Weekend Topic Suggestions
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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I’d like to see a weekend topic thread on health care finance in the U.S. Maybe it’s my imagination, but it seems like the obscene costs of health care and the out of control rate of increase is no longer the elephant in the room.
The major newspapers here in NC (Charlotte Observer and Raleigh News and Observer) just ran a major series this week. I’ll try to post a link to the series later.
Are we approaching a tipping point where the solution will be pitchforks and torches?
Am I the only one in the country who believes that the medical industry is financially raping the country one patient at a time?
Debt Collector Is Faulted for Tough Tactics in Hospitals
Published: April 24, 2012
http://www.nytimes.com/2012/04/25/business/debt-collector-is-faulted-for-tough-tactics-in-hospitals.html?hp
tease:
Hospitals have long hired outside collection agencies to pursue patients after they have left hospital facilities. But financial pressures are altering the collection landscape so that they are now letting collection firms in the front door, according to Don May, the policy adviser for the American Hospital Association, a trade group.
To achieve promised savings, hospitals turn over the management of their front-line staffing — like patient registration and scheduling — and their back-office collection activities.”
debt collection a new growth industry
Eliminate the middlemen. Single payer, public health system, including government supported research and teaching system. Private payer for whatever society deems is “elective.”
Get the insurance industry out of public health.
Am I the only one in the country who believes that the medical industry is financially raping the country one patient at a time ??
No….I would be #2….Not sure there is a solution from DC….
I suspect the solution could be the same one that lowers the cost of flat screen TV’s…Medical procedures provided abroad…If quality care was assured, I would agree to go out of the country for a non-emergency procedure in return for lower premiums, no pre-existing limitation & no cap on lifetime cost…
“…the medical industry is financially raping the country one patient at a time ??”
According to a chapter in Matt Taibbi’s book Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America, a principle purpose of Obamacare is to systemically provide for this kind of consumer abuse.
I honestly couldn’t read that chapter. There is a pain threshold of depression which I am unwilling to cross.
“…pain threshold…”
I suppose I am behaving a bit like my Kindergarten teacher, who wouldn’t read the end of Charlotte’s Web to the class because it was too sad.
I’ve been researching medical tourism for a while now. The International Medical Tourism Association (IMTA) is one, and there are domesic (USA) associations as well. Even the “blues” own a medical tourism firm.
With health care costs out of control, we should all get a basic understanding of our options. You don’t know if you have good insurance (of any kind) until you need it for the big stuff.
“…until you need it for the big stuff.”
I’m thinking that’s where the grift really hits the fan. You spend a lifetime of handing over your income to the medical industrial complex (MIC) through tax subsidies of medical school and health care institutions, not to mention the health insurance premiums you pay out of every paycheck, only to learn when you are too sick and decrepit to defend yourself that you owe tall dollars for expensive procedures you thought were prepaid.
I would like to see a topic on the future of the exurbs. The Washington Post had an article recently on how outer exurbs are dwindling:
http://www.washingtonpost.com/blogs/ezra-klein/post/americans-are-fleeing-the-exburbs–but-will-it-last/2012/04/13/gIQANH9cFT_blog.html
According to the article, somewhere between 30% to 50% of people in the US would like to live in a walkable urban enviornment. Add that to high gas prices, and the prognosis doesn’t look good for the exurbs.
I think what you’re more likely to see is exurban satellite office sprawl, if the industries can stay in business long enough. For example there is an SAIC/Bechtel office building in Frederick, Maryland, an exurb of DC. The SAIC workers can live in a McMansion a 10-minute drive, or even closer, to the office. But they can easily train/metro for an hour only on days when they have meetings with the gov workers downtown. For those who want the walkable urban feel, the housing bubble has already built the walkable urban environments — I’ve seen dozens of work-here-live-here-shop-here condos developments in such towns.
With video and telecommuting, we may see a return to the small town supported by one industry, only instead of being a tire factory or a lumber mill, it’s a white-collar office building.
We might see exurban satellite office sprawl. Such a thing would be good for corporations who want to see their employees trapped into working for them. In the end I don’t see how that would work well. Take a married couple. Most likely they work in two different places. Maybe one of them works in Frederick, MD, but I would doubt that both do. At least one of them will end up with a horrid commute which over time would lead people to the walkable urban option (that isn’t in the middle of nowhere).
I have noticed that everyone I know who lives in an exurb has ended up with a horrid commute sooner or later. Sooner or later people switch jobs. When that happens it’s rare that people living in exurbs can get another job close to where they live. One of the reasons why I lean toward the walkable urban option even if its in a suburb is because I have seen exurbanites and their commutes. I can tell you that the younger end of generation X and generation Y have noticed it too and want to avoid the exurban commutes if at all possible.
Video and telecommuting could change all this, but I have been hearing that widespread telecommuniting is just around the corner for 20 years. I don’t expect widespread telecommuting to happen anytime soon.
I am currently antagonizing over the walkable/exurb conundrum. In Pinellas County, FL., the best academic school pattern is in a far-flung, car-only exurb. Some of the toughest schools are in gorgeous, walkable parts of St. Pete. In other “middle ground” areas, you have both problems: mediocre schools and unwalkable ‘hoods.
We spend, get this, about 20% of our take-home on motoring:
$400 gas
$410 car payment (one is paid for)
$200 insurance
This doesn’t even include routine maintenance or big ticket repairs. It’s depressing to think about.
I like Bubba’s idea, but I also wonder what is going on in terms of the duration aspect of the economic slowdown.
I had a good long chat with my friend who was a corporate attorney working on deals and did a stint (as an attorney) with a small investment bank helping to take smaller high tech companies public.
They are nearing the end of their resources; they are going to have to make a decision about defaulting in a few months. The originating bank still owns the loan so they are unlikely to have a way to fight the foreclosure. And they believe the house is not underwater, but with the costs of selling there won’t be much of anything left over (and, of course, their guess might be wrong). The house is large, but they use a substantial chunk as his business offices, so going back to a small apartment is not going to be easy, might not be doable at all. Living with parents means leaving the country. They have held on since 2007. The original loan, while large, was probably less than 2.5 times their income when they qualified. The downpayment was around 25%. And they have held on for over 4 years with her income being only intermitent. Hanging on couldn’t last forever even for the people who started out with substantial resources.
How many more? Is this just a trickle? Is there any reason to believe that we have reached a time when another chunk of people will have reached the end of their resources? I don’t think my friends are representative of any large group, but this is when they are running out.
Did they have student loans?
If so, you might not be counting total debt.
If relatively high-income people are feeling the squeeze then it can only mean they stretched WAY beyond their resources. Also at higher incomes, you have far far less leeway in terms of mistakes whether business or personal finance. The stakes are higher for a reason.
Yes, another chunk of people will run out.
There are three arguments - demographics, student loans, and current policy which encourages ever more oversupply.
This is a grand tragedy in the making, or if you’re like me, it’s more opera buffa.
We are old, Faster. Student loans are done. Actually, he went to school in Canada and Britain, so I don’t know that he had any.
Her income was much larger. That they have managed to last this long on his income (small business with several partners) and what work she has managed to scrape together is amazing to me. I don’t know the exact details (and I haven’t since the last time I helped them with their taxes), but the problem is the house.
The problem is the DEBT.
The house is merely the manifestation of the debt.
Incidentally, I never thought of you as “old”. What does it mean anyway?
More like a pre-opening performance of “Spiderman.”
“…it’s more opera buffa.”
Spot on!
“…but with the costs of selling there won’t be much of anything left over (and, of course, their guess might be wrong).”
fsbo.com
“The original loan, while large, was probably less than 2.5 times their income when they qualified. The downpayment was around 25%.”
In a world rife with low-downpayment financing to subprime borrowers, people who believe they are somehow playing it safe by purchasing a home at a low multiple of their income, using a large downpayment as part of the financing, are mistaken. They are the suckers who are likely to lose both downpayment and home.
How much longer until the Canadian and Chinese residential real estate markets collapse into heaps of rubble, strewn with sobbing victims who lost every penny of their savings by purchasing or investing in real estate?
When US intrest rates go up as investors finally beleive they are no longer AAA rated
then the money machine will stop
But the Fed has promised to keep rates low until 2014, and come 2014, they can promise to keep rates low until 2018, undsoweiter.
The question which interests me is, what limits the Fed’s ability to hold rates down indefinitely? Suspected answer: Double-digit inflation accompanied by fears of spiraling into hyperinflation; i.e., a replay of the 1970s.
We’re not there yet.
Is there any real news to report on the GSE principal reduction front? It almost seems like the airwaves on this story went dead after around April 10, 2012. I’m a bit surprised this isn’t a bigger issue, given the number of wealthy (aka voter) households potentially impacted, whether as payers or recipients of unearned income,and that it is a presidential election year.
Fight brews over principal reduction for upside-down homes
Published: 25 April 2012 08:30 AM
By Brian Bean & Tim Hardin
Lawmakers, finance industry figures and The White House are ramping up pressure over mortgage balance reductions for distressed homeowners.
Christine Lagarde, managing director of the International Monetary Fund, called this week for principal reductions to help ease the global financial crisis and boost a worldwide recovery.
“The housing problem in the U.S. is something that needs to be addressed” and it is “a matter of urgency,” she said last week at the Brookings Institution in Washington, D.C.
Her message was aimed at Edward DeMarco, acting director of the Federal Housing Finance Agency, which oversees GSEs Fannie Mae, Freddie Mac and the Federal Home Loan Banks.
DeMarco has overruled requests for principal reductions by GSEs, saying such a move could actually be a more costly solution and prompt homeowners who are not in distress to “strategically” miss payments.
“A key risk in principal forgiveness targeted at delinquent borrowers is the incentive created for some portion of these current borrowers to cease paying in search of a principal-forgiveness modification,” DeMarco said earlier this month at the Brookings Institution.
Eleven state attorneys general recently sent DeMarco a letter urging the FHFA to allow mortgage giants Fannie Mae and Freddie Mac to use principal writedowns as a workout solution to “preserve assets and prevent unnecessary foreclosures.”
The Obama Administration has pressured DeMarco to allow GSEs to utilize principal reductions, proposing triple incentives for lenders who participate. Obama even tried to have DeMarco, an independent appointee who does not report to him, removed from the FHFA. But his efforts were blocked by Senate Republicans.
Some lawmakers and banking industry officials oppose principal reductions, saying they’ll do more harm than good.
“Principal reductions create an incentive for a huge group of borrowers who have continued making their payments, despite lower home prices, to stop paying in hopes of principal forgiveness,” Frank Keating, president and chief executive of the American Bankers Association, said this week on The Hill online finance blog.
“A broad principal reduction program would result in fewer investors who are willing to lend for housing finance, increased borrowing costs and tighter credit availability,” he added.
Sen. Bob Corker (Tenn.), a Republican member of the Senate Banking, Housing and Urban Affairs Committee, said principal reductions punish taxpayers.
“The last thing the federal government should be doing is taking taxpayer money and creating a program that incentivizes homeowners to not pay their mortgages,” Corker wrote in a letter sent this week to DeMarco.
Officials from Fannie Mae and Freddie Mac last month sided with lawmakers in urging their conservator to consider principal reductions for the most distressed homeowners. Their requests came after the agencies reworked analyses to account for new triple financial incentives for principal reductions.
…
How did keeping people who borrowed and spent beyond their means become a federal government policy goal?
And how did Fannie Mae and Freddie Mac so quickly return from the point of outright collapse in Fall 2008 to become “the nation’s largest mortgage lenders”?
At what point did the Main Street American voter have a say in any of this?
Fannie, Freddie Won’t Write Down Mortgage Principal
by Yuki Noguchi
All Things Considered
[4 min 40 sec]
Many experts say reducing mortgage principal can help troubled homeowners stay in their homes. But two of the nation’s largest mortgage holders, Fannie Mae and Freddie Mac, have not signed on to the idea.
Justin Sullivan/Getty Images
Many experts say reducing mortgage principal can help troubled homeowners stay in their homes. But two of the nation’s largest mortgage holders, Fannie Mae and Freddie Mac, have not signed on to the idea.
February 29, 2012
Despite some green shoots in the economy, the housing sector remains weak. With 11 million Americans still underwater on their mortgages, some housing experts believe it’s time for more dramatic solutions.
The idea of reducing the principal on the loans of underwater homeowners used to be a fringe concept, embraced by a few outliers. Today, many policymakers believe principal reduction is necessary to keep some troubled homeowners afloat. But so far, the nation’s biggest mortgage holders, Fannie Mae and Freddie Mac, haven’t embraced the idea.
Policymakers Split
Housing and Urban Development Secretary Shaun Donovan has argued in favor of Fannie and Freddie writing down principal for homeowners. “We do think principal reduction is a step that’s important,” Donovan said Wednesday. “That can be good both for homeowners and for taxpayers.”
…
Fair Game
A Bailout by Another Name
By GRETCHEN MORGENSON
Published: March 24, 2012
ED DeMARCO is a marked man.
Enlarge This Image
Andrew Harrer/Bloomberg News
Edward DeMarco of the Federal Housing Finance Agency faces pressure to make Fannie Mae and Freddie Mac reduce principal on troubled mortgages.
The acting director of the Federal Housing Finance Agency and overseer of Fannie Mae and Freddie Mac, Mr. DeMarco is a soft-spoken, career public servant — and under fire. In the thankless job of conservator for the loss-ridden mortgage finance giants, he has a duty to ensure that the companies operate in the best interests of the taxpayers who own them. That means working to keep a lid on the companies’ losses, which now total $183 billion.
But in recent weeks, Mr. DeMarco has come under increasing pressure to chuck his obligation to taxpayers and make Fannie and Freddie write down principal on mortgages held by troubled borrowers. He says, with reason, that such a program would run counter to his legal obligation to pursue only those activities that pose the least cost to taxpayers.
Representative Barney Frank, the Massachusetts Democrat who supported Fannie Mae almost to its collapse, has called for Mr. DeMarco’s resignation because he is “too rigid” on the issue. Representative Elijah E. Cummings, a Maryland Democrat and ranking member of the House Committee on Oversight and Government Reform, told a field hearing in Brooklyn last week that Mr. DeMarco “may be the biggest hurdle standing between our nation and the recovery of our housing market.”
…
“…would save Fannie Mae and Freddie Mac an estimated $1.7 billion.”
But how much would it cost taxpayers (i.e. the U.S. Treasury)? I thought the purpose of FHFA was to protect taxpayers’ interests, not Fannie Mae’s and Freddie Mac’s interests.
Fannie, Freddie Weigh Mortgage Write-Downs
by Chris Arnold
Morning Edition
[4 min 13 sec]
Edward DeMarco, the acting director of the Federal Housing Finance Agency, says principal reductions would save Fannie Mae and Freddie Mac an estimated $1.7 billion.
Enlarge Chris Arnold/NPR
April 11, 2012
Hundreds of thousands of homeowners facing foreclosure might get help by having the amount they owe reduced by Fannie Mae and Freddie Mac.
This is a hot topic in Washington, D.C., with many Democrats pushing for these so-called “principal reductions” to try to help the housing market. On Tuesday, a top federal regulator came a step closer to allowing the move.
NPR and ProPublica reported three weeks ago that Fannie and Freddie had each just completed a new analysis and found that principal reductions would save the government-owned enterprises money.
Edward DeMarco, acting director of the Federal Housing Finance Agency, which controls Fannie and Freddie, has released the official figures from the agency’s report.
“In this analysis, principal reduction is better for the enterprises. … It reduces … [their] losses by $1.7 billion,” DeMarco said.
This is a big change.
…
POLITICAL DIARY
April 11, 2012, 11:50 a.m. ET
Mr. DeMarco’s Markers
By MARY KISSEL
Obama administration officials involved in pressuring Fannie Mae and Freddie Mac’s boss to support more taxpayer-backed mortgage principal write-downs got a rude surprise Tuesday. Instead of caving to the political pressure, Federal Housing Finance Agency chief Ed DeMarco laid out a reasonable, analytical framework for how to evaluate the risks and benefits of such an idea—and it wasn’t all sweetness and light.
Mr. DeMarco opened his Tuesday speech at the Brookings Institution by noting that all borrowers aren’t the same. There are groups of Americans who were hurt by the housing downtown, borrowers who “over-extended financially,” and those who acted responsibly, continue to pay their bills and were victims of circumstance. The latter group “does not seem to receive much attention,” he said. That’s an implicit criticism of the Obama administration, which wants to take some portion of $20.9 billion in unspent TARP money to help the former group.
…
Since Treasury yields keep falling on their own, is QE3 off the table?
April 27, 2012, 4:03 p.m. EDT
U.S. 10-year yields down a sixth-straight week
By Myra P. Saefong and Deborah Levine, MarketWatch
SAN FRANCISCO (MarketWatch) — Treasury prices gained on the week, sending 10-year and 5-year yields down a sixth-straight week, as fixed income traders mulled weaker-than-expected first quarter growth in the U.S. economy, a credit rating downgrade for Spain and further easing measures by Japan’s central bank.
Yields on 10-year notes 10_YEAR -0.21% fell less than 1 basis point to 1.94%. It had traded slightly lower following the Commerce Department’s data on gross domestic product, but also touched a high of 1.96%.
Bond prices move inversely to their yields. A basis point is one one-hundredth of a percentage point.
A week ago, 10-year notes yielded 1.97%. The benchmark’s yields have now posted a six-week decline, the longest since last June.
…
Front-running the trade.
I bet on it myself and it’s done quite well.
“Front-running the trade.”
Does it matter to you whether or not it actually happens, provided that an increasing number of investors become convinced it will happen between now and whenever it either will- or will-not happen?
Or do you remain convinced that QE3 is ‘in the bag’?
Well, both.
At some point, Europe will happen. It’s largely inevitable. Just plain ol’ long division. The Fed has to act because the largest banks have a lot of EU exposure.
Either way, these are trades. I reserve the right to reverse them at any time. Nothing long-term about them, and nothing that says I can’t take multiple-dips in that pool.
“The Fed has to act because the largest banks have a lot of EU exposure.”
That’s a perfectly reasonable point. I guess the only issue they have to overcome is how to make another Wall Street Megabank bailout politically palatable.
“Either way, these are trades. I reserve the right to reverse them at any time.”
Like I pointed out yesterday, so long as you are first to leave the burning theater, you can make out like a bandit. Those who get stuck behind the exiting throng get burned.
Just found this gem on a random IRC board I was on:
(3:27:50 PM) MattyMatt: mortgage isn’t buying
(3:28:25 PM) MattyMatt: it’s rent with a sunset clause
(3:28:37 PM) Jymmm: sunset?
(3:28:55 PM) MattyMatt: yeah, you may not die before you can stop paying
Florida homeowners to get mortgage paid for year under new Hardest Hit Fund rules
by Kim Miller
This entry was posted on Friday, April 27th, 2012 at 10:39 am
Changes to Florida’s more than $1 billion Hardest Hit Fund announced today will increase the amount of time homeowners can get mortgage assistance and eliminate roadblocks that have stymied program eligibility.
Nationwide, $7.6 billion has been doled out to states with the most devastated housing markets through the Hardest Hit Fund, which was announced in February 2010. But a report released earlier this month said the programs, which are developed and administered by individual states, have been slow to start up and have helped too few homeowners.
Florida’s changes include increasing the number of months homeowners can have their mortgages paid from six months with a $12,000 cap on payments to 12 months with a cap of $24,000.
For homeowners who need to bring their mortgage payments current, the cap on payments was lifted from $6,000 to $18,000.
Also, the changes eliminate the requirement that homeowners be less than 180-days late on their mortgage payments. The new program says only that the homeowner cannot be in foreclosure to be eligible.
The report earlier this month from the inspector general of the Troubled Asset Relief Program said as of the end of December, the Hardest Hit program has assisted just 30,640 people nationwide and spent only 3 percent of the available funds.
If I wasn`t already on a watch list, this should take care of that.
by Kim Miller
posted on Friday, April 27th, 2012 at 10:39 am
9 Responses to “Florida homeowners to get mortgage paid for year under new Hardest Hit Fund rules”
9
jeff saturday Says:
April 27th, 2012 at 6:40 pm
Is there any chance that those in charge of dolling out the government cheese might check to see if they were serial refinancers that are also collecting rent on a couple of condos while not paying those mortgages either like the last star victim that the PB Post had in the paper for losing her Hardest Hit money? Jebus it took about 2 minutes for the people who comment here to look up her records you would think the people who are paid to hand out $1 billion Hardest Hit Fund cheese should be able to do the same thing. But I forgot they are working for the government so I guess that is waaaaaay too much to ask.
Is it more like the “Most HELOCked Fund”?
And who gets to share the pleasure of paying these folks’ mortgages for a year?
Well this is a late comment but its written kind of personally to you Ben. Have you ever thought of copywriting your name to see if you couldn’t develop some sort of franchise potential with your good name? It might be a way to make yourself financially independent with a very small amount of work. You could attempt to get publishing from a major publisher that would be able to get a rather high profile book about calling the bubble at exactly the right time.
It would make a very compelling movie if the main players in this blog could be personified and some overglorified scenes of how they saved their bacon financially from this blog. And how fun it would be to fantasize what ever happened to the of the more eccentric participators. You know we could have Aladinsane in a Perth, Austrailia bomb shelter with 50 pounds of precious lining the walls of his Vigilante Dome. I could give you ten more examples because I’m already writing the story in my head, but anyway, some collaboration might be enlightening.