislation aimed at helping those unable to make their mortgage payments. President Barack Obama: ‘Responsible homeowners shouldn’t have to sit and wait for the housing market to hit bottom to get some relief. And that’s why I’m sending this Congress a plan that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage by refinancing at historically low rates.’”
“Jed Kolko, Chief Economist, Trulia: ‘When it comes to voters, housing really is a bipartisan issue. We at Trulia did a survey of consumers, and we found that even a majority of Republicans want the government to support homeownership. And they’re actually in favor of most of the types of proposals that are on the table. The problem for the candidates, though, is almost any policy that you might come up with, such as refinancing, or reducing principal, loan modification, will either cost somebody some money — and that somebody is probably going to be the government or the banks, or both — and it’s very hard to separate people who are underwater or might lose their homes and it’s entirely not their fault from people who might have taken risks or made bad decisions that maybe they shouldn’t be bailed out for.”
“Democrats are a lot more willing to accept that some people who may be less deserving could be helped than Republicans are. And Republicans are a lot less willing to burden either the government or banks with more money. So, it means that even though Republican voters want to hear from their candidates some kinds of policies that might help the housing market, Republican candidates face these land mines of the challenge of spending more money and the reluctance among lots of Republicans to help undeserving homeowners.”
“President Barack Obama: ‘Responsible homeowners shouldn’t have to sit and wait for the housing market to hit bottom to get some relief”
Ha!
What relief awaits the “homeowner” at the bottom?
Being able to sell?
I have said it before. I don’t understand the people who claim they have to wait for the market to “turn around” before they sell. If listing prices for comparable houses right now are about $150K, but aren’t selling, then list for $130K. You’ll get some traffic. Lets say you do that and can sell for $125K, or $120K.
How is that worse than waiting until you have to list it for $100K and maybe get to sell for $105K. I think that when folks say “market turn around” that is what they mean. Enough people looking to buy so that there is competition for the house and maybe they even get to sell for more than it is listed.
Perhaps the real issue is that at the market turn around point, you don’t have to do as much to fix up the house to get it sold? That now it has to “show” perfectly, but in a sellers market you can leave it cluttered and unpainted? Or perhaps they really think that it can’t go any lower.
I find the whole thing baffling. I get it is an emotional thing, but baffling still.
The President is not saying that you should wait for the market to “turn around”. He is saying that you will be relieved when the market “hits bottom”. What will you be relieved of? That is the mystery.
I wasn’t discussing the president’s comments. I was discussing what people mean when they talk about the market turning around. Selling is the only relief that they are looking for.
The president saying that people shouldn’t have to wait for the market to hit bottom before they get relief is just a complex and confusing way to say he wants to do something now, not later. It, is, oddly enough, a round about way of acknowledging that the market has not hit bottom. I thought that this was obvious and didn’t need much discussion.
I thought it was just that they had $xxxk mortgage to pay off with the proceeds, but are underwater. So as soon as the price goes up over the mortgage balance, whoohoo they’re outta there!
Someday.
It’s really not at all baffling. The Fed and the CIC keep insinuating that they are going to make real estate go up again. This fosters a cargo cult mentality that encourages would-be sellers wait forever for bubble prices to return, rather than selling currently. Hence housing market liquidity shuts down.
Was that what the Fed hoped to achieve?
People aren’t complaining that they can’t sell period, but that they can’t sell for those delicious bubble prices which they so covet. They’re waiting for a time that is long gone, and will not return in their lifetime. It’s called denial, and they are basking in it.
I thought they already helped the dozen of some responsible homeowners nationwide they have been able to identify.
The problem is there is a shortage of responsible Americans of any sort over age 35, after a few decades of indoctrination by the advertising industry. Some say those younger will be better because of the recession, but we’ll have to see.
Among the latter group and I will never buy anything, NEVER!
You forget WT, its the parents paid off house that will transfer to the kids, if they sell it , then they would have a down payment for their own place….
I cant think of anyone i meet today that could ever save 20% down…they just don’t make enough, and in order to make that not enough, they have to have the iphone ipad and be mobile.
I will be buying the mac mini soon..i already have an old g4 laptop which cant be upgraded anymore 10.5.8 works fine, but the new flash makes stickam unusable
1. We need to stop calling these mortgage holders “homeowners”
2. Where my 3 grand as a responsible renter?
3. F.O. Obama.
From the PBS piece:
‘At last week’s debate in Jacksonville, Romney took aim at Newt Gingrich’s consultancy work with Freddie Mac. MITT ROMNEY (R): He should have stood up and said, look, these things are a disaster; this is a crisis. He should have been anxiously telling the American people that these entities were causing a housing bubble that would cause a collapse that we’ve seen here in Florida and around the country.’
‘JEFFREY BROWN: Gingrich attacked Romney in return. NEWT GINGRICH (R): Gov, Romney owns shares of both Fannie Mae and Freddie Mac. Governor Romney made a million dollars off of selling some of that. Governor Romney owns share — has an investment in Goldman Sachs, which is today foreclosing on Floridians.’
On this part: ‘He should have been anxiously telling the American people that these entities were causing a housing bubble that would cause a collapse’
For all the bluster about ‘housing’, we’ve never had a plain discussion of the housing mania. No congressional hearings on how far prices went up, no historical comparisons. I’ve said it before; we went from ‘is there a housing bubble’ to ‘how do we keep house prices from falling?’
If there was a housing bubble, the first question has to be, when did it start? That will begin the understanding of how much irrationality is in current prices.
Oh I know, we have several posters here who will tell us ‘the govt has to do something! You’ll all lose your jobs if house prices aren’t “stabilized.” You know, we’ve had years of this “policy” and we’ve got nothing to show for it except a few million future FBs headed to the pile and trillion$ wasted.
So how many more years do we continue this thing? Why not just have a discussion about manias and mention that gravity is still in effect.
Are you calling for a national psychoanalysis, in public?
Not psychoanalysis. We had this bubble and no formal public discussion of what it was and means for future house prices. It gets mentioned all the time, but then the subject turna to wall street or refinancing, etc. Never about what amount of current prices have no fundamental basis for being.
Last summer I was at a lakeside party of mostly educated working professionals, and when the discussion turned to housing I raised the continuity issue. If a family has a $50k income (about $1,600.00 net every two weeks) what portion of that could be devoted to a mortgage payment, the cars, school loans, etc.; I was clear and concise. One of them turned the topic to a new on-line game…end of rational discussion.
My take was that many of them are in hoc up to their eye teeth, basically insolvent, and didn’t want to discuss the issue while their wives were listening.
“…what portion of that could be devoted to a mortgage payment, the cars, school loans, etc…”
We’ve been paying 21% of our income on rent, and have seen no rent increase for three years running, while our income increased slightly. I wonder how this compares to the amount the average homemoaner throws away on their mortgage?
28% here, but that includes all utilities (water, gas, electric, cable) except phone and internet.
There’s no way I could pay so little proportionally if I had a mortgage. Wouldn’t even come close to 28%. (And no, I’m not in a rent-controlled abode).
Home prices are still way too high. Knock ‘em down another 30-40% and I’ll start looking.
didn’t want to discuss the issue while their wives were listening.
I think the whole subject is considered taboo now, or at least gauche…or something bad.
The talking heads don’t talk about it because they don’t want to *blame the victim* especially since they’re probably FBs themselves.
People have large bets riding on their houses. Hearing data points that suggest they may have bet wrong upsets them.
It’s the same thing with the government’s constant extensions of unemployment insurance, food stamps and section 8 housing. They should cut out all this government interference on the natural order of a capitalistic economy. What’s the worst that can happen? Maybe 20% unemployment for awhile but as long as they can’t take up arms against the government or lynch rich people why should we care?
They should cut out all this government interference on the natural order of a capitalistic economy.
But I don’t think we have the natural order of a capitalistic economy. If you cut out foodstamps and unemployment insurance after a crony-capitalistic/corporatist/extreme wealth inequality system has been put in place isn’t that unfairness on top of greatly reduced opportunity? Or kicking a man while he’s been put down? Or unfairness on top of unfairness?
Yes it is. But the world is not fair and the ends always justify the means. If it’s ever going to change then somehow liberals have to enshrine their cause with a moral justification. Maybe the left should Occupy the Church instead of OWS and seize the high ground.
http://billmoyers.com/segment/jonathan-haidt-explains-our-contentious-culture/
But the world is not fair
So we should just roll over and let the 1%ers win?
Has nothing to do with morality or “liberals,” it’s a matter of rational public policy.
Until we get over our national schizophrenia and make abortion free and available on demand, stop paying young women to have babies they can’t afford to raise and educate, and address the fact that without public sector intervention there are more workers than available jobs, America will have a substantial underclass that requires food, housing, and tax-funded subsidy.
Let them starve and go homeless at your peril.
Colorado said: “So we should just roll over and let the 1%ers win?”
Why do people tend to say stuff like that, using the future tense? They 1% already won. They won decades ago, and what’s happening is just the playing out of the consequences of that win. And you know what? We keep V-O-T-I-N-G and A-C-T-I-N-G to continue the consequences of their win to be as bad as possible for us, the common people. We keep putting Wall Street’s selected candidates into office. We keep voting locally for continued taxes and even more taxes. We keep running up debt when we’re allowed to. We’re the dumbest slaves to have ever existed… which is fairly odd, since we’re allegedly the best educated people to have ever existed. Wait, wait, now we have to talk about how our education system (which we continue to support) is just a propaganda system for supporting our empire.
“Maybe 20% unemployment for awhile but as long as they can’t take up arms against the government or lynch rich people why should we care?”
Because I don’t want to see people starve to death or die of preventable diseases. Because I’d probably end up as one of those 20%. Because with the number of guns in this country I think that taking up arms against the government and killing the rich is a very real possibility.
“What’s the worst that can happen?
You are sorely lacking in imagination.
Maybe 20% unemployment for awhile but as long as they can’t take up arms against the government or lynch rich people
And you believe that you are among those who will thrive in your new capitalist order. You may — for a while.
why should we care?”
Speak for yourself, kemosabe.
Capitalism and a Free Market do not occur together…. The 1st thing a wealthy capitalist does is Capture the governmental regulating process to enact corporate welfare, monopoly exemptions and sweetheart governmental policies to flow the wealth from the bottom to the top - a captured government is a Robin Hood for the rich…….
Any economy that isn’t wholly corrupt delivers gains in Economic output to all segments of society……
The last 30 years has been one where ALL the gains to economic output has gone to the top 1% while e rest of us fight over an increasingly smaller piece of the economic pie……..
Keep pushing it and unrest is guaranteed….
Imagine the whining And crying the rich would do if we rearrainged the economy so that for the next 30 years the poor and middle classes took all the gains from growth - the rich’s whining would reach to the stars…..
What gets lost in the conversation between the two candidates is that Romney didn’t set Fannie/Freddie policy but profited off of it.
I see nothing wrong with that. It’s analagous to people on the HBB selling their houses at the height of the market from 2005-2006 and profiting handsomely. They did what Romney did re: stock shares.
Gingrich MAY be another matter, however. When he was “historing” Fannie/Freddie (whatever the hell that actually means who’s to say), was he involved in setting POLICY?
I find profiting off a policy that someone else enacted and writing/revising policy to the benefit of one’s self quite different matters, ethically speaking.
“…when did it start?”
…
An ‘‘Own Your Own Home’’ campaign was launched by the U.S. Department of Labor in 1918 (Weiss 1989). In the same vein, Herbert Hoover, while Secretary of Commerce in the Harding and Coolidge administrations, served as president of Better Homes of America, Inc. This remarkable public-private partnership offered education and publications promoting housing and homeownership. By 1930 there were 7,279 local Better Homes committees sponsoring home improvement contests and lectures on how good homes build character (Wright 1981). But no financial support for homeownership was forthcoming from the federal government during the 1920s, and housing finance was primarily regulated by the states.
…
Because if they had an inquiry on the subject, they’d find out what really happened. Politicians’ dirty laundry would be aired, as Gingrich’s laundry is being aired. Their precious financial sector might suffer some costs as a result of the public discourse on the subject.
I’m not being snarky, or snide, or dramatic. These are the issues which prevent the inquiry.
There is no inquiry because it is not in the politicians’ best interest to have an inquiry.
“There is no inquiry because it is not in the politicians’ best interest to have an inquiry.”
I don’t see this making much difference in the information age. Regardless, it’s going to come back to bite them on an international scale.
Irish Central
Newt Gingrich’s Fannie Mae-and-Freddie Mac-sponsored trip to Ireland
New York Times reveals Irish trip funded in part by the housing giants
By DARA KELLY,
IrishCentral dot com Staff Writer
Published Sunday, February 5, 2012, 7:50 AM
Updated Sunday, February 5, 2012, 7:50 AM
See more: US Politics
In 1998, Speaker Newt Gingrich traveled to Ireland, where he researched his Irish roots, discussed the prospects for peace in Northern Ireland and even helped build a home in Belfast for a good-will project. Two of the sponsors for the trip were Freddie Mac and Fannie Mae.
As Newt Gingrich fights to stay in contention against Mitt Romney in the Republican primaries, he has faced many questions about the more than $1.6 million in consulting fees he got from Freddie Mac since leaving Congress in 1999. But records and interviews show that the relationship started years earlier, reports the New York Times.
While on the campaign trail, he has minimized his past connections to the government-backed housing industry giants, records show that, as House leader in the 1990s, Gingrich aligned himself with the two closely related companies on a number of key issues.
Gingrich also worked with Fannie and Freddie on a number of housing projects in the U.S. and abroad, including Ireland.
The visit to a Belfast neighborhood in 1998 to start building a home for a low-income family was part of a foreign extension of an American program called “The House that Congress Built.”
The Belfast project was sponsored principally by Fannie and Freddie, along with Habitat for Humanity and the National Association of Realtors.
Marianne Gingrich, Mr. Gingrich’s wife at the time, joined him in Ireland, as did other members of Congress.
…
The government has time to devote to highly publicized inquiries on Barry Bonds and Roger Clemens. But none to devote to the causes of the financial crisis.
Congress is a farce.
Comment by MrBubble
2012-02-04 08:35:14
1. We need to stop calling these mortgage holders “homeowners”
2. Where my 3 grand as a responsible renter?
3. F.O. Obama.
———————————————————————————
Sweet, productive rage. Stay pissed and shutdown HCS talk.
Peace
That’s socialism for ya. Everything is swell when it’s someone else’s money.
Problem for you, Mr. Bubble, is that this time it’s YOUR money. Doesn’t taste too good, either, does it? You’re responsible, yet those who aren’t can now help themselves to your wallet.
Your anti-socialism comment in response to mine seems a bit of a klunky stretch. It’s always “my money” whether it’s defense, prisons, the war on drugs, gmo food, medicare, ss, etc. I am now just withholding it wherever I can. Just got a six bird chicken coop off of Craigslist and will be feeding them with my black soldier fly larva “digester”.
RAL, when you wrote HP the other day, did you mean “Huff Po?”
I ask because my friend’s wife recently joined their staff as a managing editor — they, as a family, are not mouthpieces for HCS and rent in NYC.
Just wondering…
Yes I was. I’m talking about the posters, not the editorial staff.
Got it.
It’s been weird to hear their take on the whole thing, because his wife had all of the data and stories right in front of her, yet they still argued with me about house prices while simultaneously renting (but not because they wanted to).
You’re arguing with a religion… a theology…. not people. If they’re important to you, tread lightly. If you don’t give a crap, shut down the conversation.
All of this is just a rehash of stuff that was discussed three years ago. Let me put it in WWE terms, to make it simpler…..
In this corner, weighing in at 350 pounds, wearing the red tights, feather boa, and Red Wing boots, (paid for with a BoA credit card), are……..
-The banks, FuBuyers, state and local governments dependent on property taxes on residential homes, and anyone else holding MBS/paper whose value depends on prices staying close to 2007 valuations…….and the RAL crowd, who depend on the commissions (mainly because it’s a lot easier/less bother to sell one $300K house than six $50K houses). The whole house of cards depends on the dumb oxen hanging in there, buying high, and to keep making the mortgage payments.
And in the other corner, their opponents…..weighing in at 105 pounds……in the dollar green speedos and the purple CROCS……
-People wanting homes at a fair market price, anyone “shorting” any of the above.
If things are left “unmanaged”, prices will more than likely overcorrect. The plan is to give the poor fools hope that they may be able to sell their house at a profit, someday. When even the dullest, lousiest at math J6Ps figure out that they are throwing good money after bad, the game will be over.
The plan might even work, if a little wage inflation were to occur. Too bad someone made the decision that it would be a good idea for Joe6P to compete for jobs/wages with Xian6P at Foxcomm. Hard place, meet other hard place.
Anyone want to make a bet on how long they can keep this plan afloat? If it’s five more years, it’s as good as forever, as far as it concerns me.
What’s really great is that, as the unoccupied properties deteriorate, the renters will be asked to kick in along with everybody else to pay for the bulldozers tearing down the “blight”/reducing the housing inventory.
Want to have people leave you alone? Start telling your Republican, free market, homeowners friends that they are bigger parasites than welfare queens.
The responsible family with an average income has a difficult time affording a house without any help. Prices need to correct further.
You can buy beautiful homes in Europe for under 200k (USD). In the US you don’t get much for that. It’s because of all the greed and entitlement mentality. The financial industry is at the core of this problem.
In New York you have lots of people working on Wall Street earning ridiculous amounts of money. Why is this bad? Those people can afford to overpay on homes in surrounding areas, thus inflating the prices to silly levels. Many can afford to buy second and third homes and rent them out. Now you have a situation where not just houses are inflated, now rent is inflated.
The banking system is a black hole. If you aren’t big enough It sucks all the lose change out of your pockets into someone who is more established.
Again, the geographical divide between the coastal areas of the U.S. (where the Haves live) and everywhere else (where the Have Nots live) is warping our fearless leaders’ sense of reality.
They have no sense that a $200K home is very much out of reach for upwards of 100 million well-educated people in flyover country.
Not talkin’ ’bout the rubes in the prairies. Not too many of dem peoples left anyhows. Not da Suthnah rednecks neitha.
Perhaps one day da Massahs will undastans.
What does the board think about the “pent up demand” of a million new households being created yearly in the USA and only half a million being built? I read this in our local msm.
Also, agrument for banks to do something with their two trillion dollars stored away and not lending - matched by two trillion corporations have saved - and the two trillion off shore held by global corps - the argument ? “Obama turned around the economy with only 780 billion - -”
With 20 million empty houses there is pent of demand?
Sounds like it will take 40 years to work through those 20M houses at the current rate of household formation and housing production. BWAHAHAHAHAHAAAAHAAA!!
Plus, you’re assuming a steady job market (one new job for every new entrant into the workforce).
We need to create what - 450,000 jobs monthy? - just to break even. We’re nowhere near creating jobs at that pace.
8.3 percent unemployment is hogwash. Fewer are unemployed because more are falling off unemployment pay after 99 weeks.
8.3 percent unemployment is hogwash. Fewer are unemployed because more are falling off unemployment pay after 99 weeks.
Exactly.
“Fewer are unemployed because more are falling off unemployment pay after 99 weeks.”
BINGO
Local governments need to start fining any vacant houses that sit for months on end….. They are a vector control problem, often are used by drug users…. Degrade the neighborhood, lower the housing prices in a neighborhood - thereby lowering the tax base of local communities…….
“…often are used by drug users…”
Looking at the positive side of this, even though neither drug use nor sales directly contribute to GDP, doesn’t the money drug dealers and users spend on other goods and services have a positive impact on the 70% consumption economy?
“…20 million empty houses there is pent up demand…”
Sounds like some MSM-favored real estate ‘experts’ should crack open their undergraduate economics textbooks, they clearly have mistaken pent-up supply for demand.
“…a majority of Republicans want the government to support homeownership. And they’re actually in favor of most of the types of proposals that are on the table.
…
Democrats are a lot more willing to accept that some people who may be less deserving could be helped than Republicans are.”
Point me in the direction of the candidate who believes it is not the government’s job to use market-distorting housing interventions to pick winners and losers.
I think his name is Ron Paul.
Housing isn’t coming back until Dcent living wage level JOBS come back.
And even with job and wage growth, inflation could easily tap any potential housing price increases leaving housing in the dust for a generation.
It doesn’t help that the insolvent banks are being bailed out by the Federal Reserve leading to inflation - and they use those funds to BUY Off Both major parties…….
Preaching to the choir here, Woodster, but glad to have your voice. Welcome!
Is there any truth to this writer’s assertion that fewer than 10,000 homeowners (compared to 10-12 million underwater homeowners) have been helped by previous FB bailouts? I didn’t think the actual figure was very high, but 10K sounds implausibly low.
Aren’t Obama’s handlers afraid of a voter backlash if they keep promising relief that never materializes? Only 10,000 out of 10,000,000 homeowners with underwater mortgages getting help could easily translate into 999 out of 1000 in this group becoming angry voters.
FAMILY FINANCES
FEBRUARY 5, 2012
Help for Hurting Homeowners?
By REX NUTTING
Quoted: “I am sending Congress a plan that will give every responsible homeowner in America the chance to save about $3,000 a year on their mortgage by refinancing at historically low rates.…
“What this plan will do is help millions of responsible homeowners who make their payments on time but find themselves trapped under falling home values or wrapped in red tape.”
—President Barack Obama Feb. 1, 2012
Editor’s Note
Rex Nutting, MarketWatch’s Washington-based international commentary editor, checks the facts behind financial and economic pronouncements of executives, pundits and politicians.
Reality: The president has rolled out another government program to help homeowners hit by falling home prices, but there’s little reason to think this plan will enjoy much more success than the previous ones.
The administration says up to three million homeowners who owe more on their house than it’s worth could refinance their mortgages, but that estimate is much too optimistic, says Guy Cecala, publisher of Inside Mortgage Finance.
“It would be wildly successful if it hit a half million,” says Mr. Cecala, noting that fewer than 10,000 homeowners have been helped by previous programs. Between 10 million and 12 million homeowners are “underwater” on their house.
“This sounds an awful lot like the FHA short-refi program announced in 2010 that is 1,499,500 short of its 1.5 million goal,” tweeted Neil Barofsky, the former inspector general of the Troubled Asset Relief Program.
Greek debt talks on Groundhog Day — how appropriate is that!?
Eurozone crisis live: China tells Europe to ‘do its homework’ -
2 February 2012
• Wen Jiabao: China could offer financial help
• Groundhog Day in Greece as negotiations continue….
• Liquidity rally boosts auctions
• Athens talks hang on wages, pensions and the banks
• German officials hope to do deals in Beijing
For how long can a debtor nation slide along a razor’s edge before getting cut?
Greece on ‘Razor’s Edge’ as Debt Talks Drag On
By Marcus Bensasson, Maria Petrakis and Natalie Weeks - Feb 5, 2012 8:30 AM PT
Greece’s efforts to win a second bailout from international creditors teetered in the balance as negotiations in Athens failed to clinch an agreement.
“The distance between success and failure, which could come from misfortune or misunderstanding, is very small,” Greek Finance Minister Evangelos Venizelos told reporters in Athens yesterday after consultations with euro area finance ministers. “We are on razor’s edge.”
While agreement had been found on issues such as bank recapitalization and state asset sales, the government and the so-called troika of international creditors are still at odds over labor reforms and fiscal measures for this year. The talks with euro-area finance ministers were “very difficult,” Venizelos said yesterday.
With the country’s stability at stake, the government is racing to clinch agreement on a plan that’s been in the works since July, with talks between international monitors and Greek officials running in parallel with discussions among caretaker Prime Minister Lucas Papademos’s coalition members and Greece’s government and its private creditors.
Venizelos and Papademos convened with leaders of the three political parties backing Papademos after “intensive” meetings with representatives of international creditors earlier in Athens today.
…
Greece on ‘Razor’s Edge’ as Debt Talks Drag On
“I watched a snail crawl along the edge of a straight razor. That’s my dream. It’s my nightmare. Crawling, slithering, along the edge of a straight razor … and surviving.” -Kurtz
But Greece won’t survive, IMHO. Unfortunately there are too many other places that require borrowed taxpayer trillion$.
Doesn’t it really depend on the return to investors to making new loans to Greece versus many other places they might put new money?
Of course, if central banks work together to suppress returns to investing in Greece, I guess there will be a shortage of investors funds going there.
California’s 2008 BofA Deal May Force Signing of National Mortgage Accord
By Joel Rosenblatt - Feb 3, 2012 10:56 AM PT
California Attorney General Kamala Harris objects to giving banks broad releases of liability for predatory lending. At the same time, she may be locked into her predecessor’s 2008 settlement with the largest lender in the state during the mortgage boom that does exactly that.
Facing a Feb. 6 deadline to join a proposed multistate agreement over foreclosure practices said to be worth as much as $25 billion if California joins, Harris has said she won’t sign onto a deal blocking her from investigating whether the five largest U.S. mortgage servicers misled homeowners about the terms of their loans, among other issues.
One of the five lenders involved in the talks, Bank of America Corp., reached an agreement in 2008 with Harris’s predecessor, Jerry Brown, who is now governor, that bars its Countrywide Financial unit’s mortgage holders from pursuing claims of the type that Harris wants to investigate.
Based on the “broad release” contained in the agreement, “it is unclear on what grounds Kamala Harris would pursue lending violations by Countrywide,” said Guy Cecala, publisher of Inside Mortgage Finance, an industry publication.
Harris, 47, whose state is the most populous and leads the nation in foreclosure filings for housing units, has described as “inadequate” the proposed settlement state and federal officials have been negotiating for more than a year with Charlotte, North Carolina-based Bank of America, JPMorgan Chase & Co. (JPM), Citigroup Inc. (C), Wells Fargo & Co. and Ally Financial Inc (ALLY).
The foreclosure probe, which had involved attorneys general from all 50 states, began in October 2010 following disclosures that banks were using faulty documents to seize homes.
Principal Writedowns
The proposed accord would set requirements for how lenders conduct home foreclosures and mandate that the banks fund loan principal writedowns for homeowners and provide refinancings, said a person familiar with the matter who didn’t want to be identified because the terms aren’t public.
With California’s share of the settlement said to be at least $6 billion, a decision by Harris to opt out would put pressure on her to extract more favorable terms from the banks, Ken Scott, a Stanford University law professor, said in a phone interview.
For Harris, “the rationale has to be, ‘We’re going to get so much more it will have been worthwhile, and that’s a gamble’” Scott said. While the attorney general may “get the glory,” he said, “the risk and the possibility that isn’t the outcome is being born by the borrowers.”
Credit Crisis
Countrywide, which was based in Calabasas, California, and was acquired by Bank of America in 2008, was “by far the largest mortgage lender in the state” before the credit crisis, Cecala said. In 2006, Countrywide reported that while residential loans in the U.S. had tripled since 2000, from $1 trillion to $2.9 trillion, Countrywide’s origination business grew about three times faster, from $62 billion in 2000 to $463 billion in 2006, according to a court filing.
Based on the liability release in the 2008 settlement, in which Bank of America resolved fraud complaints in 11 states by agreeing to pledge $8.7 billion in assistance to Countrywide borrowers, “BofA wouldn’t seem to have much reason to pay still more for the benefit of anyone already covered by it,” Scott said.
Harris, through spokesman Shum Preston, declined to comment on the Countrywide settlement or the multistate negotiations.
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“One of the five lenders involved in the talks, Bank of America Corp., reached an agreement in 2008 with Harris’s predecessor, Jerry Brown, who is now governor, that bars its Countrywide Financial unit’s mortgage holders from pursuing claims of the type that Harris wants to investigate.”
Oh bugger.
God bless Kamala Harris!
Hong Kong Homes Face 25% Drop in Year of the Dragon: Mortgages
February 02, 2012, 12:16 PM EST
By Kelvin Wong
Feb. 1 (Bloomberg) — The Year of the Dragon, representing wealth and power in China, is shaping up to be the opposite for the world’s costliest housing market, Hong Kong.
Mortgages that need to be insured by the government because of risk experienced the steepest plunge in six years in 2011, a sign the biggest home price decline since the global credit crisis is accelerating. Property prices that have slid 6 percent since June may fall as much as 25 percent by 2013, estimates Andrew Lawrence of Barclays Capital, who predicted the initial slide in April.
Asian real estate markets from Singapore to Beijing to Mumbai are stalling or have started declining as governments seek to curb the type of housing bubble that brought down the U.S. economy. In Hong Kong, rising borrowing costs, extra transaction taxes and higher down-payment requirements imposed by the government have fueled the slump.
“We’re in for a very challenging first half,” said Wong Leung-sing, associate director of research at Centaline Property Agency Ltd., the city’s biggest closely held realtor. “The drop in secondary mortgages means buyers are having trouble borrowing from the banks the full amounts they need. The ones that are taking the biggest hits right now are the middle- to lower- priced housing segment.”
Prices had surged 70 percent from 2009 to their 14-year high in June. Home deals in December fell for a sixth straight month to the lowest since November 2008, according to the Land Registry.
Hong Kong will continue measures to maintain stable home prices, Financial Secretary John Tsang said at his annual budget speech today.
36 Percent Drop
Loans covered by the Hong Kong Mortgage Corp.’s insurance program decreased 36 percent in 2011 from a year earlier to HK$26 billion ($3.4 billion), according to figures released Jan. 11. It was the biggest drop since 2006, said the body, which was set up in 1999 to provide government insurance for mortgages exceeding 70 percent of a property’s value — also known as secondary mortgages — in a bid to revive slumping home prices at that time.
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The Hong Kong housing market sounds crazier than the wildest U.S. counterpart.
Hong Kong Won’t Loosen Curbs on Homes Even as Prices Fall
By Sophie Leung - Feb 2, 2012 11:03 PM PT
Hong Kong will not loosen its property-market policy curbs even as housing prices and transactions decline, Financial Secretary John Tsang said.
“Currently, our measures, which aim to keep the home market development stable and healthy, are effective,” Tsang told reporters in Hong Kong today. “We will continue the existing measures.”
The city’s government is following China’s lead in trying to rein in housing prices in Hong Kong, which had risen to a 14- year high by the middle of last year. Premier Wen Jiabao said this week that his government will maintain curbs on the property market to bring values to a reasonable level.
In Hong Kong, rising borrowing costs, extra transaction taxes and higher down-payment requirements imposed by the government have damped demand.
The number of home sales in Hong Kong slumped 56 percent in January from a year earlier to 3,507, the lowest level since 2008, Land Registry figures showed yesterday. Home prices slid 6 percent from their peak in June, according to Centaline Property Agency, the city’s biggest closely held real-estate broker in the city.
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boy..you guys in Phoenix missed the bottom!..in 85014 prices are up..for a basic house from 36k(10 months ago) to 46k..you guys blew it..