Why Do We Need The Thirty Year Mortgage?
Readers suggested a topic on mortgages. “I think a discussion of the 30 year mortgage (and the government intervention that is necessary to keep it around) would be interesting. Here is an article arguing in favor of it. I’m sure there are plenty out there arguing against at least the government intervention portion and probably the idea of the 30 fixed mortgage entirely. Article is pretty short, so I will provide all the text, but click through to the article anyway. I’m sure I’ve mentioned here that the Fannie building looks like it wants to be an English country manor.”
A reply, “You are probably aware that Canadian terms tend to run only to five years, so hearing that the USA does 30 is a surprise.
My thoughts are why would a bank invest in these:
1. because they can be insured
2. because they can be securitized
3. because they have changing values; ie interest rates lower than contract then mortgage is worth more, etc
I agree that not all people probably have them for full term, having borrowed up, separated, etc and I also agree that knowing what percentage of these make it to term might be a surprise.
I think the Private label should not be insurable, require 25% down, along with all debt service numbers - including DTI.
I think these 30 year have a place though because they allow lesser incomes to purchase. I think these are the only mortgages that should be insurable by the government. However, at least 10% down should be required. The gov should also enforce the banks to have a percentage of their inventory in these types of mortgages, and representative of all social status and location.”
One said, “With the boomers retiring in droves will there not be a boom in move-up jobs? The existing under 50 folk get promoted and so on until they need new 20 somethings to the do the menial work?”
“Currently, almost all the boomers in STEM, especially the TE fields, are all directors, VPs and above - a sort of inverted pyramid. There ought to be a chance that these high paying jobs would be passed on to at least a few in their 40s and so on. People should be feeling richer and out they go to buy 2 to 3 of the ever increasing- in price houses!”
And another, “I think there will be move-up jobs, but I don’t think there will be a ‘boom.’ Many places — including the US government — are already banking on attrition rather than layoffs to reduce the workforce. Example: Six people will retire. Two jobs will be eliminated, leaving four openings. Three of the openings will be filled by patient Gen Xers, the last opening will be filled by a go-getter Millenial. As for the rest of the Millenials… I don’t know.”
One had this, “What percentage of people with 30-year mortgages actually pay them off on schedule? If that percentage happens to be minuscule (my guess!), why do we need them?”
“More guesses: 1) The false pretense that the loan will be amortized over 30 years enables the buyer purchase the same home with lower monthly payments than for a shorter amortization period and the banks to charge more interest.”
“2) Cross subsidies in the form of mortgage guarantees and interest rate suppression (aka taking away retirees’ ability to survive on fixed-income investments) provide a wealth transfer to 30-year mortgagees.”
A reply, “You are hitting it close here. Government subsidy is always a wealth transfer.”
One said, “Government subsidy of long term mortgages keeps the prices of rental units high, just like it keeps the price of all houses high. Commercial rents fell during the crisis, dramatically. That is one area not subsidized (that I am aware of) by the FedGov.”
And finally, “Families raising children cannot afford a mortgage with terms longer than ten years because their children eventually cost more in their teen and college years. The story above was very narrow and short sighted in that it didn’t examine other countries or our post-WWII single income housing experience. The thirty year mortgage and the working-mom are a by product of LBJ’s Great Society; how else to afford 30% of the population spending their lives on the porch sipping cheap wine? Like Dubya, Obama is nothing more a corporate shill pimping life-long debt. He should be ashamed of himself and considered an enemy of the productive family.”
There is one and only one reason why this instrument of slavery exists;
Housing Prices Are Grossly Inflated
Or … (to look at it another way):
Housing prices are grossly inflated because this instrument of slavery exists.
If needed cash isn’t available for the purchase then the buyer has to thinks in terms of how-much-a-month. If a lot of buyers think in these terms then prices will go up because the how-munch-a-month crowd will push them up.
Once the how-much-a-month concept is imbedded in people’s minds then how-much-a-month will dominate their thinking instead of just the price alone doing the dominating of their thinking.
Considering price alone becomes looked down upon as old school thinking while financing is considered to be somewhat sophisticated.
Leverage leads to bliss. (Until it doesn’t)
“If needed cash isn’t available for the purchase”
It’s not a matter of available cash. It’s the amount of cash required as a result of 30 year debt slavery instruments. It they didn’t exist, cash wouldn’t be an issue.
“Or … (to look at it another way):
Housing prices are grossly inflated because this instrument of slavery exists.”
What came first: The chicken or the egg?
“Housing prices are grossly inflated because this instrument of slavery exists.”
Wrong.
There were housing bubbles in pretty much the entire world…LOTS of places with bubbles that have no 30-year mortgage.
The difference?
With a 30-year, fixed rate mortgage, if interest rates rise, the lender takes it in the shorts in the US. In other parts of the world, the borrower takes it in the shorts.
“What came first: The chicken or the egg?
Exactly.
And Rental Liar,
Is that your denial or you corrupt character talking?
True, loose lending does not cause a mania, but it sure does facilitate it being larger and longer. Without it the natural limits of a mania are tighter.
The Canadians have very loose credit for mortgages, on 3 to 5 year terms. One refinances at the end of the term, the debt not being paid in that period, until one cannot. The Canadians have a housing bubble. It will be very ugly to be underwater in a Canadian housing downturn.
Loose credit provides a larger bubble and a larger disaster, for both borrower and lender. It is not just one or the other.
If people were restricted to only 30-year fixed rate mortgages, the bubble would not have grown as large (required payments under a 30-year fixed rate loan are usually larger than the required payments under 5, 7, 10 year ARMs, Option ARMs, etc.). What caused the bubble to go into overdrive were people being able to borrow money on crazy low interest rates, option ARMs (with negative amortization, etc.), 5-year fixed rates, etc.
If the market were restricted to 10 year fixed rate mortgages, housing prices would be 75% lower.
“How-much-a-month” = high interest payments and debt slavery for life
How is it debt slavery for life? It’s not for life because it’s only 22 years. It’s not slavery because I can sell out of the contract any time I feel like it. And I still question whether it’s “debt.” Do you, prof,live for free? No, you are simply paying a series of one-year mortgages.
Renters are in debt too. Don’t believe me? Skip a monthly payment. And report back how you’re not in debt.
30 years is 22 years? More OxyMath?
Renters sign 30 year debt instruments?
Renters are debt(loss)?
No no… YOU are in debt. Deep in debt(loss) on a rapidly depreciating asset that you overpaid by 150-200%.
It s slavery because it is a relentless obligation to serve.
You are in debt because you spent a pile of money that you “borrowed” and you have to pay it back with interest or there are consequences. You think this is not debt and that renters are in debt! This borders on psychosis.
^
DyingLMAO
I do not borrow money to pay rent. I can break my lease with a one month penalty. I am free still to move about the country. Even though I am now a direct hire and supposedly more secure job, a former colleague of mine told me. Am still a contractor. I like that.
“How is it debt slavery for life?”
Slight exaggeration; how about ‘debt slavery for thirty years’?
“Renters are in debt too. Don’t believe me? Skip a monthly payment.”
This is a risible strawman. Even in unaffordable San Diego, one month’s rent is a couple of thousand. If you skip a monthly payment, you stiff your landlord by a couple of thousand dollars, and put your family at risk of getting evicted.
By contrast, buying a home at today’s artificially inflated prices puts your household at risk of losing hundreds of thousands of dollars in case the Fed’s underwater mortgage rescue plan ever comes to an end and prices revert towards fundamental, affordable values, as they already have in many parts of the country. Even with the underwater rescue plan in full force, the ship is taking on water and risks sinking.
“Renters are in debt too. Don’t believe me? Skip a monthly payment.”
She has a token point.
I have long believed that we are all born into bondage—a bondage to our lifetime of physical needs. These are not actually that large: food, water, air, clothing, shelter; and they are generally confused with a great many non-needs.
But the needs do exist, and we all must serve them, or others who can offer to satisfy them, during our lifetime.
“the ship is taking on water”
The problem with a “holed” ship is that as the ship takes on water, the force and velocity of the leak increases. This means it takes an ever increasing amount of effort to bail it.
It helps if the officers shout that the ship is rising in the loudest voices possible, as it encourages the pumpers. At some point though, it is better to be in the lifeboat.
I’m talking about owning an overpriced mortgaged house, of course.
“At some point though, it is better to be in the lifeboat.”
That is spot on! And the trillion dollar question is exactly what point is it that one is better off in the lifeboat?
One of my former professors moved overseas a couple of years ago. The last time I saw him, he commented that “I’ve always been one of the first rats to leave the sinking ship.”
You think this is not debt and that renters are in debt!
Of course renters are in “debt”. Look at the definition of the word. When one rents, money is due each month.
debt /det/ Noun
1. Something, typically money, that is owed or due…
dictionary.com
This borders on psychosis.
What borders on “psychosis” is HA’s and to a lesser extent your constant attacks on anyone who offers a differing opinion in certain situations on housing. That borders on psychosis.
‘Of course renters are in “debt”.’
Oxide’s point is a strawman with which I am intimately acquainted, which I call qualitative obfuscation of significant quantitative differences.
In this case, Oxide is suggesting that owing $500,000 or more on a mortgage is no different than owing your landlord $2K or less on your next monthly payment, because both are ‘debt.’
To put a finer point on it, the commitment costs of entering a 30-year mortgage obligation and the weasel costs of leaving it are far greater than what faces a renter in a one-year lease.
no different than owing your landlord $2K or less on your next monthly payment, because both are ‘debt.’
Fair enough, and very true. The renter never gets trapped upside-down in a lease due to the leverage that they used.
which I call qualitative obfuscation of significant quantitative differences.
LOVE that turn of phrase!
Renters are in debt too. Don’t believe me? Skip a monthly payment. And report back how you’re not in debt.
Wow. Where to start? I guess this misunderstanding is the downside to the lack of debtors prisons…
“Difference of opinion”?
There are no differences in hard numbers like building costs and the number of excess empty houses.
Take your “opinion” elsewhere. We discuss truth.
I stopped paying my rent in May. I am glad not to be in prison over this. I’m running around like a free man!
“It’s not slavery because I can sell out of the contract any time I feel like it.”
How does that work if your mortgage ever goes underwater?
Or have you assumed away that contingency?
“…qualitative obfuscation of significant quantitative differences.”
It’s SOP for propagandists.
Just to answer stuff:
$2000 a month will rent something equivalent to a $250K mortgage, not $500K.
I said 22 years because I’m adding extra payments on principle. Even then, my PITI is less than my rent.
I do not “borrow” money to pay my mortgage either. I have a job.
Will my house go underwater? My guess says no, because I did put money down. And I still think there is enough cash out there to buy up houses even if prices do fall. And yes, a house contract does take longer, and more money, to get out of than a rental contract. However, buying offers the promise of a paid-off house at the back end. That has always been the trade-off.
The renter never gets trapped upside-down in a lease
Actually, wouldn’t a renter be trapped in a lease when the rent rises above the PITI for an equivalent place. If I were to rent an equivalent place, the rent is already higher than PITI. If I were to rent a 1-bed apartment, rent would increase above PITI in 12-13 years or so.
Drowning Debt Donkey,
A $400k note is well under $2000 a month.
And yes, you’re underwater but we’re sure OxyMath says you’re not.
There is that, but renting 1-bed will be $4000 a month in ten years. Learn to extrapolate. I suppose government spending will also be 200% of GDP then.
Renter is locked in for one year (usually) after which they can walk away and find another domicile. House with mortgage does not have the same seamless transition unless they line up a buyer or renter for the property.
Renters don’t have to pay for a new roof, furnace, ac, appliances etc. which will give out and need replacing at some point. Don’t forget that the house will have to be updated to the current trends when you go to unload, as the buyers won’t pay top dollar for a dated abode.
YUP, much of the inflation is “thanks” to our corrupt and insane government.
Deep-six F & F….and you would see housing prices become affordable.
What does this have to do with pancakes?
Is there a pancake bubble too?
Pancakes good, leverage bad.
‘Britain is flirting with another runaway rise in house prices, economists warned this week.
A majority asked in a Reuters poll put the chances at 50-50 or higher over the next five years.
Only nine out of 29 economists surveyed said the prospect of another house price bubble – where prices rise so fast they are at risk of a sharp correction – is small. But the other 20 were split between seven describing the risk as even, 11 as likely, and two as very likely.
Mark Harris, chief executive of mortgage broker SPF Private Clients, is also concerned about the risks of a bubble.
“With returns on cash hopeless, buy-to-let investors returning to the market in droves and the introduction of government schemes to help homebuyers, we have all the makings of a housing bubble so it is important to moderate and not get too carried away,” he said.
With the Bank of England’s base rate having never been lower and the new Bank Governor, Mark Carney, last week signalling that rates may not rise for three years, it’s no wonder more people are thinking about joining the property ladder or taking advantage of the attractive headline rates to move home.”
Same movie everywhere…..
“… and the introduction of government schemes to help homebuyers.”
This should read “government schemes to help lenders.”
Helping homebuyers is an easy sell - a much easier a sell than helping lenders - so this how it is packaged up and marketed.
This should read “government schemes to help lenders.”
+1 “There are two ways to conquer and enslave a nation. One is by sword, the other is by debt.” - John Adams, 2nd President of the United States and a Founding Father
Do any of you out there have a link to information regarding bogus stats from the real estate crowd concerning sales and prices at the top of your housing bubble. Info here in Canada seems to intimate such a strategy is being used. The report’s site is down today, but you can read the gist of it here.http://www.greaterfool.ca/
There’s alot of it out there and much of it chronicled right here on the HBB. The most frequent observation is clear cut omission of data by state and regional realtard organizations. And the most hubristic occurred after NAR was caught publishing false/fake sales data every month for 5 years running.
That was specific.
Found it. Also this. Neo-feudalism in the UK. http://www.theguardian.com/books/2013/aug/18/default-line-extract-faisal-islam-housing
Excellent summation, rosie. Thanks for posting this.
Here’s your concise analysis of the origins of the UK credit bubble. Key takeaways:
“…The housing market is not really a market for houses. The housing market is driven principally by the availability of finance, mainly mortgage debt, but sometimes bonuses, inheritances, or hot money from abroad…
…The property ladder was a one-off opportunity for a lucky generation-and-a-half. Now we are back to a kind of neo-feudalism, in which your quality of life depends on who your parents are, and what they owned….”
A 30 year loan might be appropriate for a new house built with low maintenance materials, otherwise a 15 yr loan is the way to go. That way you have equity built up when the inevitable repairs come.
I studied inflection points in a calculus class back in the day and figured out the inflection point on a mortgage was about 12 years. After that a extra year doesn’t make nearly as big a difference in the payment.
The inflection points will vary with the interest rates. With higher interest rates early payments in the amortization schedule are predominately interest. As interest rates fall, a greater percentage of the initial payments go towards principal.
At the extreme lower limit, zero percent, the entire amount of each payment is 100% principal.
It occurs to me that as the dust from the info revolution settles, the 30-year mortgage will stage a comeback.
Here’s why:
The nomads of this generation (the millennial equivalent of the corporation man of the 50-60’s who was transferred all over the country while wifey and family followed meekly), will, like them, eventually find their niche and root. Society simply cannot afford an unstable population where families and communities are uprooted almost as soon as they alight. And the rapid-turnover mortgage brokers, having made a shambles of their experiment, will no longer be able to count on federal bailouts to make their mistakes whole again.
Incomes are declining, jobs are becoming more precious (meaning management can extract greater commitment from employees), and rental rates soon will no longer cover the costs of ownership. Public housing (as we’ve known it) isn’t politically tenable, so smaller, cheaper SFH purchased on affordable thirty, forty, even lifetime mortgages will be more in demand.
Keep in mind also, that retiring Boomers may prefer to structure income from existing properties as private person-to-person reverse-mortgage annuities rather than sell them outright and let a bank broker the transaction.
Yet the notion that massively inflated prices falling to affordable levels completely eludes you.
You are now officially full of strawman feces; so invested in your mantra you can’t even recognize your fan base anymore. Sad. So very sad.
“Fan base”????
That’s what it’s about for you? A popularity contest? I think it’s time for you get some help Prom Queen. Quickly.
And on and on it goes. Back in your hole, weasel. The adults are trying to talk here.
They’re your words Prom Queen.
You’ve got some answering to do. Get at it.
You forgot one thing? America, Hong Kong, Japan and South Korea were the market economies of the 60s up to maybe late 80s. The need to uproot is partly caused by world competition. Now competion has gone high octane.
Conservatives are defined as most resistant to change, and eventually they cannot hide from the reality of change and have to accept it. Gay marriage. Atheism growing in America. World competion driving jobs overseas. Conservatives are either hide their disdain for market economies (Republican mainstream) or are vocally against economic freedom (Most democrats).
I am a liberal in true form. Modern democrats and so called “progressives” are in reality conservative and regressive. They are the true Orwellians who successfully stole two concepts describing voluntaryism and twisted them into meaning the opposite.
Necessity trumps ideology any day. And if you want to be truly free, it’s best to avoid labels. They only slow you down.
The point is that you have not accepted change. The other nations have gone away from thugs racy to market economies and the have to in order to keep down rebellions such as Tianmen square (if China ever pulls that off again) India will become the strongest economy on the planet).
Market economies? Surely you jest? The are ALL protectionist. We are the economy with open markets and free trade. And a fat lot of good it has done us.
“I”? “I” “have not accepted change”? GMAFB. I’m so John Galt up here it would make your head spin, and have been for the last 20 years. No, make that 50, ever since I read Harry Browne in high school and his words validated my sociopathy; it just took me another 30 to make it happen.
Change is a way of life for me. Change is what I live for. Do you think I give one rat’s arse for what sort of market economy you silly little people struggle within?
I do not.
So there.
Do you think I give one rat’s arse for what sort of market economy you silly little people struggle within?
Yes, I do—enough to read here, think, and share your excellent thoughts in return.
And I for one am glad that you do.
So there.
Shhhhhh.
(1.) Conservatives are defined as most resistant to change, and eventually they cannot hide from the reality of change and have to accept it. Gay marriage. Atheism growing in America.
(2.) Modern democrats and so called “progressives” are in reality conservative and regressive.
I can’t see how anyone could possibly write both 1 and 2 with a straight face.
It takes a huge amount of bias or having one’s head in the sand to pull that off. It just does not compute.
“the 30-year mortgage will stage a comeback.”
Possibly not at all.
The future may not look so much like the recent past. All any of us have ever seen with our own eyes is credit expansion. The thing most likely to happen after a massive credit expansion is a credit contraction. The next credit contraction is likely to be massive as the scale of the expansion was massive. It is hard to imagine something that hasn’t happened in living memory.
I suspect this will not look like stable happy little villages, knit together by massive long term debt obligations. It is more likely to look like something we have only heard about second and third hand, from a time before we were born, when the fear of debt overrode the enjoyment of unaffordable luxury. Mindsets developed in a great collapse or defeat will last another lifetime.
I am not pessimistic about this, rather I would prepare for the possibility of it and be positioned to enjoy life either waiting it out or riding it out. I personally think the model of living high on borrowed money is dying. I could be wrong, but I don’t think so.
The next credit contraction is likely to be massive as the scale of the expansion was massive.
Aren’t we still in credit contraction, in spite of the echo bubble? I thought I saw recent data from the Fed saying that.
If that’s the case, I’d say the contraction is likely to look a lot like the last few years. How long it lasts is harder to predict, as it depends a lot on how many ineffective delaying policies are attempted.
It will likely last until none alive remember the last time.
It will likely last until none alive remember the last time.
I used to believe that, Blue.
But when the vast majority of the public is sheltered from feeling the effects of their choices, the learning process is short-circuited. I now doubt that we will have the benefit from this episode that we have had from previous episodes: the generational memory of the dangers of debt servitude.
This time, we may learn nothing, and thus suffer the same painful consequences again in a much shorter time interval.
I still believe that manias do not go away softly, no matter how much enabling extends them. If this doesn’t leave a mark, then it wasn’t really a mania, not the kind of mania we discuss here. It may take a long time to find out how it ends, or maybe not.
Maybe not, Blue, but the only new houses most people will be able to afford in the coming years will be the low-cost, mass-produced Levittown types that were popular after WW2 — houses that are privately financed by the builder at how-much-a-month rates.
Many of the REITs who bought foreclosures with the expectation of renting them out until they can sell at a profit will likely find the cost of ownership isn’t covered by the rents they can charge, and they’ll have to sell them off at rates (if not prices) their tenants can afford.
With lowered general income comes lowered general expectations. I see a return to a 1950’s-scale economy as we rebuild our national strength after this period of world war — military and economic — and an increasing popularity for the old 30-year mortgage as part of that necessary socio-economic reorganization. But time will tell.
I agree with all of that except the future reliance on long term loans. If the government doesn’t give that up we will never “rebuild” our strength.
“Currently, almost all the boomers in STEM, especially the TE fields, are all directors, VPs and above - a sort of inverted pyramid
LOL! That statement made me chuckle.
See like every cartel this is also one. Someone here mentioned that the interested parties will never want to give up on good thing. Like in almost every area, there are those that got to higher positions not by the dint of their hard work, but by who they knew.
“by who they knew…”
Not so much. We all meet enough people along the way who offer to give us an advantage if we give up something in return. It is called the Faustian Bargain.
I can understand the attraction of being a director. But I love keeping my hands dirty and never liked the idea of being a manager. Too many are manipulative cretins who know nothing about issues affecting the product development and maintenance.
I can understand the attraction of being a director.
It’s about being a crony. You get a huge paycheck for dubious work, and if it goes south, your pals will find you another gig.
I recall a former coworker at HP who was able to switch to management. His dream is to become a director because they get “the crazy money”
“But I love keeping my hands dirty and never liked the idea of being a manager.”
You my brother by another mother, Bill!
LOL! That statement made me chuckle.
Me too. Who ever said that needs to get out more. Most STEM boomers I know (who ar estill in Tech) are still individual contributors, and that’s all they’ll ever be.
Any government backing or insurance of one party’s profit in a private transaction is fraught with danger. It’s really the camel’s nose in the tent and will invariably be gamed to failure. As it has with the current state of housing finance. However, the people gaming the system have walked away very wealthy as a result.
Heck, even QM turned out to be a Trojan Horse. Sounded like a great idea, but… the inevitable result is that it’s controlled by politicians who are deeply influenced by the business interests they are supposed to regulate. On top of that that, the loan originators / lenders got an explicit shield from liability, something they didn’t have before.
tl;dr summary: Every policy has costs and benefits. Any government insurance of private debt is a system which is ultimately bad for the population. It encourages gaming the system and the generation of bad debt, debt slavery, and all the subsequent consequences of that. It is antithetical to building wealth for American households.
Where is the bits bucket?
Furloughed.
That’s what we get for being flippant. Ben works hard on his topical posts — the one’s that require reading and critical thought– where only a fraction of us post with any regularity.
(Ahem) Maybe he wants us to focus our attentions there for awhile instead…?
(Ahem) Maybe he wants us to focus our attentions there for awhile instead…?
I’m down with that. Of course, it may get more off-topic posts (and thus a lower signal-to-noise ratio) as a result.
I think it was mistakenly intercepted by the NSA while they were looking for terrorist rodeo clowns.
OK, I’ll try and be pithy for once. Remember this- With all of the hyperventilating, realtor/greator fool-inspired blather about interest rates increasing rapidly and the URGENCY to buy NOW or be forever relegated to living in a yurt:
A higher interest rate on a loan can always be renegociated LOWER in the coming years, but an incomprehensibly, unreasonably high selling price obligates you FOREVER once you sign the mortgage document. Remember that the BUYER is the one signing The Big Check and without that signature, NOBODY at the closing table gets paid. NOBODY. Who is putting their ass on the line? The BUYER. Who is absorbing ALL the risk? The BUYER. Who gets screwed if the whole thing is misrepresented? The BUYER. So who kisses the buyer’s ass? EVERYONE WHO WANTS TO GET PAID. If they don’t treat THIS buyer right, who signs The Big Check? Not me- maybe some other schmuck- but I’ll wait until their price goes down. If they don’t like that, they can pound sand. I watched this movie 4 years ago and I know how it will end. Anyone ignorant or delusional enough to try to outwit our outwait reality- good luck! You will need it.
You are eloquent. Stay on ‘em and keep speaking the truth like you’ve done.
“So who kisses the buyer’s ass? EVERYONE WHO WANTS TO GET PAID.”
Everyone who wants to get paid acts as a shill, acts to keep the transaction moving foreward.
And it’s not just those that are directly getting paid that act in this manner; The lenders and those who back the lenders (i.e. the FED) also act to keep transactions moving foreward because these folks too have a stake in keeping prices up.
There are swarms - herds - of people who have an interest in raising home prices and few that have an interest in lowering them.
They may have an interest but no means to make it happen.
Wrong word: “Shill” should be “promoter”.
Everyone who has an interest in moving the transaction forward acts as a promoter and works to keep the transaction moving foreward.
It works because people move in herds.
And why did it stop last time, when people- in herds- stopped moving? And why do you believe that it won’t happen again- like it has EVERY other time? Because THIS time is different? Because THIS time, YOU are involved? Magical thinking. Let me know how that works out for you. Better still, I will let YOU know how that works out for you, because - like millions of others- I am not signing The Big Check right now. Information is power. Buyers have power. Sellers only have magical thinking.
“And why do you believe that it won’t happen again - like it has EVERY other time?”
Where did this come from? Where in my post did I say anything about I “believe that it won’t happen again”?
“Let me know how that works out for you.”
And this, what sparked this?
Maybe your ’snark’ tags aren’t visible, but from your other posts you seem to strike the pose of a RE cheerleader, apologist and enabler.You seem to advocate and defend P.T. Barnum’s brand of hucksterism and weeks ago you made a comment where you rationalized bubble/flipper behavior by stating words to the effect that, ‘I don’t make stupid people, I just take advantage of them’.
If you look around the table and do not know who the mark is….
“A higher interest loan can always be renegotiated…”
Agree. Care to tell me WHEN we will see these lower prices and higher interest loans? Soon enough to justify paying rent While we wait? I still believe that higher interest may only drop prices a little. Then the cash will come back in and snap up to rent out. They don’t care about interest rates.
Donkey,
Renting for 18 months costs MORE than taking a $150k loss (add financing) as a resulting of overpaying for a rapidly depreciating house?
Seriously?
At least you’re offering a timeline. You think houses are going to craaater by $150K in 18 months? Check.
Your losses in just a few short months are what? $100k?
Check.
“cash….don’t care about interest rates”
The “cash” isn’t available.
This fundamental lack of insight will provide you with a profound shock. Rents, house prices, employment, wages, even government spending will collapse with a rise in interest rates.
“I still believe that higher interest may only drop prices a little.”
I’m frankly shocked that a self-professed scientist engages in such magical thinking. Have you totally ignored the many posts I have made in the past several months illustrating how a slight increase in interest rates significantly hammers purchase budgets (assuming the same monthly payment)?
Do you believe that higher interest rates mean that incomes will increase in lockstep to keep purchasing power unchanged?
Don’t be so critical. She never claimed to be a scientist, rather to work with the sort.
I have no idea WHEN and I never stated that I did. YOU have no knowledge of what loans or housing prices will be in 2 months- much less 2 or 10 years. I simply stated the obvious truth that a loan can always be renegotiated. How about this one: How long after purchasing a house can you renegotiate the selling price? I can answer that one for you with certainty- NEVER. Once you obligate yourself to overpaying for a house, you are chained to that price forever.
“Who is putting their ass on the line? The BUYER. Who is absorbing ALL the risk? The BUYER.”
Time will tell whether it stays that way.
Whether it does depends in part on the courts’ willingness to side with wealthy investors against poor, black, inner city residents and other people of color with little financial or political power.
And to overturn a Supreme Court precedent.
California Eminent Domain Isn’t Government Run Amok
By Stephen Mihm Aug 16, 2013 8:24 AM PT
To judge from the disparaging reaction to its plan to use eminent domain to cope with underwater homes, you’d think the city leaders of Richmond, California, had proposed an outrageous and unprecedented distortion of state power.
Filing suit against Richmond, BlackRock Inc., Pacific Investment Management Co. and other plaintiffs alleged that the city’s proposal amounts to an “unconstitutional application of eminent domain” and a “brazen scheme.” The Federal Housing Finance Agency announced that it was considering ceasing to do business in municipalities that pursue this course. Media coverage generally echoed the plaintiffs’ take. USA Today’s headline summed up the conventional wisdom, declaring that Richmond “runs amok with eminent domain.”
In fact, the city’s plan relies not on a novel use of eminent domain but on one endorsed by the conservative Supreme Court of 1935. And although there is a long history of excessive use of eminent domain, Richmond’s plan has no place in it. Richmond’s plan is to seize 624 mortgages valued at more than the homes for which they were written. Relying on a private intermediary, the city would compensate the investor holding a mortgage at a price reflecting the home’s current value rather than an inflated bubble value. The city would then sell a more modest loan to the homeowner. Richmond hopes this will induce residents to remain in their homes and pay their mortgages and property taxes. Proponents of the plan also point out that this probably will lower the risk of default, protecting investors holding the mortgages.
Nonetheless, the big players in the bond markets are angry that they’re being forced to accede to the demands of a small city in California. Before they fight city hall, the plaintiffs should appreciate that use of eminent domain to seize intangible assets like mortgages has a solid history. Federal courts have long sanctioned the taking of everything from shares of stock to contract rights, insurance policies and even hunting rights.
But mortgages? Yes. Consider a famous Supreme Court case from the Great Depression. During that crisis, banks foreclosed on farmers who fell behind on their mortgage payments. In response, Congress passed the Farm Bankruptcy Act granting farmers five years to negotiate a reduction in the principal of their loans. Farmers were entitled to buy the property at the current appraised value, even if it fell short of the value attached to the original mortgage.
Then, as now, banks didn’t like the policy and went to court, arguing that it violated their property rights, as guaranteed under the Fifth Amendment. In May 1935, the Supreme Court overturned the law in a unanimous decision, the first of several such rulings that made the court into a conservative counterweight to the New Deal. Nevertheless, in the final paragraph of its decision, the court laid out an alternative course for just the kind of remedy the Farm Bankruptcy Act had sought.
Justice Louis Brandeis observed, “If the public interest requires, and permits, the taking of property of individual mortgagees in order to relieve the necessities of individual mortgagors, resort must be had to proceedings by eminent domain.”
In effect, the court stated that if the government wished to modify loans, it could only do so via an eminent domain proceeding of precisely the sort now being contemplated in Richmond. Brandeis didn’t think this a particularly controversial point; he made no effort to defend it or explain his reasoning because it was an established doctrine.
And so it remains today: Intangible assets have again and again been deemed fair game for eminent domain proceedings, so long as “just compensation” is given. In California, the state Supreme Court has taken a similar stance: A decision in 2008, for example, affirmed longstanding precedent that the state’s eminent domain law “authorizes the taking of intangible property.”
None of this is to suggest that eminent domain hasn’t been abused. In the postwar era, however, its victims have not been investors but poor, black, inner city residents.
…
O.T. (missing the bits bucket today…)
Friday Humor: The New Normal Miranda Rights
Submitted by Tyler Durden on 08/16/2013 18:41
Miranda Warning 2013…
YOU HAVE THE RIGHT TO REMAIN SILENT. ANYTHING THAT HAS BEEN SECRETLY GIVEN TO US BY THE NSA CAN BE USED AGAINST YOU AND WE CAN CONCEAL THAT INFORMATION FROM YOU, YOUR ATTORNEY AND THE COURTS.
That’s not even remotely humorous. Alas.
It’s not funny, it’s true.
Enough! You’re Wrong About Bonds
By Michael A. Gayed Aug 15, 2013 10:40 am
You are mistaken if you think spiking rates are bullish. Period.
Interest rates are the heart, soul, and life of the free enterprise system.
– Michael E.S. Gayed
I fail to understand why no one is getting more concerned about the way bond yields have behaved in the past few months. For some time now, I have warned that spiking interest rates are not a good thing for the economy and for the stock market. While historically one can point to rising rates as desirable for equities, the rate of rising rates is almost always ignored. So let me make this as clear as I can: Rising rates are good if gradual, and if it is a reflection of demand for money (inflationary). However, if rates spike, it serves as a shock (deflationary).
It is for this reason that I have in the last few days argued that there are parallels to 1987 here in 2013. In 1987, yields spiked and the Dow Jones Industrial Average (INDEXDJX:.DJI) was on a tear. The Crash of 1987 was a coiled response to the bond market shock as investors, after a lag, panicked. History never exactly repeats, but it is instructive to consider fragility in US averages when bonds act violently and stocks have a delayed reaction. Interest rates are what differentiate capitalism from communism. Interest rates are what drive risk taking. If you want to cause an instant depression, raise rates overnight to 25%. If you want a massive boom, lower rates to -25%. You’ll get Dow 100,000 alright, but of course, that comes at the expense of inflation.
So what does this imply about “Sep-taper?” First, I find it hard to believe that the Fed will get too aggressive on any kind of reduction of stimulus. The Fed does not dictate policy – the market does. In a world where the multiplier is broken, market cap volatility can erase the benefits of any kind of “wealth effect” for stocks. Any kind of violent reaction that may be in the midst of happening would be a warning shot to the Fed. From an investment implications standpoint, that means we may see the bond market soon recover as stocks scare Super Ben and the League of Extraordinary Bankers into action.
…
“First, I find it hard to believe that the Fed will get too aggressive on any kind of reduction of stimulus. The Fed does not dictate policy – the market does.”
+1 All we’ve done so far is rearrange the proverbial sinking ship’s deck chairs by rewriting the terms of government debt; think Greece, little real progress. At the family level propagandized newspaper stories blur the difference between paying down debt or having it discharged in bankruptcy and crown the piece with a misleading title that suggests things are getting better.
Like the mortgage interest tax deduction, the 30 year debt slavery instrument needs to die a painful death.
“Families raising children cannot afford a mortgage with terms longer than ten years because their children eventually cost more in their teen and college years.”
The 30 year mortgage is a great deal when inflation is higher and incomes are rising. The first 10 years are painful, but after than their share of one’s income is much lower, and more of that payment is going to amortization.
The disinflation of the past 30 years has increased the real cost of that mortgage.
You are on the right track, but perhaps missing something important.
The low interest rates which naturally accompany a deflationary environment at the end of a mania were hammered down to multigenerational (perhaps all-time) lows by the Fed’s QE1, QE2 and QE3 rate suppression policies. While this made it recently possible for American households to purchase more expensive homes on the same monthly payment, it conversely inflated home purchase prices beyond fundamental value by artificially stimulating housing demand.
While the 30-year mortgagee’s biggest cost two decades ago clearly was making cumulative interest payments of about two times the purchase price of the home, today’s buyer faces the risk of buying with a loan calibrated to artificially inflated purchase prices. When and if interest rates revert to historic norms, today’s buyers will most likely remain underwater forever.
When is overpaying by 150% for a rapidly depreciating house and then financing it for 30 years ever a good idea?
Anyone? Hello?
Right after you wake up in a strange hotel room with an 8-ball tattooed on your forehead and a nameless woman lying asleep next to you with a diamond ring on her finger?
LOL
When you sell it to someone who will overpay by 200%.
And as long as the birth rate of suckers who will do this is somewhere around one a minute there should be no shortage of willing buyers. The only thing that limits their excesses is their access to money.
These willing buyers are often willing buyers indirectly - willing buyers by proxy.
What these buyers by proxy would never dare to do as individuals they will willingly do collectively. They do this collectively by pooling their money into a fund of some sort and the folks who run the fund are the ones who go out into the marketplace and do the buying.
The folks who run the fund do not have the restraint due to fear that individuals have because the money they use for this buying doesn’t belong to them.
Plus, if done correctly, the buying by the fund guys can act to push up prices of not only what they are currently buying but also can push up the prices for what they have already bought.
If they take some of their fees from what capital gains they incur then they have an incentive to pump up the capital gains, and if they can control prices then they can control their capital gains.
And the best part is …
(ta da)
… this is all done with somebody else’s money.
And as long as the birth rate of suckers who will do this is somewhere around one a minute there should be no shortage of willing buyers.
It’s a good thing that the US birth rate is lowest in this countrys’ history.
“When is overpaying by 150% for a rapidly depreciating house and then financing it for 30 years ever a good idea?”
When you make the first twelve neg-am teaser payments, then stop paying, cry foul, then live in it for free for six years and get a $10k check as a parting gift.
Or, overpay by 150% for a rapidly depreciating house, finance it for 30 years with $0 down, rent it out, make the first twelve neg-am teaser payments, then stop paying, cry foul, continue to collect rent for the next 6 years on the rapidly depreciating house that you financed for 30 years with $0 down while you are not paying the mortgage, pocket the cash while not reporting it as income to the IRS and then short sell it.
When is being a scammer a good idea?
When you can get away with it?
When is overpaying by 150% for a rapidly depreciating house and then financing it for 30 years ever a good idea?
After you pay it off in 15. Or when someone “overpays” you 200% for it.
Or when you put nothing down, lose your job or health and get to live in it “free” for a few years.
Or when you overpay 150% for it and it’s still cheaper than renting.
Wrong again. Rental rates are half the cost of buying at current grossly inflated asking prices of resale housing.
Lending at interest has been called usury for many centuries. The word usury means literally being used. John Wayne said “I’m used” meaning he was tired. So to borrowing money is volunteering to be used and it will make you tired.
I’m telling you there are better ways to get your “used and tired” than to borrow money from a bank for 30 years.
Hey Ben,
Hope you’re out having fun, getting tired and used, not down with something!
I’m on about day 20 straight of working, with a few more to go. With all the rain, I’m in the middle of lots of brush hogging.
Here’s one possible reason why we have 30 year mortgages; if we didn’t we wouldn’t need the federal government to back them. The President just came out with the (usual BS) speech on housing, announced this and that but just said we have to keep 30 year mortgages. He didn’t say why really, or that we should have a public discussion on the matter, just that this is the way it’s going to be. It looks to me like the REIC and wall street makes a lot of money on this arrangement, and that’s why we have them.
I was thinking about what one poster here has been saying; that he believed there was a bubble years ago, but that has passed and there’s no bubble now. He’s making money and you should too. You’re just living in the past, etc.
See, this is a clever position that avoids having to back anything up. It works like this; I used to believe the way you do, but I saw the light. I am therefore enlightened, and you are not. Until you come to see things the way I do, you will be clueless in the dark. Alone, wandering, and poor. Until, that is, you wake up to see what your intellectual superiors see.
It doesn’t matter what topic, this thing works if you accept the face of it. No facts even need to enter into it.
Down with work can be a good thing, to a point.
On a more mundane note, the cool and rainy weather we’ve had in the NE is producing an excellent and abundant sweet corn harvest. The best in years.
There are a couple of ways that it won’t just continue to be that way. I think the people need to say they want their power back. Don’t know what that will take.
“sweet corn harvest”
One of my fav memories of upstate
Beyond envious here. Because of drought and extremely erratic weather patterns, no one’s harvested commercial corn or hay here in Central CA. for two years. The herds are so thinned as to be virtually non-existent.
On the bright side, I think I’ve finally eradicated the mustard and foxtails….
Some of the field corn here is over 8 ft tall. A ltiile to the north, not so much as they got too much rain.
become part of the protected class, buy a house!!!!
you cannot lose in the casino. I dont make the rules.
They turned housing into a casino like stocks so you just have to play your cards right.
the good old days of banks loaning money out of deposits are over.
Now a loan is originated, sold to fannie or freddie, and the money is then loaned over gain.
You need to keep enough people in the game to keep prices going up for the bankers.
Its a big club and u aint in it!!!!!!
Now here’s some trolling classics:
‘become part of the protected class, buy a house’
You forgot ‘or otherwise you’ll live in your parents basement’. See you have to throw in a put down regularly.
‘!!!!’
That’s probably one exclamation point too many.
‘I dont make the rules’
This is one of my favorites; I’m really one of you guys, and I feel your pain, but ya gotta buy a house!!!’
‘They turned housing into a casino like stocks so you just have to play your cards right’
That one’s no good. Simple minded people can’t juggle stocks, houses and card playing all at once. Simplify man, simplify!!!
‘the good old days of banks loaning money out of deposits are over’
Now you’re getting it; ‘wake up old man (notice the put down?). It’s a new day and you are living in the past. This is how things are done now. Buy a house!!!’ - (you aren’t saying buy a house often enough).
‘You need to keep enough people in the game to keep prices going up for the bankers.’
Naah, no good. You have to say something like ‘don’t fight the Fed.’ Sounds more inevitable. But you get a minor bonus point for mentioning ‘prices going up.’
‘Its a big club and u aint in it!!!!!!’
Now that’s bad trolling. You should say, ‘it’s a big club and the only way to join is to buy a house!!!”
your the man ben jones!!!
i guess I’ve become a bit cynical with all this. Well see how it all plays out.
I’m not going to sit around for another 5 years and watch it all happen.
“I’m not going to sit around for another 5 years and watch it all happen.”
Now that you’ve decided to not sit around for another 5 years, it is plainly obvious that anyone who doesn’t go out and buy themselves ten investment houses is a fool!
“Hyperbole”. Look it up. Also “irony”, “parody” and arguably bad “satire”.
It’s occurred to more than one poster on this board that az is simply HA in alter-ego. Double the trolling, double the fun….
“It’s occurred to more than one poster on this board that az is simply HA in alter-ego.”
Though that would be an awesome revelation, I fear their writing styles are too different to support this hypothesis (unless there is a split personality at play!).
You’ve got some answering to do Prom Queen.
The mark of a good writer, which exeter can be, is the ability to write in multiple voices — including lousy syntax, execrable punctuation and uni-level thinking.
But yes. I concur with your assessment because Ben just zapped az in all sincerity. Unless….
Back to the nerd wall with you, weasel. Fetch me some punch.
Get calculating Prom Queen.
‘I’m not going to sit around for another 5 years’
Dude #2, you have got me all wrong. How does a roofer feel about a hail storm? Or a windshield repair guy? See, I’m in the foreclosure business, and when I see people buying houses like crazy, borrowing a bunch of money, I’m more excited than Bill Clinton in a school for wayward girls. I really want you to buy many houses. Especially in Flagstaff. Borrow every extra penny you can get, even if it’s from your grandma. If the prices goes up a tiny bit, please refinance and buy a little condo or something. Why? Because YOU’RE the man #2, you are the man.
Ouch ouch ouch, BJ. My poor little sides are hurting.
“Who does #2 work for?!…”
See, I’m in the foreclosure business, and when I see people buying houses like crazy, borrowing a bunch of money, I’m more excited than Bill Clinton in a school for wayward girls.
Pure poetry…[sniff].
I think dude 1 & 2 has the right idea…he sees the situation for what it is. But I think he is way too confident that he can dump his houses/equities to someone at the right time. I doubt it will work.
The “situation is” that losses associated with housing at current asking prices are massive.
Has anyone else noticed that Beer and Cigar Guy always posts right next to HA?
Ol’ Barbara,
Truth must be a conspiracy.
Fan boy. B&C’s been around as long as you have — since long before HA became HA. And he wasn’t on the same side of HA’s arguments back then.
“…or that we should have a public discussion on the matter, just that this is the way it’s going to be.”
More and more, it seems like top policy in the U.S. is dictated by decree with no public voice (aside from industry lobbyists) driving the decisions.
“It doesn’t matter what topic, this thing works if you accept the face of it. No facts even need to enter into it.”
It works remarkably well for religious conversion!
Anything that can compare old with new. Even atheism; I used to believe in the imaginary man in heaven, but now I see that he doesn’t exist.
Globalism is a good example; the nation state has gone the way of the buggy whip (it’s important to use past tense - it’s already happened and you missed it dummy. It is also therefore inevitable). The way forward can only be a global network of trade, managed by organizations (lead by the elites, of course) that transcend nations and operate by global rules only (which elites have establish and will maintain; no voting/individual input necessary).
“It looks to me like the REIC and wall street makes a lot of money on this arrangement, and that’s why we have them.”
Old way for financiers to make money off the 30-year mortgage:
Convince homedebtors to buy a nicer, larger home off the same monthly payment, thereby tricking them into paying 2/3rds of 360 mortgage payments as interest to the bank, with much of it paid up front (e.g. over the first ten years).
New way for financiers to make money off the 30-year mortgage:
Lure unsuspecting homebuyers to use low-interest mortgages to purchase homes at bubble-inflated price levels, leaving the homedebtors holding the bag on making payments in excess of the value of the underlying once mortgage rates revert to historic norms and home prices adjust downwards to fundamental values.
If the bankers have an interest in the collateral staying close to the loan amount believe me the central bank with see that that happens.
Believe you? A Housing Troll and established liar? Why?
hey loser how u doing today? still blowing smoke I see.
Answer up. Why?
“If the bankers have an interest in the collateral staying close to the loan amount believe me the central bank with see that that happens.”
They already tried and failed. Despite QE3 continuously pumping $40 bn a month into MBS purchases, mortgage rates have taken off like a bat out of hell.
Mortgage rates on march to 5 percent
Commentary: One year into housing recovery, jobs showing signs of life
Lou Barnes
Contributor
Aug 16, 2013
Long Treasurys broke upward, out of the trading range of the last eight weeks. Not by much, but out, the 10-year T-note above 2.8 percent for the first time in more than two years — 2.86 percent at this moment. Mortgages are stickier, the rise negligible (investors have lost fear of another refi wave), but the march toward 5 percent is underway.
…
Another historical pattern: When the Fed appears to be turning, long-term rates always rise. And people like me always warn that the rise may abort the recovery, and it never has. This time is different in two ways (maybe). First, the panicked runup in long rates since May is not justified by Fed statements or implications, or by economic data — especially inflation. Too far too fast. Second, can it be that a still-impaired and misregulated financial system has been more dependent on QE than we or the Fed have known? Despite falling mortgage production and Treasury issuance, the Fed has been the only buyer, and rates must go much higher to find another.
…
Also worth noting: All taxpayers implicitly chip in subsidy payments to support the interest deduction on U.S. mortgages. This is especially relevant in the case of the high interest payments over a 30-year amortization period.
There’s a difference between short term and long term trends; within there is profit (for the wildly connected/lucky/daring/foolish) –sometimes.
“Here’s one possible reason why we have 30 year mortgages; if we didn’t we wouldn’t need the federal government to back them.”
Dead on right.
Other countries have limited government involvement in home finance, they still had a bubble, but they have no 30-year mortgage.
The only way a 30-year mortgage exists, is if there is protection for the lenders against rising interest rates. You get this by selling the mortgages quickly (or charging a higher interest rate to begin with).
Take away the 30-year, there is no need for government backing.
Take away the government backing, there will be no 30-year.
Take away the government backing, there will be no 30-year.
Nonsense.
Without the government backing, there is more risk: increased interest rate risk due to the increased duration.
But that doesn’t mean NO ONE would lend for 30yrs. It does mean that lenders would expect to be compensated for the higher risk, mostly likely via higher rates; there’s also a chance that they would reduce their risk through tighter underwriting standards.
Neither of those sounds like the end of the 30yr to me.
Why are there no 30-year loans elsewhere in the world?
Because 30-year loans provide too much interest rate risk for lenders. If they can put that risk upon the borrowers via adjustable rate mortgages, it is much better for the lenders.
So, the government backing leaves, and over time, since the GSEs do not anchor the 30-year rate for conforming loans at low levels (making jumbo relatively attractive at slightly higher rates), the interest rates on the 30-year loan relative to the cost of shorter term loans goes up, while the interest rates for 5- year ARMs, etc. do not. Over time and cycles, borrowers will look for the short-term high of ARMs, making the 30-year less and less competitive.
Over time, you will see the 30-year loan disappear, as the US mortgage market will look a lot like the market in the rest of the world.
Is there some other magical force that would keep our mortgage market looking like it does when the rest of the world’s mortgage market does not?
How is the eminent domain battle shaping up between the Wall Street goliaths and the tiny, impoverished city of Richmond, California?
It seems ironic that, after myriad federal government underwater homeowner rescue plans have been implemented and failed, the federal government would stand in the way of a local government’s underwater homeowner bailout plan which might prove both legal and effective.
Wall Street sues California city looking to bail out homeowners
Published time: August 15, 2013 02:58
Edited time: August 15, 2013 22:54
Justin Sullivan/Getty Images/AFP
A city in California has become ground zero in a battle with mortgage lenders and now the federal government in its push to implement a radical new plan to assist homeowners who cannot meet the terms of their loans.
The Bay Area city of Richmond is the first to push for the use of eminent domain in a plan that would see mortgages in repayment delinquency seized from lenders and investors, or rather sold at a deep discount, by the city, and then refinanced on behalf of borrowers with more affordable terms.
The US Federal Housing Finance Agency, which regulates mortgage giants Fannie Mae and Freddie Mac, has now said that it will move to halt the use of eminent domain by cities to seize underwater mortgages from lenders.
Richmond, a working-class city of 106,000 people in the East Bay, has a large population of both blacks and Latinos, and was hard hit by the US housing crisis, with homeownership rates considerably below the national average according to the LA Times.
Richmond’s plan is unusual since eminent domain is usually only invoked to obtain land needed for public projects such as highways, or at other times to take possession of run down and abandoned structures. The concept itself is deeply ingrained in both the US Constitution and that of state constitutions.
The federal housing agency indicated on Thursday that it has no intention of allowing the city to go forward with its mortgage plan, and will instruct Fannie and Freddie to “limit, restrict or cease business activities” in any jurisdiction using eminent domain to seize mortgages according to the Los Angeles Times.
The agency’s move on Thursday has now set the stage for a battle that has been developing since last week, when three mortgage-bound trustees filed a suit in a federal court in Northern California and asked for a preliminary injunction against the city of Richmond and Mortgage Resolution Partners, a firm contracting with the city to implement its planned strategy.
The mortgage holders involved in last week’s suit were prompted to sue by firms including Newport Beach-based Pacific Investment Management Co., BlackRock Inc. of New York and DoubleLine Capital of Los Angeles. According to the lawsuit, Richmond’s program could potentially cost investors losses of $200 or more.
Though the lawsuit involves large players in the mortgage securities business Mortgage Resolution Partners Chairman Steven Gluckstern seemed unphased, calling the suit “without merit” and that actions by his firm and the city of Richmond were “entirely within the law.”
“No investor in any trust will be made worse off by the sale of any loan,” Gluckstern said in the statement. “Rather, it is these trustees that are wasting trust assets at the expense of America’s pensioners by pursuing fruitless litigation.”
…
How many of you folks in blog land would be willing to pay 40% of your monthly income for the privilege of home ownership?
The “40% of monthly income” strawman is what the Zilldoes come up at mortgage rates of just 5%. How much of monthly income would they predict will be spent on housing once interest rates get back up towards historic norms of 7%-9%?
Housing affordability falls with rising prices
Julie Schmit, USA TODAY 10 a.m. EDT August 18, 2013
Housing affordability takes a dip as home prices rise and mortgage rates rise.
(Photo: Justin Sullivan, Getty Images)
An era of exceptionally affordable housing is fading in some parts of the U.S. as stagnant incomes collide with rising prices and interest rates.
The share of median household income devoted to home mortgage payments recently surpassed historical averages in six of 30 major housing markets, according to John Burns Real Estate Consulting.
Five of those are in California — San Francisco, Los Angeles, Orange County, San Jose and San Diego — and the sixth is Portland, Ore.
At the bottom of the housing downturn, those cities were more affordable than their historical averages dating to 1980, Burns’ data show.
But home prices have risen rapidly in those cities as the housing recovery has taken hold.
Prices in Los Angeles and San Francisco were 21% higher in June than a year ago compared with the national average increase of almost 12%, according to CoreLogic.
Affordability remains high in most of the rest of the country.
In the second quarter, 69% of new and existing homes sold were affordable to families earning the U.S. median income of $64,400, according to the latest National Association of Home Builders/Wells Fargo Housing Opportunity Index.
That is down from almost 74% of homes sold in the first quarter and marked the lowest level for affordability in more than four years.
In 2006, at the height of the housing bubble, just 41% of homes sold were affordable for median income earners, the index shows.
Low interest rates have been a big driver of affordability.
Rates will stay near current levels — 4.4% for a 30-year, fixed-rate loan — for the next month, predicts Frank Nothaft, Freddie Mac’s chief economist. But they’ll crack 5% in mid-2014, he says.
If so, the cost of housing in 30 of 250 metropolitan areas will exceed historical averages for affordability, according to an analysis from market watcher Zillow.
Zillow’s data shows a Honolulu resident earning the median income spent about 36% of it on monthly mortgage payments from 1985 to 2000. With 5% interest rates, rising house prices and flat incomes, they would spend 40%.
…
I am OK paying less than 10%. I guess I’m missing out on something.
“Housing affordability takes a dip as home prices rise and mortgage rates rise.”
+1 And the taxpayers remain the only mortgage lender in this risky lending environment. Welcome to the grand illusion called free market capitalism.
“And the taxpayers remain the only mortgage lender in this risky lending environment.”
Since when did the Fed start paying taxes on QE3?
Which prospective Fed chair would be more likely to soon end the war on retirees’ ability to live off their accumulated savings? Yellen or Summers?
Analysis: Summers-led Fed might raise rates faster than Yellen
Alister Bull
Reuters
5:06 a.m. CDT, August 18, 2013
Former U.S. Treasury Secretary Lawrence H. “Larry” Summers speaks during a financial and economic event at the London School of Economics (LSE) in London (POOL New Reuters, / August 18, 2013)
WASHINGTON (Reuters) - Barring another financial crisis or slide back into recession, the next head of the Federal Reserve is likely to oversee a gradual normalization of monetary policy.
But that pace, including the first interest rate hike, might be somewhat quicker under former Treasury Secretary Lawrence Summers than under current Fed Vice Chair Janet Yellen, the two top contenders for the job, if their own comments are any guide.
Moreover, a Summers-led Fed would appear less likely to extend or expand the use of the extraordinary measures that the central bank has undertaken during the tenure of current chairman Ben Bernanke, whose term expires in January.
The distinction between Summers and Yellen is perhaps best illustrated by remarks they delivered at separate events in April.
Yellen, a strong supporter of Bernanke’s policies, in a speech to business editors in Washington, exhorted the Fed to keep its focus on efforts to foster a lower unemployment rate, even if it comes at a cost of stronger-than-desired inflation.
By contrast, Summers, in a separate, closed event in California later that month, raised doubts that the unemployment rate could drop all that much lower without kindling unwanted levels of inflation.
…
“Former U.S. Treasury Secretary Lawrence H. “Larry” Summers…”
I’m going to have a difficult time seeing this greedy parasite’s mug on a regular basis if the Dark Man installs him as the fed chairman.
I can’t help but suspect that floating Summers as a prospective future Fed chair is a political cover for the opposition that would face Yellen if she were promoted as Obama’s first choice.
Aug. 18, 2013, 1:26 p.m. EDT
Jackson Hole, Fed minutes dominate week
Housing data also to be released
By Greg Robb, MarketWatch
WASHINGTON (MarketWatch) — When central bankers and economists gather near Jackson Hole, Wyo., for their summer retreat this week, they know that most of the action will be 2,000 miles to the east, where President Barack Obama is considering his choice to replace Federal Reserve Chairman Ben Bernanke.
The retreat, at Jackson Lake Lodge in Grand Teton National Park, will feature speculation — some informed, some maybe not — on Obama’s deliberations over the next top central banker. And there will be an active debate among participants over whether, how and when the Fed should pull back from its $85 billion-per-month asset-purchase plan.
Bernanke has decided to skip the Jackson Hole retreat this year, so there will be no celebration of his legacy as there was for former Fed Chair Alan Greenspan in 2005.
Vice Chair Janet Yellen, one of the two leading candidates to replace Bernanke, will attend, moderating a panel discussion on Saturday. She’s not expected to make substantive comments.
Larry Summers, the former Treasury secretary and Obama confidant, will not attend.
The media, market economists and academics who attend the Jackson Hole event will press U.S. central bankers for the policy makers’ views on tapering.
Most top Fed officials who have spoken since the Fed’s last meeting have not ruled out a September tapering. St. Louis Fed President James Bullard is the only one making a strong case for waiting for either the October or December meetings.
According to The Wall Street Journal’s latest poll, 53% of economists surveyed expect the taper to begin in the third quarter and 36% expect it to begin in the fourth quarter.
There could be some more information about the central bankers views even before the retreat starts in the minutes of the July 30-31 policy meeting to be released on Wednesday at 2 p.m. Eastern.
The document could show how many policy makers were prepared to slow asset purchases, economists said.
“The July minutes may give some insight into just how strong the conviction level at the Fed is for tapering in September,” said Ethan Harris, chief U.S. economist at Bank of America Merrill Lynch.
“If the Fed is close to a September taper, then we would expect some discussion of operational details in the minutes, such as how much to taper and in which assets—mortgage-backed securities or Treasuries,” he said.
…
I was reading a little bit about the media manufactured Summers-Yellen face-off for the Fed. Something about Summers rapidly raising interest rates.
Would this be Summers pulling his version of a Volcker?
My read: The MSM believes that Summers would have the cojones to pull a Volcker while Yellen would not, both literally and figuratively speaking.
But would he? To me he always looks lazy, disinterested and incompetent. Lazy and incompetent people have been in higher positions so I guess I should just keep quiet.
“To me he always looks lazy, disinterested and incompetent.”
Appearances can be deceiving. Check out his academic publication record and get back to us.
Well, I don’t think payer walker is being considered for the fed chairman either.
Have you ever tried to get an academic paper published? Lazy, incompetent people typically aren’t among those who succeed in this business, because it takes a great deal of effort and candlepower to succeed.
Cabal membership improves the odds, IMHO.
rms — your point is totally on target!
That said, there is still quite a bit of work involved with getting just one academic publication to press. (Though I suppose cabal membership might be useful for buying research assistant time to help with the effort!)
“Something about Summers rapidly raising interest rates.”
A move that would bury our government.
Can anyone who thinks they understand kindly explain why President Obama is stepping up to defend the 30-year mortgage?
Real Estate
President Obama, Defender of the 30-Year, Fixed-Rate Mortgage
By Christopher Matthews
@crobmatthews
Aug. 08, 2013
President Obama is availing himself of the bully pulpit again this week, with a speech in Phoenix on Tuesday and an online question-and-answer session hosted by real estate website Zillow, both of which focused on the real estate market and Administration plans to further encourage the housing recovery.
During these events, the President focused on a variety of issues, from proposals aimed at helping underwater homeowners refinance their mortgages to how he believes immigration reform will help bolster the housing market. But of all the topics the President touched on, Congress currently seems most interested in addressing housing-finance reform — which means deciding what to do with Fannie Mae and Freddie Mac, the mortgage giants that the government took over during the height of the financial crisis.
Two separate pieces of legislation are presently being debated in Congress: one put forward by House Republicans and another, the bipartisan Corker-Warner bill in the Senate. In short, the House bill would wind down the federal conservatorship of Fannie and Freddie within five years, replace it with a system of private finance, while maintaining a scaled-back version of the Federal Housing Administration to help first-time and moderate-income borrowers get mortgages. The Senate bill, on the other hand, would replace Fannie and Freddie with a new government entity called the Federal Mortgage Insurance Corp., which would provide insurance for mortgage issuers and investors, for a fee, on the condition that these private participants bear the first 10% of any losses.
The President hasn’t publicly discussed the details of either of these bills, probably because they can get very boring very quickly. But he has consistently signaled his desire to protect the 30-year, fixed-rate mortgage and has argued that some sort of government role is necessary to maintain the availability of that product for most Americans.
…
MORE: A Nation of Renters: Should We Be Worried That Fewer Americans Own Homes?
In order to buy a house do you have to become a slave to the banks in most parts of the US? They will get their interest out of you one way or another partner.
U pay or you dont play?
NAR: Obama housing finance reforms ‘closely mirror’ Realtor recommendations
Realtors see government guarantee as a must for secondary mortgage market
Inman News
Aug 6, 2013
The housing finance reform plan outlined today by President Obama to wind down Fannie Mae and Freddie Mac includes principles that “closely mirror” an outline the National Association of Realtors presented to the White House in 2011, NAR says.
…
Why would our leaders follow the guidance of the National Association of Retards?
This dummy fails to recognize that all the subsidy dollars currently flowing into mortgages were a key driver of housing prices towards unaffordable bubble levels.
At what point did “homeowners” become a protected class? And
isn’t this qualification discriminatory against American service personnel, who by the nature of their occupation, are in a less favorable position to lay down roots and purchase a home on a thirty-year mortgage? Why does DC discriminate against the men and women who serve us?
they are a protected class because the banks get a lot of profits on those home loans. Its a gravy train for a banker.
an amortization table is a bankers best friend.
Once again I will say it:
Stocks and homes are playing a larger role in the economy as jobs disappear.
The amortization table was a lot friendlier to bankers back when the interest rate was 8% than at recent 4% levels.
For instance, consider the monthly payment on a $500,000 30-year mortgage loan used to purchase California starter home at either 8% or 4% interest:
The payment at 4% interest is a relatively affordable $2,387 a month. At an 8% rate, the monthly would go up to $3,669.
The interest payments on these two respective mortgages would be 12*30*$2,387 - $500,000 = $359,320, or roughly 28% less than the principle amount financed, at 4%, and 12*30*$3,669 - $500,000 = $820,840, or 64% higher than the principle amount on the 8% loan. In the latter case, the buyer pays almost twice the purchase price back to the bank over the course of the loan.
It looks like the 4% buyer comes out way ahead, until you consider the risk of falling home prices as mortgage rates adjust up towards historic norms.
bottom line:
If you want to participate in this economy and buy a house you have to pay the banks their fair share.
No wonder banks have the nicest buildings downtown.
bottom line:
If you pay current inflated asking prices of resale housing, you’re overpaying by 200%+.
bottom line:
you agenda is significantly flawed.
“…you agenda is significantly flawed.”
What’s wrong with honestly warning people that they risk significantly overpaying if they buy a house now?
“…28% less than the principle amount financed…64% higher than the principle amount on the 8% loan.”
I realized after posting that I could have stated this comparison more clearly.
At 4% interest, you pay the bank 72% of the purchase cost of the home in interest payments.
At 8% interest, you pay the bank 164% of the purchase cost.
In either case, you pay for high future inflation to take away the sting of usurious interest payments to the bank. Except there currently are no inflationary pressures on the horizon; nada; none.
GI Bill/VA guaranteed loans have helped many veterans buy homes, I bought a house with one in 1997 with 0% down and it basically amounts to no cost PMI for the veteran if you do not have 20% down…but it would be useless to me in the present California market, I was unable to get an offer considered even with 20% down and a preapproved conventional loan when I was still looking from mid 2011 to mid 2012, lost out to 100% cash bidders several times…but perhaps VA loans will be usefull again after Bubble 2.0 pops.
What’s the homeownership rate of the members of the House and Senate?
I honestly don’t know, but I’m willing to wager that it’s higher than the US average.
I bet every one of them has at least a couple of houses.
Dissolving Fannie Mae, Freddie Mac may hurt borrowers
There’s no consensus on how to replace Fannie and Freddie, but without them home loans will almost certainly be more expensive.
By Kenneth R. Harney
August 16, 2013, 6:49 p.m.
WASHINGTON — You may have seen two sets of news reports recently that didn’t quite add up: First, President Obama called for the liquidation of Fannie Mae and Freddie Mac, the country’s largest providers of funds for home mortgages. Then, Fannie Mae announced its sixth straight quarterly profit and said it was sending $10.2 billion in dividends to the Treasury. Freddie Mac also reported a hefty profit — $5 billion over the previous three months — and said it is providing $4.4 billion in dividends to the government.
Both companies also summarized what they’ve been doing for home buyers and owners since their takeover by the federal government in September 2008. Given the president’s call for them to disappear, it’s worth taking a quick look.
Since January 2009, Fannie says it has provided funding for 3.1 million home purchases and 11.4 million refinancings of existing home loans. It has also helped 1.3 million borrowers who were behind on their payments and heading for foreclosure with loan modifications, workouts and other forms of assistance.
It has already paid back $95 billion of the $116 billion in taxpayer funds the government lent it, and could pay the rest next year. It expects to be profitable for the “foreseeable future,” the result of the high credit quality of the new loans it’s making and because of declining losses on its existing mortgages.
Meanwhile, Freddie Mac has financed 1.8 million home purchases, 7.2 million refinancings and 872,000 loan modifications or workouts. As of next month it will have paid back $41 billion of the $71 billion in assistance extended by the government. Its 2.8% rate of serious delinquencies is far below the mortgage industry average of 6.4%.
Both companies also provide significant financial support for rental apartment construction.
Wait a minute. Didn’t both companies go off the rails in the years immediately preceding the housing bust, investing in subprime and other loans that contributed to the severity of the housing bust?
No question. But here’s the point: The president and congressional critics want to dismantle Fannie and Freddie, but what’s to replace them? That’s a thorny political thicket. Not only is there no consensus on how to do it but also little discussion of the potential costs for home buyers and owners. What would capital punishment for Fannie and Freddie mean to consumers?
Start with higher mortgage interest rates. Without the federal guarantees supplied by Fannie and Freddie, the costs of mortgages are virtually certain to rise. Economists at Moody’s Analytics estimate that dumping the companies and switching to a plan advocated by Sens. Bob Corker (R-Tenn.) and Mark R. Warner (D-Va.) would increase the interest rate for the average mortgage borrower by one-half to three-quarters of a percentage point.
…
maybe the FED you buy some more bonds with money created out of nothing and keep them afloat?
Isn’t money suppose to be a storage of wealth? That means you had to do something or sell something to get it.
Creating money out of nothing sets a bad example for people working hard to get it. If they start seeing other people getting money for nothing than it takes away incentive for them to work hard for it.
Isnt money really away to get people out of bed and competing amongst each other?
If they start seeing other people getting money for nothing than it takes away incentive for them to work hard for it.
And we blame the EBT and SNAP recipients. Wonder where they learned that from. Our elites get money for nothing, the government gets money for nothing.
“And we blame the EBT and SNAP recipients. Wonder where they learned that from.”
Yes.
Feds: More Americans selling their food stamps for cash
Published August 18, 2013
FoxNews.com
FILE: 2006: A lunch meal at the Part of the Solution soup kitchen and food pantry in the Bronx borough of New York. Nearly one in 10 Americans at the time were expected to rely on food stamps. (REUTERS)
The percentage of Americans selling their food stamps back to stores for cash has increased by 30 percent over the past several years, according to a new Agriculture Department study.
The study on food stamps trafficking — which the agency said included “covert investigation” in stores — compared the periods of 2006 -2008 to 2009 -2011.
Despite the increase, trafficking has declined since the 1990s, when the rate was nearly 4 percent of food stamps, also known as Supplemental Nutrition Assistance Programs benefits.
The total amount of SNAP benefits is now at roughly $858 million, compared to $330 million annually in the 2006-2008 period.
The increase reflects the overall growth in SNAP participation and benefits, the agency said in the August 2013 report.
Recipients typically sell back their benefits at a discount, according to the agency, which said its undercover investigations and research into electronic SNAP transactions focused on stores that showed “suspicious activities.”
However, the numbers were later adjusted to reflect activity within the entire program.
While the trafficking doesn’t directly increase costs for the federal government, it diverts taxpayer money intended to help low-income families get access to a nutritious diet.
About 10.5 percent of all authorized SNAP stores engaged in trafficking, the study found, compared 8.2 percent in the 2006-2008 review.
…
• A multi-generational 100-year mortgage will allow one to borrow more than one could with a 50 year mortgage.
• A 50 year mortgage will allow one to borrow more than one could with a 40 year mortgage.
• A 40 year mortgage will allow one to borrow more than one could with a 30 year mortgage.
• With a 30 year mortgage, one can borrow more than with a 15 year mortgage.
• With a 15 year mortgage, one can borrow more than with a 5 year mortgage.
• All of these mortgages result in higher prices for houses, as people borrow more and more. This is what I mean when I say that the 30 year government-backed mortgage made the 30 year mortgage necessary. A 50 year government-backed mortgage will make the 50 year mortgage necessary. And so on.
• The profit on the house transaction is also increased. And it goes to Wall Street. And it goes to politicians in the form of higher taxes. Any economic surplus is swallowed up by Wall Street and politicians. The debt on the homeowner goes to pay for the profit.
• There is a culture of debt in American society. And it doesn’t enrich the populace in general. It enriches Wall Street, and entrenches politicians.
You wanna have economic surplus for yourself and your children? Then you’ll fight long term government backed mortgages.
“The profit on the house transaction is also increased. And it goes to Wall Street. And it goes to politicians in the form of higher taxes. Any economic surplus is swallowed up by Wall Street and politicians. The debt on the homeowner goes to pay for the profit.”
Ding ding ding!!!
This is the essence of Republican-style taxation, post Ronald Reagan.
And none of this chicanery would be possible without government insurance of private debt.
could the govt pay its debt on inflation alone?
Inflation is the biggest tax of them all right?
Perhaps they could take out put options on municipal bonds in cities which are destined to go bankrupt, then exercise them when bankruptcy happens. (Not suggesting this policy…just trying to think outside the box…)
could the govt finance it debts by having the FED loan it money via the printing press and constantly keep rolling over that debt once it matures? Seems like it could go on a long time.
Basically issueing new bonds to pay off old bonds in a perpetual motion?
You are missing two major points.
1. Banks don’t make any money if they don’t lend any money. They have an incentive to NOT have you pay them back, so they offer loans that don’t have any amortization. What’s the repayment period for a 5-year, interest-only ARM? Never. It never gets repaid.
A bank’s best loan?
Fully-adjustable, interest-only, well-collateralized loan.
2. A fully adjustable, interest-only loan has a lower monthly payment than a 5 year, 15 year, 30 year, 40 year, or 50 year, fixed-rate, fully-amortizing loan.
Banks don’t make any money if they don’t lend any money.
Depends whether they are in the lending business, or the origination business. Banks have made a ton of money in the latter, without really lending themselves except for very briefly, until the loans could be sold downstream.
Replace the word “banks” with “lenders/investors in debt” and the point is exactly the same.
No loans, no interest earned for the fixed income investors (who don’t like to take interest rate risk).
No loans, no origination fees for banks.
“You wanna have economic surplus for yourself and your children? Then you’ll fight long term government backed mortgages”
It doesn’t have to be a fight. Just say no to a 30 year mortgage. Vote with your pocketbook.
Keynes was human, not The Messiah. He was a brilliant guy. But even Einstein was wrong on occasion (see quantum mechanics).
As a result, Keynes was wrong about some things. Namely, that burying bottles of currency had the same effect on the economy as building houses.
Of course, a house purchase creates a burst of economic activity. You know who pays for that burst of economic activity? The homeowner does, by going into debt, and paying for initial burst of activity in the decades to come.
And the unfortunate thing is, after a house is built, and it is sold again, it once again creates this cycle, with much less economic activity. Without that initial burst of construction and related activity.
This debt leads to a pulling forward of economic activity and the future suppressed economic activity of that homeowner is likely a significant factor in the drop in employment that accompanies higher homeownership rates.
Digging up bottles of currency doesn’t create any countervailing debt. It doesn’t pull forward economic activity. It doesn’t lead to a suppression of future economic activity. Keynes was wrong about houses.
You want to induce a “wealth effect” in a population? Then create government policies which allow them to build actual wealth. Instead of policies designed to further plunge the population into debt. Like longer and longer term government-backed mortgages.
Very OT, but no BB today, and I simply gotta vent; skip if you are bothered by the OT nature.
After the recent passing of my father (which is why I have been around the HBB less than usual the past couple of months), I discovered that one of my brothers has behaved in what I consider an underhanded manner with regard to my parent’s estate planning. Though I am my parent’s usual financial adviser, he was the one who helped them with their estate planning some years back. I didn’t insert myself into it, because I trusted him and my parents to come up with something that would make sense, and not leave hurt feelings in the wake of their passing.
Background: I am one of 5 siblings; my parents were always loving and supportive of all of us, even the oldest when he was a minor black-sheep; I had no doubt that they would treat us equally.
So, I come to discover recently that the provisions that they made for the grandchildren were sufficiently generous that more than 1/3 of their estate would pass to the brother who was helping them with the estate planning. Yes, he just happens to also have the most children; I’m sure it is a coincidence that the provision for grandchildren is so significant. But yeah, that’s the bottom line: 34% to one son’s family; 9% to another son’s family. Technically the siblings all receive the same 9%, but I can’t help but look at it along familial lines, which in my experience is normally the language in which inheritance is expressed.
I’ve really been scratching my head on what kind of provision for grandchildren is appropriate; if it were me doing my own estate plan, I think I would make provision for each grandchild separately so that they felt remembered, but at a percentage level that would be low enough that it would not lead to the appearance that one family is being significantly favored over another, nor.
The thing that has been bothering me the most is that I very clearly remember the conversation where my brother informed me that my parents had updated their beneficiary designations; he told me that my parents wanted to keep it private, but that because I was their primary financial adviser, I was welcome to look at it “if I felt like I needed to.” At the time, I thought briefly about it, and concluded that I trusted them and him, and didn’t “need to” if my parents really didn’t want me to know. Now I am seriously regretting that choice. My mother, btw, has no recollection of wanting their plans to be private, and my brother is recounting a very different version of the conversation than actually occurred, in which he said that I was welcome to look at it, almost encouraged, and that the privacy was only meant to apply to the other brothers; that’s not what occurred. He is also playing the “well that’s what Dad wanted so we have to respect it now” card; my mother is easily shifted in her opinion by the winds, and seems to find his argument compelling at the moment.
Oh, and btw: I expect to have kids in the next few years, who, if my mother passes before their birth, will be effectively disinherited by the structure that my brother is advocating. He assures me that the family would do the right thing and reallocate voluntarily after-the-fact, but I am firmly convinced the more time passes after my mother passes, the lower the odds that everyone would be both willing, and able, as for some family members the money may not last that long if history is any guide.
So, questions for the peanut gallery:
- am I smoking crack that this look kind of lopsided to disinterested third parties?
- how much are you putting aside for grandchildren vs children, assuming that you have both, or expect to have both?
- any good resources you could recommend for my mother to read?
I am wrestling with some serious anger at my brother for the way things are heading, mostly due to his attempt to do this in secrecy, and also for how he is now changing the story about that conversation. I know that I will need to come to peace with it even if it goes the way “Dad wanted it”. I am seriously considering ways that I might rebalance the scales in the future, such as giving 100% of my share to the brother who I believe is being most disadvantaged by the scheme (which would pretty much bring him back to parity—and he is the one with the most need for retirement income, incidentally, as he has the smallest safety net, having no children), or making provision in my own will to restore balance. Or does that seem like a bad idea? It would look a lot like disinheriting my one brother, and I also do not want to leave familial bad blood in my wake.
I hate the fact that my mother is even having to deal with additional stress due to this conversation right now.
Anyway… Sorry for the long post, and thanks for listening to me vent…
It’s hard not to feel cheated in a situation like this, but believe me, it’s not worth the money you’d get by opening that can of worms unless you’re talking serious millions. And in any case, you’ll fracture your extended family — which sucks. No matter what, DO NOT GET A LAWYER INVOLVED. They’ll suck every last penny you might have gotten reallocated.
Take heart inasmuch as much of the distribution is likely still in Mom’s hands as she holds the bulk of the estate now. You’ve a good case to argue to her that since Dad’s disposition favored the second generation (grandkids) at the expense of the first (kids), when she dies her distribution should favor the first generation at the expense of the second.
Certainly you can enlist the rest of your siblings to shame the evil brother into accepting a compromise on that one? There should be an equal “x” distribution to the second generation of each family to be split amongst the grandkids of that family. If that allocation is say, $100,000, each of your siblings gets 20K to distribute among their own children as they see fit. (Including childless brother.)
In the meantime, Mom can see to it that valuable family holdings like her jewelry, art furnishings, Dad’s collections etc. get distributed to the slighted first generation siblings instead of the evil brother. That ought to make up for the disparity.
Let it go, primy. I told my parents’ attorneys to cut me out of the family will when I discovered they’d turned their financial planning over to my detested brother-in-law (a real estate attorney, yet) who’s lost the bulk of their retirement funds to his self-serving hedge fund CDOs.
It’s a painful sacrifice, but I kept my integrity in doing so, and will never be forced to grovel to the black-hearted so-and-so for what he’s determined is my share. It’s only money. Think of your sanity.
Or you could use your distribution to hire a hitman….
No worries—I would never consider getting a lawyer involved. That would be all downside and no upside.
Sorry I wasn’t clear about one thing: none of the inter-generational equity is realized at this point, as my mother survived my father, and she was the sole primary beneficiary. However, my brother is currently trying to convince my mother of her obligation to put the same beneficiary arrangement in place for the retirement account that is being created in her name for the transfer of my father’s retirement assets. And she is sufficiently swayable that I suspect she will go along with it.
I’m sure that “Let it go, primy” is the right advice here. Just having a hard time with the anger part.
Thanks for sharing the thoughts, Allena.
I’m sorry, Prime, I wish I could offer you assistance here, this sort of thing also occurred in my family as well. When my father had descended into a sort of mild dementia, my brother and mother (who was by that time divorced from my father, but still had influence and who did still help him after the divorce) somehow got my father’s will changed and the additional (small) percentages allocated to the sisters, re-allocated so that all the children got equal shares.
My father, being somewhat old fashioned, felt that the female children might need a little extra something due to the way the cards are sometimes stacked against women, and I agreed with this. The one brother who got that changed screamed “No Fair!”, as he always did since he was able to vocalize, whenever someone got something he didn’t get, or think he should have gotten. My mother always favored him for reasons of her own, and had my father been in full control of his faculties, this would never have happened. One sister went along with it, they tried to hide it from the other, who could have used the extra. The one sister who went along, later took care of the other, so I guess it evened out. But it sucked, and for this and other reasons, I cut my ties with the one bro’ years ago.
Technically what he did was illegal, and the one sis could have sued the peewadden out of him for it, but felt that the expense and trouble just wasn’t worth it, especially since it was sort of made up to her in the end.
The family members who usually prepetrate these sorts of manipulations count on the other family members not wanting to cause any trouble, especially for a surviving parent.
“It would look a lot like disinheriting my one brother, and I also do not want to leave familial bad blood in my wake.”
Screw it. We ended up with some familial bad blood anyway after both my parents passed. Know what? I’m a happier person for it, now that I no longer have to communicate with a sibling who caused considerable trouble over the years (that one issue was the least of it, really). I don’t have to worry about sending him or his family cards and presents and I won’t have the expense of going to a funeral.
My other sibs feel differently, and for a long time tried to effect a reconciliation, but finally, to my great relief, they gave up.
The one brother who got that changed screamed “No Fair!”
Hm, now I’m wondering whether I am resembling your brother.
Technically what he did was illegal
Out of curiosity, what was illegal about what he did?
Thanks for sharing the perspective, palmy…
“now I’m wondering whether I am resembling your brother.”
Not in the least.
It was something to do with him and my mother contacting my dad’s attorney and manipulating the will somehow, I foget the exact legalese that was applied to the situation. The will as it was originally written had been long-standing, in place for many years.
No one would have known what had occurred, except that when I was helping my one sis box things up after my father passed, I happened to come across the paperwork, including the attorney’s bill and noticed something odd. One thing I’ve always liked is how specific attorneys are with their bills, with dates and times and notes and such. Fascinating. There was SOME hoedown hootenanny when I brought it up, lol. First, the bluff and bluster anger at having been caught out, followed by lots of hand-wringing and pleading and exhortations to consider the family.
Like I said, eventually things were worked out internally, but I did get a bit of a kick out of watching my ex-bro’, who had been so accusatory toward others of us from time to time over the years, get caught with his hand in the cookie jar.
If you take on mortgage debt at current massively inflated housing prices, you’ll enslave yourself for the rest of your life.
“Debt is bondage.”~ Suze Orman, May 11, 2013
Don’t Be A Debt Donkey®
“Don’t Be A Debt Donkey®”
That’s not the only thing you shouldn’t be as far as a Donkey is concerned.
Man convicted of molesting donkey arrested on unrelated charge
By Austin L. Miller
Staff writer
Published: Friday, January 18, 2013 at 7:34 a.m.
A man on probation for sexual activity with a miniature donkey is back in jail on unrelated charges.
Carlos R. Romero, 32, was arrested Thursday night on a warrant for dealing in stolen property and violation of Florida’s pawnbroker act, according to Ocala Police Department officials. He is accused of selling 16 stolen train batteries.
On Dec. 14, Romero accepted a plea offer from the State Attorney’s Office for a year of probation and a $200 fine, avoiding jail at the time. He pleaded guilty to sexual activity with a miniature donkey named Doodle.
Since then, Romero said, he has been living in the woods or his 1981 Ford F-150 pickup and eating food from Dumpsters. He said he didn’t know he had a warrant for his arrest and thinks the charges are bogus.
In an interview at the jail, Romero said he found four batteries on the side of the road on Monday afternoon, placed them in his truck and took them to a recycling company, where he received a little more than $100.
Romero said he needed the money to pay his car insurance. When he was booked into the jail, he only had 92 cents, half of which went to repay charges incurred during his previous visit.
“I took them in for scrap. I’m trying to survive. I’m homeless,” Romero said.
As part of his plea deal, Romero was ordered to undergo a psychosexual evaluation and possible treatment and HIV and STD testing. Romero cannot have contact with children in a school or playground setting or unsupervised contact with animals.
He was also required to give up the donkey.
“I miss her,” he said
http://www.ocala.com/article/20130118/ARTICLES/130119700 - -
“He was also required to give up the donkey.”
“I miss her,” he said
(see if you can find the two words changed in these lyrics)
THE CHI-LITES
“Have You Seen Her”
I know I can’t hide from a memory
‘Though day after day I’ve tried
I keep sayin’ she’ll be back
But today again I lied
Oh, I see her face everywhere I go
On the street, and even at the picture show
Have you seen her?
Tell me, have you seen her?
Oh, I hear her voice as the cold winds blow
In the sweet music on my radio
Have you seen her?
Tell me, have you seen her?
Why, oh, why
Did she have to leave and go away (oh, yeah)
Oh-oh-oh, I’ve been used to havin’ someone to lean on
And I’m lost
Baby, I’m lost (Oh)
Oh, she left her kiss upon my lips
But left that break within my heart
Have you seen her?
Tell me, have you seen her?
Oh, I see her hoof reaching out to me
Only she can set me free
Have you seen her?
Tell me, have you seen her?
[Spoken:]
As another day comes to an end
I’m lookin’ for a dumpster or somethin’
Anything that she would send
With all the people I know
I’m still a lonely man
You know, it’s funny
I thought I had her in the palm of my hand
[Repeat to fade:]
Have you seen her
Tell me, have you seen her (tell me, have you seen her?)
The Chi-lites - Have you seen her - YouTube
http://www.youtube.com/watch?v=ZxOBInMi3l0 - 165k -
Without remarking on the specifics, may I just add that if a mini-donkey isn’t receptive to someone’s attentions, those attentions will not be attended to.
Has anyone considered that this poor man might just be a latter-day St. Francis, wandering the countryside caring for the needs of the dumb beasts?
Also, how do you steal the battery from a freaking train?
Has anyone factored in the existing situation of foreign buyers changing the real estate game here in the U.S. with their cash purchases and long term view? Would enjoy seeing this as a topic for further discussion.
I do think it is a different game then what we saw in the years 2000-2006; and, not a positive one for an American living in foreign buyer popular areas.
Just saw a video interviewing International RE Brokers who cater to foreign buyers who are currently purchasing in the U.S and UK. One noted how the Chinese — for fear of future political unrest in their country…are getting their many dollars out by purchasing Real Estate in Canada, US, Australia, UK. One realtor mentioned how his Chinese buyer just paid 700K cash for a house in Orlando, Florida…for his daughter who is being born next month. This was to exemplify the Chinese long term view with their investments.
I do think that foreign buyers such as these are a game changer. What applied logically in the past seems to no longer be the case. I have personally waited for prices in San Diego to go “where I thought they should logically go” these past few years.
What I’ve seen is how prices in San Diego in good areas went down from 2009-2012 — yet basically stayed somewhat “stable” during the lowest downturn a few years back. The good area I live in had low to no selling inventory — as sellers of good properties held tight since they bought in the 1990’s and are in no rush to sell. One person who owns a great house in a great neighborhood nearby admitted to me that they purchased new in the ’90’s; and, couldn’t afford to buy their own house with today’s prices. They are staying put and just remodeled their house. They are thinking of soon buying a condo for their college age daughter though.
Therefore, I have come to the conclusion that it is best to focus on your personal situation and do what makes the most sense for you…either buy or don’t buy.
Waiting for another housing apocalypse may or may not serve one, depending on where you live and the game changers of foreign buyer competition/cash rich six figure US wage earners with low to no mortgage payments who can afford to stay put and purchase additional real estate or help their millennial kids with their real estate purchases.
It is in the best interest of the central bank and local govts to keep home prices high. Do you dare fight that?
‘Has anyone factored in the existing situation of foreign buyers changing the real estate game here in the U.S.’
It has come up once or twice, yes.
‘Waiting for another housing apocalypse may or may not serve one’
I should explain; this is not a blog about buying a house. I personally don’t care one bit if any one reading this blog buys or sells a house, or rents or lives in a van. This blog is about the economic phenomenon of this singular mania. I look into it, under it, around it, etc. But be assured I am not telling anyone to not buy the shack you are trying to sell.
Its funny that so many people cant even agree on the notion of whether or not we have inflation. One expert will say there is no inflation and the next is arguing we will be in hyperinflation soon.
From what Ive seen 90% of the purchasing power of the dollar has been eroded away due to expanding the money supply.
All that has happened since 2008 is an expansion of the money supply.
The govt has borrowed trillions of dollars from the FED to keep the economy afloat. why the FED, because there aren’t enough buyers in the private market to absorb all these bonds.
So the FED has printed trillions of dollars and bought US treasuries from the primary dealers.
This time around a lot of that money supply is sitting somewhere as ” reserves”. they started paying interest on the reserves to keep all that money from entering the system at once.
It all revolves around creating wealth out of nothing.
“From what Ive seen 90% of the purchasing power of the dollar has been eroded away due to the expanding of the money supply.”
But this did not happen in a straight line. This mostly happened during periods of economic expansions and reversed itself during periods of economic contractions.
“All that has happened since 2008 is an expansion of the money supply.”
That’s not all that has happened since 2008. Trillions of dollars have gone poof since 2008, and trillions of dollars are destined to go poof in the future as unfunded promises are reneged on.
This promised money that will go poof belongs to somebody - lots of somebodies - and if these lots of somebodies do not get paid what whey are promised - what they are owed - then they will have to do without. And their doing without will lead to a contraction of economic activity.
‘All that has happened since 2008 is an expansion of the money supply’
2008? How about the 90’s? Read Bill Fleckenstein’s Greenspans Bubbles. Remember the Asian Crisis, the Russian default/LTCM, Mexico? Every global hiccup for the last 20 years was met with a tsunami of printed money. It’s not working any more. If it was, gold would be at $20,000 an ounce. Oil at $400/barrel. All this printed money is going somewhere, but it ain’t where it’s supposed to go. My best guess is each additional credit expansion created yet more global over-capacity. To the point we see empty cities in China, empty condo towers in Manhattan and Vancouver. Never used airports in Spain. China produces many times the world demand for solar panels annually. Fleets of cargo ships rusting at the dock. And many millions of empty houses, commercial units, hotel rooms all over the world. Yes, they’ve ginned up the bubble a bit more, but that’s psychological. We just can’t use all the houses, factories, mines and resulting output.
“One realtor mentioned how his Chinese buyer just paid 700K cash for a house in Orlando, Florida…for his daughter who is being born next month. This was to exemplify the Chinese long term view with their investments.”
This is a fairly common theme in these news items featuring Chinese buyers. They can never say that the Chinese investor is SPECULATING.
There are always ulterior, noble motives - my child’s future, political unrest, a gateway house, etc. What absolute hogwash.
Perhaps the Chinese tell themselves “it’s different, this time” too.
“I do think it is a different game then what we saw in the years 2000-2006; and, not a positive one for an American living in foreign buyer popular areas.”
I presume that includes, but is not limited, to San Diego, Los Angeles, San Francisco, Portland and Seattle?
the only difference I see this time around is lower interest rates and no stated income loans.
The desirable areas will always hold up better.
The world operates on greed and fear. We saw fear come into play in2008. Smart investors jumped all over it. We are back in the greed stage now.
The question is how greedy do you become? Do you take some chips off the table early or stay in the game and risk losing more chips if you try to sell into a falling market?
Smart investors always sell into strength!
“desireable areas”? LOLZ
Public Service Announcement
Whenever you hear “desireable areas” or “location”, know that it’s a lying realturd attempting to get you to pay far more than the place is worth. Don’t believe them. Realturds Are Liars.
I know you know nothing about a desirable area coming from your ghetto.
Some people in CA actually pay more to be away from people like you.
That’s all you got Debt Donkey?
“…the only difference I see this time around is lower interest rates and no stated income loans.”
One of those two factors is rapidly receding as I type.
Warning! Mortgage Rates Are Definitely Headed Higher
By John Maxfield
August 18, 2013
I have no idea what mortgage rates are going to do tomorrow, next week, or next month. But because of the significance of mortgage rates to the housing market, and therefore the overall economy, it’s nevertheless worthwhile getting the lay of the land. And there are two important things to keep in mind with regard to mortgage rates, the first of which is that they’ve shot up considerably over the past few months.
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We saw fear come into play in2008. Smart investors jumped all over it.
Fear had just begun to come into play when TPTB realized it was going to result in the banks failing and they quickly foamed the runway for them at the expense of the taxpayers. Those who quickly jumped in to pick up nickels in front of steamrollers have done well so far. Unless they had inside Fed into they were NOT “smart investors”. They have simply been lucky enough to not get crushed. Yet. Those sleeves are looking awfully long, though…
George Will: Taming the tax code beast
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Of the three biggest tax preferences, unions, especially, oppose taxing as compensation — which it obviously is — employer-paid health insurance (a $260 billion benefit), and Democrats oppose ending the $80 billion deduction for state and local taxes. It encourages high government spending.
The third preference, the mortgage-interest deduction, is a $70 billion benefit that goes disproportionately to affluent homeowners. But Australia, Canada and the United Kingdom, which have no mortgage-interest deduction, have homeownership rates comparable to America’s. Every congressional district, however, has real estate brokers benefiting from the bankers who benefit by providing mortgages.
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affluent homeowners, bs on that. most homeowners r a check away from bankruptcy these days.
And that is only one of many reasons why I expect the Echo Bubble’s eventual collapse to be a matter of when, not whether.
Does China have 30-year mortgages?
ASIA NEWS
Updated August 18, 2013, 5:28 p.m. ET
Rising House Prices in China Spark Concern
Steady Increases Could Provoke Sharp Corrective Action by the Government to Realign Home Prices With Average Incomes
By ESTHER FUNG
SHANGHAI—Fresh evidence of rapidly rising house prices underlined the role a resurgent property sector has played in supporting China’s fragile growth, but also raised fears that a sharper correction would be required to bring prices into line with income.
Prices rose an average 6.7% year-over-year in July, up from 6.1% in June, calculations by The Wall Street Journal based on official data released Sunday showed. On a month-to-month basis, the increase in prices moderated slightly.
In a statement, National Bureau of Statistics analyst Liu Jianwei said the continued rise in prices is due to genuine home buyer demand as well as recent land price gains.
A window washer surrounded by residential towers under construction last May in Shenyang, a city in northeastern China.
A sharp increase in lending in the first half of 2013, combined with a quiet relaxation of strict controls on home purchases in some cities, also played a part in boosting sales and pushing prices higher.
From early 2010 to the beginning of 2013, China’s central government tightened property-sector controls, aiming to rein in runaway house prices. But with growth fragile and the real-estate sector a key contributor to demand for everything from steel to furniture, in 2013 policy makers have taken a more relaxed approach.
Strong sales and rising prices drive higher profits for real-estate developers, encouraging them to break ground on new projects.
A mixed national picture with strong demand in larger cities and oversupply in smaller cities makes it difficult for the central government to adopt a consistent policy nationwide.
New home prices in major cities like Beijing, Shanghai and Guangzhou showed the largest gains in July. Export hub Guangzhou in China’s southeast recorded the largest year-over-year gain among the 70 cities tracked—a 17.2% increase. On a sequential basis, the increase in prices moderated—up 0.68% month-to-month in July, down from 0.78% in June, calculations showed. Analysts said that would mitigate pressure on the government to tighten its reins on the property cooling campaign.
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Thank you for all your responses to my posting.
Just for the record, I am not a realtor; and, I currently rent so have no house that I am trying to sell.
I’ve lurked on this blog for several years and have found it educational and interesting, although it does seem to have a bit more hot headed attack comments on it as of late.
‘it does seem to have a bit more hot headed attack comments on it as of late’
Here we go again…
LOLZ
“I’m not a realtor”
What a charade.