August 13, 2007

A Well-Traveled Path In California

The New York Times reports on California. “The north end of Clarks Fork Circle in Stockton tells you all you need to know about the depth of the mortgage worries here. On a curve in a handsome new residential development, four of five homes are for sale, at least two of which have already been repossessed by a lender.”

“Once considered a safe alternative to the overheated Bay Area real estate market, Stockton and its streets are now filled with ‘For Sale’ signs and evidence of foreclosures. ‘It is disturbing, there’s no question about it,’ said Mayor Edward J. Chavez, who himself has two houses on the market, with no sales in sight. ‘What was once a vibrant market has kind of hit a brick wall.’”

“Average single-family houses here can still be had for $350,000. But many of the recent house deals, brokers and local officials say, were financed by subprime loans, some of which offered 100 percent financing for a small down payment, occasionally even no money down.”

“‘It’s gone from the most liberal financing I’ve ever seen a few years ago to the most foreclosures and delinquencies I’ve ever seen now,’ said Art Godi, a longtime Stockton real estate agent and the former president of the National Association of Realtors.”

“Alma Neri…bought a modest house in Stockton in 2002 for $223,000. Three years later, Ms. Neri and her husband found an even better house around the corner. The plan was to sell the old house to pay off its mortgage.”

“But now, both of the Neris’ houses are languishing on the market, and the debt from two mortgages, and an equity loan they took to remodel the new house, is piling up.” “‘We made bad decisions,’ said Ms. Neri. ‘We’re worried if we don’t sell by the end of the year, we will lose one of them. We just didn’t see the downturn coming.’”

“Brokers in Stockton are now increasingly offering so-called short sales. Even so, sales are slow to come, leading to annoyed sellers.”

“‘They’re not crazy about us or anybody right now,’ Mr. Godi said. ‘They’ll say, ‘Gee, I lowered the price on my house, why haven’t you sold it?’”

“He added, ‘It’s much better dealing with people if they’re going to make a profit.’”

“Fannie Mae and Freddie Mac can still purchase mortgages and issue securities. But those who want larger mortgages, or cannot make down payments, face a harder burden.”

“Jumbo mortgages are most important in areas with high home prices, most notably on the East and West coasts. ‘In California, it has shut down the purchase market,’ said Jeff Jaye, a mortgage broker in the Bay area. ‘It has shut down the refi market.’”

“Investors made the mistake of assuming that housing prices would continue to rise, said Dwight M. Jaffee, a real estate finance professor at the University of California, Berkeley. ‘I can’t believe these sophisticated guys made this mistake,’ he said. ‘But I would remind you that lots of investors bought dot-com stocks.’”

“He added, ‘When you are an investor, and everybody else is doing the same thing and making money, you often forget to ask the hard question.’”

The San Francisco Chronicle. “For California’s home builders, it has gone from a perfect storm to a pathetic one. Each week, it seems, there is more bad news as potential buyers stay away in droves. A recent wave of discounting has lured some shoppers to subdivisions, where a backlog of unsold dwellings await … something … anything.”

“But the price cuts, ranging from $10,000 to more than $150,000 on $1 million-plus homes, have yet to turn many of the looky-loos into buyers, according to anecdotal information from homebuilding executives.”

“‘This is the first recession (in the housing market) that isn’t being driven by job losses,’ said Steve Delva, president of the South Bay division of Standard Pacific Corp. ‘Somebody called (the housing bubble of 2005-06) a perfect storm of cheap interest rates, a lack of supply and rampant speculation. Then, when the air went out of the bubble, everybody turned back into pumpkins.’”

“Standard Pacific, with headquarters in Irvine, has several projects in Northern California. It reported a $165.9 million loss for the second quarter, which ended June 30.”

“Nearly all of the publicly traded home builders in the country have reported substantial losses this year, including such widely known names in the Northern California market as Toll Bros., Pulte Homes, Centex and KB Homes.”

“As the year has progressed, tens of thousands of families have fallen behind in their payments until the dreaded ‘notices of default’ arrived.”

“With no other choice, they put their nearly new homes up for sale only to discover that a growing glut of other frantic sellers had flooded the market with their distressed properties.”

“As homes sat waiting for buyers who never materialized, prices nose-dived to a point where owners owed far more on their mortgages than they could ever hope to realize on a sale.”

“‘There’s a lack of urgency among people (looking for homes) right now,’ said Mike Forsum, regional president of Taylor Woodrow Homes. ‘Traffic is up … at many of our projects, but I get the feeling that you’ve got the hovering masses waiting for the next big deal before they buy.’”

“As with previous housing slumps, this one seems to be playing out along a well-traveled path, building industry officials say.”

“‘This isn’t going to get better until this unsold inventory gets absorbed,’ said Standard Pacific’s Delva, ‘And this isn’t going to happen until the financing issues are resolved; the smart money has the slump ending in the letter half of next year or some time in 2009.’”

The LA Times. “In the county of Riverside, in the city of Corona, on a street called Plume Grass, there’s a foreclosed house that no one wants to buy. A decade ago it was worth $148,000. That’s what Theodore and Cassandra Judice paid the developer, Beazer Homes, borrowing nearly all of that sum.”

“Life threw some curveballs. In 2000, they refinanced, drawing cash out in exchange for a bigger monthly mortgage. Theodore would marvel at his neighbor’s boats, their swimming pools, their toys. He and Cassandra did some remodeling, getting the patio done, he remembers, was particularly urgent.”

“The couple refinanced again in 2001, 2003 and 2004, borrowing larger sums each time.”

“In September 2005, the Judices borrowed $447,500. Almost immediately after that, they put the house on the market for $480,000. It was time to go: They had drawn so much cash out of their home they couldn’t afford to live there anymore. The ATM had turned into a trap. With no equity cushion, they couldn’t afford to cut their price either.”

“‘They got offers, but they weren’t high enough for them to break even,’ says their agent, Peter Pesek. ‘They wanted to keep waiting for something better.’ It never came; the market had peaked.”

“The couple moved to Austin, Texas, and bought another house. They couldn’t afford both mortgages, so for Plume Grass they tried to negotiate a short sale, an agreement in which the lender accepts less than it is owed. The deal fell through.”

“A notice of default was filed June 9, 2006, making the house one of the first in Corona to enter the foreclosure process in the current downturn.”

“‘We made some bad decisions,’ acknowledges Theodore. ‘No one ever came to our house and forced us to do anything.’ He figures it will take him several years to clean up his credit record.”

“GMAC Mortgage took ownership after the foreclosure. The lender asked Leo Nordine, a veteran foreclosure agent based in Hermosa Beach, to clean up the house and evaluate it for resale.”

“On March 15, Nordine recommended $6,000 in cosmetic work and a low price to get out in front of the market. ‘Don’t overprice,’ he warned.”

“His suggestion: $425,000 for the house as it was, $437,500 if the repairs were done. The lender didn’t authorize the repairs, and stuck a price of $445,000 on the house. No one wanted it.”

“On May 30, Nordine advised reducing to $409,000. GMAC agreed to drop the price, but only to $419,500. Six weeks earlier, that might have done the trick. Not anymore. A week later, Nordine recommended $399,000. The lender didn’t respond.”

“On June 27, he suggested $390,000. Lower the price, he urged yet again: There are three times as many lender-owned homes on the market now as there were a few months ago. On July 31: ‘This is the worst market I’ve ever seen.’ He proposed $385,000.”

“There was no answer. GMAC, like most lenders, has been in turmoil. In late April it said it would fire 700 workers. The asset manager for the Plume Grass house was one of them.”

“To sell the house now, Nordine said late last week, would require a price of $379,000. ‘The banks will wise up after a bit,’ the agent said. ‘I think the fall is going to get really ugly.’”

“A GMAC spokesman said Friday morning that the lender’s goal was to sell all its properties, including the Plume Grass house, for ‘fair market value.’ Several hours later, either wising up or merely responding to the glare of publicity, GMAC sent Nordine an e-mail authorizing him to drop the price to $395,000.”

The Daily News. “Foreclosures and loan portfolio problems continue to grow, troubles that are wearing down Wall Street and spilling into foreign markets. A big question is what the impact will be in California. We’ve already seen a record number of foreclosures in the second quarter, and the threat of a record-breaking third quarter looms.”

“Sales in California have reverted to mid-1990s levels, a down cycle that persisted for most of that decade. Up until last year, credit was so easy that many loan applications were works of fiction. Not a problem, really, because appreciation was still strong, interest rates low and there would be an opportunity refinance out of a toxic loan.”

“Not any more. Now we have a situation in which the last ones into the housing market are the first ones trying to get out.”

“The Internet company Bargain Network found that in July, California had 29,931 properties on the foreclosure path. That’s the most in the nation and a 5 percent increase from June.”

“California is also the nation’s biggest real estate market so being No. 1 isn’t a surprise. California is the country’s fifth-most distressed state, foreclosure-wise. Nevada is the most distressed state followed by Florida, Colorado and Arizona.”

“California leads in another area, too, the most mortgage activity in the nation, including the subprime variety that’s now a vexing problem. For example, last year California led the nation in buyers who opted for payment-option adjustable rate mortgages, commonly known as negative amortization loans. They accounted for 24 percent of all the state’s home loans.”

“Nationwide payment-option ARMs made up 11 percent of home loans. Looks like we’ve got some of the trouble behind us. And more ahead of us, too.”




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209 Comments »

2007-08-13 15:33:22

One neighbor here who was “downsizing” (empty nest), took her home off the market and is not renting it out. She had already bought a TRAILER in a TRAILER PARK!! Now that’s downsizing. I’m still surprised she didn’t take a lower offer. It’s amazing how entitled people are to “gains”. I doubt anyone follows my posts, but I mentioned another neighbor put his home bought in 2005 on the market at a $30K loss to his 2005 price paid. It still hasn’t sold.

2007-08-13 15:34:38

FIX: “took her home off the market and is not renting it out.” to
“took her home off the market and is NOW renting it out.” — she is renting it out. don’t know the rent.

 
Comment by Not Mssing It
2007-08-13 16:45:35

Money it’s a crime
Share it fairly but don’t take a slice of my pie
Money so they say
Is the root of all evil today
But if you ask for a rise it’s no surprise that they’re
giving none away

Comment by sfbayqt
2007-08-13 23:31:59

Awww….a Pink Floyd fan. :-D

BayQT~

 
 
Comment by GH
2007-08-13 17:58:50

In 2005 you could get no money down liar interest only liar loans. Try that today!

 
 
Comment by Tom
2007-08-13 15:35:51

How Mortgage Derivative Work? How you blow them up.

http://www.youtube.com/watch?v=0YNyn1XGyWg&mode=related&search=

 
Comment by 85249 is Toast
2007-08-13 15:43:46

“Now we have a situation in which the last ones into the housing market are the first ones trying to get out.”

It’s not a bubble. It’s a stack!

Comment by ex-nnvmtgbrkr
2007-08-13 16:03:30

But what about this guy:

“‘We made some bad decisions,’ acknowledges Theodore. ‘No one ever came to our house and forced us to do anything.’ He figures it will take him several years to clean up his credit record.”

Did I hear this wrong…..is this the first we’ve heard of an FB taking full responsibilty?

Comment by seattleguy
2007-08-13 16:13:46

I’m sure that lots of FBs are taking responsibility for their own actions. One aspect of that is that they don’t feel obligated to go to the newspaper or TV reporter and cry about how unfair it all is … and they don’t generate nearly the same “human interest” as the FB who can’t believe this happened to them, so reporters are mostly uninterested in the responsible ones.

Comment by VaBeyatch
2007-08-13 17:28:15

I foolishly talked to a reporter once. Believe me, they will reword what the FB says to fit their desires for the story. Don’t ever take the quotes at face value in newspaper articles. Anyone who deals with reporters has to learn how to talk in sound bites.

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Comment by Brian
2007-08-13 18:48:02

Hehe… I did “All Things Considered” once with Linda Wortheimer (sp?)… The interview that morning was almost 50 minutes but cut to 7 minutes for broadcast that afternoon. Made me look like a complete imbecile - VERY valuable lesson.

 
Comment by Lionel
2007-08-13 18:56:39

Years ago I worked for a company that developed TV projects for Oliver Stone. Oliver at the time was championing a fellow who might or might not have murdered someone in VA. One day an ABC TV reporter from VA calls, and asks for a quote. I explain: 1) This isn’t Oliver’s company, 2) I’m the dude who picks up the phone, and 3) we don’t work FOR Oliver, we merely develop specific projects for him. Doesn’t matter a wink. She wants a quote from me. I’m a very polite person, but had no problem hanging up on her. What a tool.

 
Comment by Brian
2007-08-13 19:14:19

I got in trouble for this one- Early in my career I was basically answering the phones. There was some shenaningans going on in my office, everyone got fired except for me. Everyone. So the press decided to stake out my apartment since I was the only one left standing. But they didn’t know what I looked like, only my name. I watched this one poor guy spend about two hours setting up a news camera - directly behind my car - getting the angle juuust right. Directly behind my car (aimed at my door).

So I went out the back door, got in the car and backed right over it. “Oops, sorry about that”

I still hear about that one ;)

 
 
 
Comment by emcee
2007-08-13 16:16:57

Full responsibility? You think they will make the lenders whole after the short sale?

I can’t believe anyone would ever lend a dime to those deadbeats, no matter how many years passed.

Comment by ex-nnvmtgbrkr
2007-08-13 16:21:47

It does seem like they had enough foresight to obtain financing for the new home before allowing the other one to blow-up. So i guess their taking responsibility includes a “and I don’t give a sh#t” attitude.

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Comment by gwynster
2007-08-13 16:38:56

Exactly. It’s the new attitude. Gone are the days of “woe is me!” as we move to “I f@cked up, what are you going to do about it?”.

Remember, once you refi, you now have a full recourse loan. Most people in CA are depending on that non-recourse rule to let get out of jail free. If I were the bank, I’d go after the new house to make up what they lost on the first one.

 
Comment by bottomfisherman
2007-08-13 16:46:07

This guy is a slime ball con man. He sucked all of the equity out of the Corona house to buy the TX house, and probably lots of toys along the way. Now he walks away from the Corona place by saying ‘I just made a bad decision’ while laughing on the veranda of his new TX McMansion, all paid by MEW’s. I hope the bank can evict this scumbag from his TX hideout.

 
Comment by WT Economist
2007-08-13 16:51:51

Two words. Donald Trump. We’re all the decadent rich now.

 
Comment by desidude
2007-08-13 16:52:49

my estimate is that 90% of buyers in the past 4 years dont know that. I was talking to a friend who bought in 2002 and recently finished MBA . I ad to educate him on recourse/non-recourse, short Sale, IRS coming after for the difference and entire thing.
We had been talking about it here atleast since 2005 :)

 
Comment by Housing Wizard
2007-08-13 17:32:10

I think thats why the Lender didn’t give these people a short sale . Apparently they bought the new place with full intent of running out on the old home and leaving the loss with the lender . These are people that had alot of equity pulled out who expect the bank to take a loss of 70K of more .The last lender on their house should of questioned the ongoing refinances and suspected that something was out of control . This is one where the lender should get a judgement and place it against the new house and than go after their wages or other assets .

 
 
Comment by aflurry
2007-08-14 09:41:06

the lenders got a higher rate for their investment. why start with the moralizing here?

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Comment by kevintx
2007-08-14 09:53:02

Amazing amount of economic damage and misallocated resources. It’s enough “bad decisions” for a lifetime.

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Comment by imploder
2007-08-13 16:22:24

“‘We made some bad decisions,’ acknowledges Theodore.”

The bank made worse ones. At least he got to spend the money…. The bank’s (investors) money went to money heaven….

Comment by Matt_In_TX
2007-08-14 06:34:56

Down 12% of the loan plus a years CA carrying costs already, just on how they managed the foreclosure. (At least they laid off the first one. ;)) And they had what sounds like a reasonable RE advisor.

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Comment by rentor
2007-08-13 18:41:32

Is this the same guy who in China is was buying paint for toys?

2007-08-14 01:01:50

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Comment by VT Dan
2007-08-13 19:07:37

Closing StrikeTestTest

 
 
Comment by Front Range Bob
2007-08-13 16:26:28

This gives a new meaning to “garbage in, garbage out.”

Comment by Sartre
2007-08-13 18:45:31

closing strikethrough

Comment by Sartre
2007-08-13 18:47:04

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Comment by GH
2007-08-13 18:03:24

LIFO, except that we have an unhandled stack overflow exception arising from too much debt preventing the last in from exiting the stack.

Comment by mathguy
2007-08-13 23:56:21

Ha! Comp sci bubbleheads will always get my approval!

 
 
 
Comment by Sailor38m
2007-08-13 15:44:30

I Retired from the Navy in 2005. Still Living in Hanford but refused to buy at these prices, so I have been renting since 2005. The house next door 1640sq.ft same size as the house I rent for 1200mnth has been for sale since I moved in April 05. It started at 342k and last time I looked they were asking 276k. It’s still for sale but they no longer put fliers on the sign. They have an open house every weekend but knowone comes to look. Friends bought the same styles house in 1999 for 94k, would be nice to see those prices again.

 
Comment by 85249 is Toast
2007-08-13 15:45:19

That LA Times article is fascinating. Interesting how the lenders are behaving exactly like the FBs they replaced.

Comment by lainvestorgirl
2007-08-13 15:52:44

I saw an interesting take on it from an REO agent, she says the banks are in a catch 22, they don’t want to drop their REO prices which would lower comps for the area because that will trigger more nearby borrowers to be underwater, then they’ll go into foreclosure as well, all of which can spiral out of control.

Comment by ex-nnvmtgbrkr
2007-08-13 16:01:56

Yep, and it’s too late to play that game. The death spiral is in full motion and trying to be cute is gonna get you good and screwed!

Comment by Professor Bear
2007-08-13 16:17:18

Why can’t the banks just hold on to their overpriced REO until the walls fall down?

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Comment by ex-nnvmtgbrkr
2007-08-13 16:18:17

Your kidding, right?

 
Comment by Jen Bones
2007-08-13 16:22:24

Cut PB some slack. He’s new here.

Luv,
Jen Stucco-Bones

 
Comment by lainvestorgirl
2007-08-13 16:24:14

Wait a minute…GS…PB…Professor Bear…are these one and the same?!

 
Comment by gwynster
2007-08-13 16:34:35

As liquidity dries up, they will need to unload those REOs so they can go on to lend another day. It has a nice circular feel to it.

 
Comment by Hoz
2007-08-13 16:47:02

Don’t be mean to Prof Stucco, yet! LOL

 
Comment by Professor Bear
2007-08-13 17:05:36

“Don’t be mean to Prof Stucco, yet! LOL”

I don’t care that much what anyone says, except calling me Prof Stucco only would be appropos if I owned a home. Catching falling knives is against my religion.

 
Comment by arroyogrande
2007-08-13 18:05:12

“are these one and the same”

Where have you been?

 
Comment by memmel
2007-08-13 18:26:14

I thing the game right now is to avoid mark to market while they try to package similar loans into MBS and get them off the books. Also I think the big guys are betting on a fed bailout so its better to go down with the ship so to speak. When the dam break say sometime next year the price drops of the REO’s will be breathtaking once everyone rushes to clear them off the books. The is a herd bubble on the way down it seems.

 
Comment by Hoz
2007-08-13 18:41:31

Yep, alas GS decided that he would revert back to his nom de plume. So now is the time to pluck the plume.

He is Professor G. Stucco

 
Comment by luvs_footie
2007-08-13 20:20:10

“He is Professor G. Stucco”

Professor G. Stucco.Bearly :smile:

 
 
Comment by imploder
2007-08-13 16:19:56

This agent Nordine is the reo specialist mrincomestream was talking about a month or so ago… he was quoted as 2008 being the beginning of big discounts in the better parts of LA….

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Comment by JP
2007-08-13 16:53:12

I saw an interesting take on it from an REO agent, she says the banks are in a catch 22, they don’t want to drop their REO prices which would lower comps for the area …

I keep posting this factoid, but it bears repeating: During the last downturn he CA median price did not bottom out until about 18 months after foreclosures peaked.

They can take the medicine now, or they can take it later. The end result is going to be the same.

 
Comment by Big V
2007-08-13 17:28:42

Dear LA Investor Girl:

It seems obvious to me that the banks have no choice. If they don’t sell the houses now, they will have to wait and sell them for less. They are banks and they know that. Although they had the power to create this silly bubble, they lack the power to prevent it from popping.

Comment by combotechie
2007-08-13 19:34:07

Even if the banks hold on, don’t they have to mark to market their REOs each quarter?
That’d kill their bottoms lines.

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Comment by az_lender
2007-08-13 20:41:02

I am glad I am not a bank and don’t have to mark my notes to market. I have stopped receiving postcards from people who want to buy the notes [steal the notes]. Hence I assume the market is non-existent. That’s OK, as usual I can report to you guys that every single one of my borrowers has made the contractual payment for August 1 or July 15. The 8/15 group are beginning to roll in. Three cheers for “trailer trash”.

 
 
Comment by AKRon
2007-08-13 20:43:55

“I saw an interesting take on it from an REO agent, she says the banks are in a catch 22, they don’t want to drop their REO prices which would lower comps for the area …”

The question is– do the lenders/banks really own these properties, or are they just servicers? The majority of mortgages were securitized as bonds or else sold (by lenders like Countrywide) to specialized securitizers that were closely tied to banks (i.e. Security Asset Co. (sic), tied to Lehman). When they sell, there may be a need to make up lost principal or else to mark to market, but until they sell- these places are off their books. Service contracts often give up to three years in which to liquidate after foreclosure. A lender might think that waiting is worthwhile since (1) the securitizers might explode (2) the lender might choose to default or (3) a mortgage owner might want to rapidly take the losses and allow itself to be bought as a tax writeoff or (4) a miracle bailout might occur. If liquidating the assets is going to either force the servicers to default or else to go bankrupt, what is lost by treading water?
As far as not selling because it would lower comps, I don’t think this would be a reason for holding property. It is the old ‘prisoner’s dilemma’… if many lenders hold properties in an area, they might collectively be ahead if they all agree to hold up prices BUT the optimal move for a single lender is to drop prices, sell fast, and let the competition drown in the new comps.
Personally, I think that in the secret underground meeting silos of the lenders (hee hee), the dreaded word ‘default’ has been uttered. I think they know that most of the servicers are going to either default on their principal guarentees, or at least threaten to default to get a gov’t bailout…

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Comment by lainvestorgirl
2007-08-13 15:50:50

“…negative amortization loans. They accounted for 24 percent of all the state’s home loans.”

I don’t understand how the CNBC talking heads, most notably Kudlow and Ben Stein, can keep saying that toxic loans are such a tiny, insignificant part of the housing market, when you’re talking about 24% of the loans in a state the size of California.

Also, they keep saying Main Street will bail out Wall Street, but I don’t think they have a clue as to the kind of financial pain some of these FBs are in, how can they possibly continue being good consumers when they can barely make their monthly mortgage payment.

And if everything is just fine, why is the Fed injecting billions of dollars to prop things up.

Questions, questions.

By the way Ben, I know I’ve been ready to throw in the towel on waiting for this to unravel about a dozen times over the years, because I love investing in real estate, but this board has kept me from making some moves I would have regretted…Instead, I’ve saved and bought nothing since 2001, and I figure I have another year or two to go to build up even more cash…big thank you hug from LAIG!

Comment by 85249 is Toast
2007-08-13 15:53:12

“I don’t understand how the CNBC talking heads, most notably Kudlow and Ben Stein, can keep saying that toxic loans are such a tiny, insignificant part of the housing market, when you’re talking about 24% of the loans in a state the size of California.”

Easy answer. They’re liars.

Comment by Jen Bones
2007-08-13 16:10:40

Wrong.
Correct answer: They date stochastic models.

(stochasm off)

Luv,
Jen

Comment by ex-nnvmtgbrkr
2007-08-13 16:27:00

Go ahead make me use a dictionary one more time and you’ll find your name on one of my Joshua trees.

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Comment by imploder
2007-08-13 16:32:41

Yea! LOL

pruffesur imploder

 
Comment by luvs_footie
2007-08-13 16:38:24

:smile:

 
Comment by mrincomestream
2007-08-13 19:12:31

LOL

 
Comment by Neil
2007-08-13 21:01:34

ROTFL

Careful ex-nnvmtgbrkr, we don’t want to make those Joshua trees too rare. lol.

Got popcorn?
Neil

 
Comment by Chad
2007-08-14 07:37:58

Joshua trees, the next tulip!

 
 
Comment by JP
2007-08-13 16:58:01

Hey babe, you interested in a Wiener process?

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Comment by implosion
2007-08-13 17:32:59

Filtered, I assume?

 
 
Comment by arroyogrande
2007-08-13 18:07:42

“They date stochastic models.”

That’s sweet, good one! LMAO, BDPTMN*.

(* Blowing Diet Pepsi Through My Nose)

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Comment by ex-nnvmtgbrkr
2007-08-13 16:06:40

I’ve been there for a few of your “almosts”. Way to hang in there……oh, and continue to do so.

Comment by lainvestorgirl
2007-08-13 16:23:07

2009, baby.

Comment by Hoz
2007-08-13 16:49:12

2015

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Comment by Big V
2007-08-13 17:32:59

2010 or bust!

 
Comment by HelloKitty
2007-08-13 17:41:21

2009+ for primary residence IF you have utility need to buy

2010+ for investment property IMO

 
Comment by Hoz
2007-08-13 18:43:46

Bust

Sorry to write.

 
Comment by az_lender
2007-08-13 20:44:52

I’m with Hoz intellectually but probably I will capitulate sooner than 2015 (when I’d be 70).

 
 
 
Comment by imploder
2007-08-13 16:26:46

“…but this board has kept me from making some moves I would have regretted…Instead, I’ve saved and bought nothing since 2001, and I figure I have another year or two to go to build up even more cash…big thank you hug from LAIG!”

wow, someone’s meds are finally working! give me your docs name i need help, too!!!

 
 
Comment by bottomfisherman
2007-08-13 16:50:03

“Also, they keep saying Main Street will bail out Wall Street, but I don’t think they have a clue as to the kind of financial pain some of these FBs are in, how can they possibly continue being good consumers when they can barely make their monthly mortgage payment.”

Easy one. Joe Sixpack just breaks out the ol’ credit cards again. Happy days! ;)

Comment by gwynster
2007-08-13 16:55:05

Naw JCC breaks out the CCs while J6P goes without.

 
 
Comment by Chad
2007-08-14 07:36:06

Yay, LAIG, that’s what I wanna hear!!!! :)

 
 
Comment by Jen Bones
2007-08-13 15:55:20

I’m glad to see you that you’ve posted the second portion of that Sunday L.A. Times article, Ben. Nation, that’s GMAC chasing the market down, establishing your template for the next two years.

Luv,
Jen

 
Comment by Misstrial
2007-08-13 16:01:50

OT

Attn Californians with Union Bank of California accounts:

UBOC is now (as of 08/12/07) charging a transaction fee of $2.50 for every cash withdrawal from their ATMs.

~Misstrial

Comment by Norcal Ray
2007-08-13 16:42:01

Take out $ 20 and they hit you with a 12.5% fee. Wow, this is to get your own money. Makes payday loans look cheap.

Comment by Housing Wizard
2007-08-13 17:25:05

One of my predictions a year ago was that the banks would all of a sudden start charging fees for checking and banking . Free services will go by the wayside or fees will be increased as the banks lose money .

Comment by Misstrial
2007-08-13 17:53:14

Yes, HW, I remember that. Its happening.

What I did was just cancel out of the transaction (after going through the process 2x just to make sure I wasn’t imagining things) and went to another store and got cash back.
I am *not* going to pay for their screw-ups re giving home loans to borrowers who should have never been granted loans from the get-go.

~Misstrial

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Comment by oc-ed
2007-08-14 05:01:59

You get the props for that call HW! BofA has started charging fees for a lot of things that used to be part of “free checking”. Automated transfers from savings to checking and “international Transaction” fees are two I have seen pop up on my radar this summer.

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Comment by Wine Country Dude
2007-08-13 17:11:57

Huh? $2.50 to withdraw ATM cash from the bank at which you have the account? This can’t be. Seriously–someone tell me this is a joke.

Comment by Danni
2007-08-13 17:38:01

This happened to me today…

Comment by Gwynster
2007-08-13 17:47:18

Same bank transaction? That is really scary.

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Comment by palmetto
2007-08-13 17:53:06

Now is the time when companies and people start to go rabid for every penny they can get. Even Disney went rabid here in Florida, raising their rates. AS IF!!!

 
Comment by Misstrial
2007-08-13 18:08:31

Wait and the other banks will follow suit just like hogs take to garbage.

~Misstrial

 
Comment by Gwynster
2007-08-13 18:23:58

Hmm I’m a credit union girl. I’ll pull my account if I have too. But I expect to see BoA pull that before Golden One so I should have a little warning.

 
Comment by james
2007-08-13 22:21:20

Why are you surprised? ATMs have been charging 2% for at least 2 years.

 
 
 
 
Comment by Big V
2007-08-13 17:34:59

Maybe they’re trying to discourage withdrawals because they don’t have the cash to cover it.

Bank run.

Got popcorn?

Comment by Housing Wizard
2007-08-13 17:52:52

Yep, that would be the other reason for the increased fees .

 
Comment by OCDan
2007-08-13 17:54:49

Actually, i think the correct signoff would be, in this case, GOT CASH!

 
Comment by tg
2007-08-13 18:48:56

For the banks handling cash has to be bothersome. If people would just use a debit card as in the commerical, life would be easier for them, the merchants, the IRS, the FED & the US Treasury. It does feel Orwellian. In the old Sci Fi books people were always issued electronic credits which were debitted for things beyond their control. Similar to the company store of miners or the old merchant ships where the seaman would wind up more in debt at the end of the voyage. It’s your money why should they let you have control of it.

Comment by Gwynster
2007-08-13 19:23:31

Yes but I was promised I’d be able to use those cards on L5.

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Comment by tg
2007-08-13 20:29:59

” Love is a device invented by bank managers to make us overdrawn. ”
- Rimmer, Confidence and Paranoia

 
 
 
Comment by Chad
2007-08-14 07:44:29

Anyone checked how much less their “available balance” is than their actual balance lately? My bank isn’t charging the fees that the big nationals are, but I don’t have access to 100% of my money at any given time.

 
 
 
Comment by ex-nnvmtgbrkr
2007-08-13 16:11:32

“There was no answer. GMAC, like most lenders, has been in turmoil. In late April it said it would fire 700 workers. The asset manager for the Plume Grass house was one of them.”

You hear that you FB business owners? There’s your solution. Don’t lower your price, fire employees instead!

Comment by JP
2007-08-13 17:00:31

If the employees are going to act like FBs and chase the market down, then I say fire ‘em and hire somebody who knows how to move inventory.

Comment by Big V
2007-08-13 17:36:08

Touche.

 
 
 
Comment by Professor Bear
2007-08-13 16:13:30

‘It is disturbing, there’s no question about it,’ said Mayor Edward J. Chavez, who himself has two houses on the market, with no sales in sight. ‘What was once a vibrant market has kind of hit a brick wall.’

It is doubly disturbing that the Mayor of Stockton got stucco with the rest of the flippers.

 
Comment by Professor Bear
2007-08-13 16:15:21

“Investors made the mistake of assuming that housing prices would continue to rise, said Dwight M. Jaffee, a real estate finance professor at the University of California, Berkeley. ‘I can’t believe these sophisticated guys made this mistake,’ he said. ‘But I would remind you that lots of investors bought dot-com stocks.’”

Right on, Professor Jaffee.

Comment by Big V
2007-08-13 17:37:38

I’m hoping that was professional-speak for “These guys must have been a bunch of jackasses”. Otherwise, Jaffee is a little naive.

Comment by Professor Bear
2007-08-13 19:51:26

A more accurate interpretation of Professor Dwight’s professional-speak would be, “What a bunch of morons!”

 
 
 
Comment by ex-nnvmtgbrkr
2007-08-13 16:17:18

“Investors made the mistake of assuming that housing prices would continue to rise, said Dwight M. Jaffee, a real estate finance professor at the University of California, Berkeley. ‘I can’t believe these sophisticated guys made this mistake,’

It is a friggin’ trip indeed. I don’t consider myself an intellectual giant. Heck, above average would be a push. But maybe common sense has nothing to do with the level of your IQ. If that’s the case, I’ll take common sense any day over splitting the atom.

Comment by stanleyjohnson
2007-08-13 16:21:18

Gary Watson, earlier this year predicted OC prices would go up 8% and when Gary speaks dolts believe him because Gary knows all!

 
Comment by Deron
2007-08-13 16:31:51

Intelligence is one thing. Ability to think independently and block out or ignore the strong herd instinct present in all humans is something else again.

Comment by KirkH
2007-08-13 17:06:48

Knowing what to learn is as important as being able to learn. These brainy guys that show up on CNBC as cheerleaders are either lying or are so wrapped up in their fancy models that they’re unable to step back and see how things actually work.

 
Comment by Professor Bear
2007-08-13 17:22:25

Evolution largely bred the independence out of the herd during the dark ages of global Christian hegemony, as most independent thinkers tended to be branded as heretics or witches and summarily burned at the stake. Those of us who think for ourselves must represent some kind of mutant strain that has arisen since the onset of the Age of Enlightenment.

Comment by arroyogrande
2007-08-13 18:10:49

“some kind of mutant”

You may be right, I’ve often been called that. 8)

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Comment by edgewaterjohn
2007-08-13 18:38:25

Nice, very nice, Bear.

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Comment by lainvestorgirl
2007-08-13 18:49:13

I wonder what they’ll do to us this time.

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Comment by Vermonter
2007-08-14 04:46:35

It’s a softer, gentler age - they’ll take our money and burn at the stake.

 
Comment by lmg
2007-08-14 06:38:39

With the rise of Evangelical fundamentalism in the United States, think back to the time of Galileo for the new ‘guidelines’. All the Catholic Church did to him was show him the instruments of torture, demand he retract his heretical views, and then subject him to house-arrest until his death.

Give Christian fundamentalists half a chance, and they’d do the same thing to stem-cell researchers.

 
 
Comment by Peter T
2007-08-14 19:34:19

China’s stock exchanges are in a bubble, too. Is that also the product of those evil Christians?

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Comment by jbunniii
2007-08-13 21:47:39

“Investors made the mistake of assuming that housing prices would continue to rise, said Dwight M. Jaffee, a real estate finance professor at the University of California, Berkeley. ‘I can’t believe these sophisticated guys made this mistake,’

Sure, 20% annual price increases for a decade would only result in prices being multiplied by six - easily handled in a state where everyone is wealthy such as California. Let the party go on another years after that and prices would be multiplied by 38! How could that NOT go on forever?

 
Comment by Chad
2007-08-14 07:49:52

” But maybe common sense has nothing to do with the level of your IQ.”

Correct. Intelligence Quotient testing includes few questions that measure “common sensibility”. The nature of the exclusion derives from the word common, as if you should know it, no matter what your IQ is. Laughable, I know.

 
 
Comment by aladinsane
2007-08-13 16:17:44

“As the year has progressed, tens of thousands of families have fallen behind in their payments until the dreaded ‘notices of default’ arrived.”

Nobody’s default but mine

It’s nobody’s default but mine

Try to save my house tonight

Oh, it’s nobody’s default but mine

Devil he told me to let it go

Devil he told me to let it go go go go

How to get out from under tonight

Nobody’s default but mine

Lender he showed me how to be gone

Sheriff hit me with the ding dong ding dong

How to kick that house out of my life

Oh, it’s nobody’s fault but mine

Got a monkey on my back

M-M-Monkey on my back back back back

Gonna get foreclosed on tonight

Nobody’s default but mine

How to walk away, foreclosing tonight

Nobody’s default but mine

I will be down & out tonight

N-N-N-Nobody’s default but mine

Comment by Diplomatbob
2007-08-14 06:30:41

Would love to hear Robert Plant, in his prime, wailing this out.

 
 
Comment by Professor Bear
2007-08-13 16:21:21

“A GMAC spokesman said Friday morning that the lender’s goal was to sell all its properties, including the Plume Grass house, for ‘fair market value.’ Several hours later, either wising up or merely responding to the glare of publicity, GMAC sent Nordine an e-mail authorizing him to drop the price to $395,000.”

Is this where Blackstone enters the residential housing market? Maybe they could snap up all the ‘undervalued’ California residential real estate at fire sale prices and repackage it as a REIT to sell to GFs with bank?

 
Comment by aladinsane
2007-08-13 16:22:53

California:

We know your situation and it’s hopeless..

Throw down your A.R.M.’s and come out peacefully, one house at a time~

“California leads in another area, too, the most mortgage activity in the nation, including the subprime variety that’s now a vexing problem. For example, last year California led the nation in buyers who opted for payment-option adjustable rate mortgages, commonly known as negative amortization loans. They accounted for 24 percent of all the state’s home loans.”

 
Comment by aladinsane
2007-08-13 16:25:06

Heard Mentality

“He added, ‘When you are an investor, and everybody else is doing the same thing and making money, you often forget to ask the hard question.’”

 
Comment by WT Economist
2007-08-13 16:26:54

I can’t believe the GMAC story. Maybe the CEOs haven’t decided not to sell the hopes to defer booking the losses. Maybe there is no plan and no decision. Maybe it’s deer in headlights time, to be followed by…

Comment by Deron
2007-08-13 16:35:11

While the frozen in the headlights explanation is possible, I lean more towards hiding and deferring the losses. That certainly appears to be the industry standard right now, look at the way analysts have been stonewalled by the banks when trying to find out the assets actually on the books. Maybe they can push the losses out 6 months or so - just long enough for the year-end bonus checks to clear.

Comment by WT Economist
2007-08-13 16:41:24

Whether by accident or design, there are a lot of losses out there that have yet to make their appearance. And no way a rising market bails them out. Not without hyperinflation.

Think about it — half a mil for a phone guy. My father-in-law was a phone guy. Solid, middle class job, though there were always struggles when the old car wore out or the roof needed to be fixed. Half a mil?

 
Comment by Professor Bear
2007-08-13 17:02:48

“…hiding and deferring the losses. That certainly appears to be the industry standard right now,…”

AKA The Enron Standard.

Comment by Hoz
2007-08-13 19:37:36

No, what is happening now is within the rules of GAAP as applicable to US institutions subject to Basel II regulations. Or non disclosure.

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Comment by Gwynster
2007-08-13 20:00:04

Damn Swiss.

 
Comment by FutureVulture
2007-08-13 22:07:07

Yeah, as if they know anything about banking!

 
 
 
 
Comment by AZtoORtoCOtoOR
2007-08-13 17:06:10

If I was a business in trouble, I would have jumped in last week and let out the bad news while everyone else was. I could blame on all the same factors all the other geniuses were also.

 
 
Comment by Slowkey
2007-08-13 16:27:04

My wife and I were FASCINATED with this artticle:

“In 2000, they refinanced, drawing cash out in exchange for a bigger monthly mortgage … The couple refinanced again in 2001, 2003 and 2004, borrowing larger sums each time.” “In September 2005, the Judices borrowed $447,500.”

AM I insane or is that 5 refi’s from 2000 to 2005? ZERO sympathy, I didn’t get to spend 300K (tax free) in those 5 years.

And the place still isn’t sold despite the bank’s willingness to lose at least 70K? Please IRS don’t lose track of these people.

And I love the BONUS of the new house in Austin. How did that happen ?? I’ll bet there was some of that 300K left over used to finance the house in Austin. Any equity in Austin is at risk due to refi??

Comment by Steve W
2007-08-13 16:55:05

Don’t articles like that make you feel like the fool?

Credit screwed for a few years for 300K? Sounds like a pretty good trade to me.

All one can hope for is karma. Play the game fair and honest and hope you’re rewarded.

 
Comment by JP
2007-08-13 17:04:06

300K (tax free)

Once the bank forecloses, they get a 1099 for that money, no?

Comment by Gwynster
2007-08-13 17:54:00

On a short sale yes, on a non-recourse loan, no. Once they refi’d, their loan rolled over to full recourse so I’m not sure where that leaves their 1099 status.

Comment by GH
2007-08-13 18:05:27

So what happens if a debtor continues making small payments say $5 a month as “good faith” payments. Can the debt be written off for IRS purposes and considered a non debt since the debtor is making payments?

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Comment by Orwell
2007-08-13 18:28:50

Banks won’t accept anything less than payment in full once you are behind because it delays the foreclosure process.

 
Comment by Gwynster
2007-08-13 18:35:20

If the bank is smart, they won’t cash the $5 checks as that is certain to fall way short of GF by anyone’s estimate. Regardless, I’m sure that account would get flagged pronto. If you want to trick someone like GMAC into postponing action using piddling payments, it’s going to need to be a good bit higher then $5.

But with corp lockboxes or payment processing centers, I’m not sure how the legal discourse has changed.

 
Comment by GH
2007-08-13 21:09:45

I am not talking about paying the loan, but rather keeping the debt in unpaid debt status from a tax standpoint. Obviously, if you are making payments on a debt it is not income, therefore potentially not taxable?

 
 
Comment by VT Dan
2007-08-13 18:33:58

Now I am wishing that I hadn’t put as much down on my house. I have thought about taking out a line of credit on my 33% equity while I still can, that way if times get tough I could use that line of credit to pay my mortgage for a long time and in the end the bank gets the house, and I walk away with damaged credit rating (that I would never use again because my plan is to live debt free) Obviously it would be in my interest to sell if I can.

It sounds like if I did take out a line of credit then that would be a recourse loan, while my first mortgage (never refinanced) is a no-recouse?

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Comment by Gwynster
2007-08-13 18:44:51

Depends on your state. I know that CA is non-recourse. And being a true myopic Californian, I no clue how the rest of the world copes.

 
 
 
 
Comment by pismoclam
2007-08-13 17:55:55

Austin house is safe. You can’t go across state lines.Irs can go across state lines but, using the 2 out of 5 rule, $500 k is sheltered.

 
Comment by Sartre
2007-08-13 18:43:28

This is clear cut fraud, they probably bought their new place outright with all the money they pulled out of the new last one. So what if the credit is screwed for a few years. If this indeed is the case, and they didn’t just blow it away on toys, its pretty nicely done, actually.

 
Comment by jbunniii
2007-08-13 21:50:07

AM I insane or is that 5 refi’s from 2000 to 2005? ZERO sympathy, I didn’t get to spend 300K (tax free) in those 5 years.

“O crap, my debt is too big for me to handle, what to do, what to do? Ooh I know, I’ll pile on more debt!”

 
 
Comment by vmaxer
2007-08-13 16:31:43

Cramers’ still trying to game the FED into lowering rates. Tonight he made a comment to his viewers that the FED wants to drive down home prices. Looks like he’s trying to get the average Joe mad at the FED. Maybe he thinks if he gets enough people mad at the FED it will put pressure on the FED to lower rates and bail out his Wall Street friends. If anything it looks like he’s fueling the panic. He’s probably frustrated the market wasn’t down big today, putting pressure on the FED.

Comment by lmg
2007-08-14 06:47:53

Jim Cramer…”the new Pied Piper of CNBC”.

The one thing I’ve noticed is how panicked the anchors/reporters on CNBC, as if a sustained decline in the markets will lead directly to their job loss. Probably not to far from the truth, as I’ve noticed that virtually all of the long-term knowledgable anchors (Ted David, Ron Insana) have been replaced by bubble-headed ex-beauty contestants.

 
 
Comment by luvs_footie
2007-08-13 16:34:38

Stock Market Brushfire; Will there be a run on the banks?

http://www.globalresearch.ca:80/index.php?context=va&aid=6534

Comment by imploder
2007-08-13 16:38:47

link don’t a wurk, footie

 
Comment by palmetto
2007-08-13 17:33:36

“The contamination from the massive real estate bubble has now infected nearly every area of the broader market. The swindle which began at the Federal Reserve–with cheap, low interest credit—has spread through the entire system and is threatening to wreak financial havoc across the planet. The Fed’s multi-billion dollar bailout will do nothing to contain the brushfire they started or avert the catastrophe that lies just ahead. Greenspan opened Pandora’s Box and we’ll all have to live with the consequences.”

GREAT article, footie, thanks for the link. Awesome summation at the end there. You know, this might actually be the impetus Ron Paul needs to gain ground. The FED: a con racket. Time to for it to go, we can’t have such an institution with that sort of control over people financially. But the people need to wise up. Arithmetical and mathematical illiteracy is a real problem.

 
 
Comment by dba
2007-08-13 16:34:40

http://www.census.gov/mtis/www/mtis_current.html

nice tidbit that the financial news media ignored while hyping the retail sales

inventory to sales ratio is trending up for the first time in 7 or 8 years

Comment by kthomas
2007-08-13 16:58:21

meaning?

Comment by Darrell_in_PHX
2007-08-14 04:50:36

Inventiries are piling up in the system. This means there will be a cut back in manufactuiring/importing waitig for the inventories to be burned off. Cut back on the production end results in unemployment and underemployment. Underemployment means fewer customers, making the inventory not burn off. Meaning further cuts in manufacturing…

It means we’re at the turn in the business cycle.

Comment by Chad
2007-08-14 08:00:25

But look on the bright side. Fewer 18 wheelers on the road, and cheaper gas. Less production means less transportation (fewer big rigs) and if there are fewer of them trolling around, that means gas demand (at least diesel) will go down, thus raising supply, thus lowering the price to get it sold. ‘Bout time diesel will come back down to the level of regular. Takes less refinement, but sells for more. It’s ‘causa demand, baby!

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Comment by hhh
2007-08-13 16:42:05

“The couple moved to Austin, Texas, and bought another house. They couldn’t afford both mortgages, so for Plume Grass they tried to negotiate a short sale, an agreement in which the lender accepts less than it is owed. The deal fell through.”

These types have been moving to Austin in droves over the past few years and they’ve all but ruined that town.

 
Comment by plastic fantasic
2007-08-13 16:44:10

‘In September 2005, the Judices borrowed $447,500.’

Multiply by a few million people, and just think of all this money pumping into the economy as this bubble went along…

And now it is GONE.

Contained?

 
Comment by Professor Bear
2007-08-13 17:01:01

“Not any more. Now we have a situation in which the last ones into the housing market are the first ones trying to get out.”

It’s a LIFO market! LOL

Comment by rentor
2007-08-13 18:34:51

LIFR - Denial’s a bitch.

 
Comment by dan_manfre
2007-08-13 20:10:25

Shouldn’t it be LIFR? Last In First Foreclosed.

Comment by dan_manfre
2007-08-13 20:11:58

I meant LIFF. DOH!

Comment by SLO Bear
2007-08-13 21:13:48

No, LIFF is correct - Last In, First F@cked!

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Comment by REJournal
2007-08-13 17:06:37

Perhaps someone can enlighten me here and sorry for the ignorance, but the Fed is injecting $B into the system through repo’s (repurchase agreements) that are very short term paper. Doesn’t that have to be paid back at some point? So, the money goes into the system, banks, hedge funds, etc. on short term loans from the Fed, which doesn’t get paid back (or maybe they do but I’m not understanding the concept here) and the banks, hedge funds, etc. get a free ride just like the borrowers that they funded. Who holds the Fed’s paper? China?

Comment by Big V
2007-08-13 17:44:24

The banks have agreed to pay the Fed back or lose their MBS paper. What do you think they will do? Probably the same thing their borrowers are doing. Give up the house and walk. I’m betting some of these banks don’t pay.

Comment by Gwynster
2007-08-13 17:59:55

So the Fed will assume the mortgages backing the paper? If so I smell a New Deal affordable housing program in the making.

 
 
Comment by Housing Wizard
2007-08-13 17:45:18

If they don’t pay back the Feds short term loan than the taxpayers will end up paying it .Let Wall Street inject with their own funds and take their loss because God knows they made alot of money the last 7 years .

 
Comment by dba
2007-08-13 19:40:35

Bob Woodward and Jim Cramer explained it in their books. the financial system is always leveraged and there is a system of payments that goes on every night to cover loans, trades, etc. banks are always borrowing money from each other.

the Fed lent money so banks can pay their bills to other banks. if one bank doesn’t pay, another won’t pay and things will fall apart very fast. we came very close in 1987 and not as close in 1998

 
 
Comment by 85249 is Toast
 
Comment by luvs_footie
2007-08-13 17:24:47

Marc Faber……..USA in for a Colossal recession in 3 to 6 months

http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/vcakh.TJPdTU.asf

Comment by WT Economist
2007-08-13 17:53:45

Convincing case for moderate doom. I’m not sure the emerging markets can’t become their own engine, limiting the damage there vs. here. But he’s in Hong Kong and I’m in NYC.

 
Comment by Paul in Jax
2007-08-13 17:54:35

Interesting conversation

Points:
(1) U.S. already in stagflation (inflation understated)
(2) “Colossal recession” coming in U.S.
(3) Corporate profits getting ready to plumment, thus P/Es way too high
(4) Moving into de-leveraging, bad for asset prices
(5) Liquidity contraction will cause emerging stock markets to be hit worse than U.S. market
(6) Commodity prices will come down
(7) U.S. dollar may do OK
(8) hold U.S. treasury bills and try to avoid losing money

BUT, my favorite quote, showing general level-headedness, near the beginning:

Q: Will humanity weather the storm? A: “Humanity is very resilient and to weather the storm is not the issue.”

Comment by Paul in Jax
2007-08-13 18:01:57

plumment=plummet (because it’s a strange typo, and I don’t want to people to think I’m like a friend of mine who thinks “motivate” is “moltivate”)

 
 
 
Comment by Housing Wizard
2007-08-13 17:39:19

Boy the talking headson business shows are between a rock and a hard place . Now they understand that BB won’t cut unless there is proof of a bad market or recession ,yet the heads can’t sell their stock unless they sell the concept of a strong market moving forward .

Comment by ex-nnvmtgbrkr
2007-08-13 18:21:55

Fun to watch, ain’t it?

Pass the popcorn Neil…

Comment by Neil
2007-08-13 21:05:22

lol.

munch munch munch.

This is interesting… but sad to watch.

As I noted before, I believe 5 of my good friends are candidates for bankruptcy. There is nothing that can be done now but offer support post foreclosure. Yea… statistically one or two will pull through. (I hope!) So my schadenfreude meter is off peak today.

As to the talking heads… they’ve created so much pain feeding this mania… time to watch them fall!

Ready, set, got popcorn?
Neil

Comment by James
2007-08-13 22:11:57

It would be funnier if it wasn’t for watching a fair number of good people getting hit out here.

A few hard working coworkers are caught. They are stuck in LA LA land till the end of time. Not to mention several have critical debt loads.

I’m not totally busted up but its a more hollow victory to be right about this when friends/families got sucked in.

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Comment by mrincomestream
2007-08-13 19:22:25

Yea, Ben Stein was a real piece of work on CNBC today so was Cramer (first time watching his full show), I couldn’t imagine taking advice from either of them after watching them today.

Comment by Home_a_Loan
2007-08-13 21:05:51

You know, despite the fact that I think Ben is misunderestimating the housing bubble by a lot, I don’t think he’s a shill. I think Ben calls it the way he sees it. I could be wrong, of course.

His current thesis is that the defaulted subprime loans represent a very tiny fraction of the loan value (of all classes) outstanding, and therefore not to worry (~30 billion by his estimate).

He’s wrong for the following reasons:

1) He ignores the rising default rates for prime and Alt-A mortgages.
2) He ignores the fact that the subprime foreclosure level is largely for recent loans, meaning the full extent of the foreclosure of these loans will get much larger unless a miracle happens.
3) The foreclosures are driving down sale prices for homes and making it harder to get a loan. The difficulty in getting loans drives the sale prices down further, etc.
4) Falling home values and falling sales volumes really kills the homebuilders because it quickly eats up their profits.
5) He skips over the fact that subprime loans, in terms of their numbers, are distributed more heavily in expensive markets such as CA. Last year, ~30% of loans made in CA were subprime, one of the most expensive states.
6) He discounts the level of foreclosures that have already happened. In time, the cumulative levels become quite large. In CA, for example, 50,000 homes were repossessed just in the latest quarter. That’s an annual rate of 200,000, for just the state of CA! After a couple of years of that, well… add it up! The REO lists just keep getting longer.
7) Last but not least is the fact that prices on homes has far outpaced the ability for people to afford them. In most of the “sexy” markets today, the people living in the market can’t afford a market home. The appreciation that allowed this to remain true for a while has stopped. Subprime loans, no-doc loans, and 100% loans are an expression of this fact. Thus, look out below!

Comment by Vermonter
2007-08-14 05:08:13

I said this in another thread: Ben Stein is extremely intelligent but has mile wide blind spots about stuff he likes. He likes houses. He owns several houses and is, in general, very bullish on them. I agree with all your points above and I think he’s probably just ignoring and/or rationalizing some uncomfortable facts.

Same thing can be said for the Republican party. I remember watching some TV debate including him before the first Bush, Jr. election. Everyone, including Ben, acknowledged that Bush, Jr wasn’t the sharpest tool in the shed. Listening to his rationalizations on why we should vote for Bush anyway was quite amusing.

(Comments wont nest below this level)
 
 
 
Comment by joeyinCalif
2007-08-13 21:05:02

Talking heads who hang out here know what’s what. Those who don’t don’t.

 
Comment by lainvestorgirl
2007-08-13 21:34:52

I really don’t understand this Cramer guy, he acts like he’s ENTITLED to a rate cut, meanwhile the dollar is in the toilet, unemployment is relatively low, inflation is rising, the only part of the economy that would benefit from such a cut are the housing/credit markets — who screwed it all up on their own free will, so where’s this entitlement mentality coming from, HE REMINDS ME OF MY SECTION 8 TENANT (that I evicted) for crying out loud.

 
 
Comment by aladinsane
2007-08-13 18:02:16

S.P.Q.A. (Senatus Populusque Americanus)

David Walker, comptroller general of the US, issued the unusually downbeat assessment of his country’s future in a report that lays out what he called “chilling long-term simulations”.

These include “dramatic” tax rises, slashed government services and the large-scale dumping by foreign governments of holdings of US debt.

http://www.ft.com/cms/s/80fa0a2c-49ef-11dc-9ffe-0000779fd2ac.html

 
Comment by arroyogrande
2007-08-13 18:20:40

California - we have a house in LA (rented) that we bought in 2003 with a 5.5% fixed rate ‘jumbo’ ‘prime’ mortgage from E*Trade Bank. If we were to do the same purchase today, E*Trade bank tells me (via its web site) that I would have to pay a point, and my interest rate would be 8%.

Then…5.5%…now…8.0%.

And since then the prices have increased about 70%-80%.

You do the math.

Comment by Larenter
2007-08-13 19:54:48

It is all FAKE appreciation! Just plug some numbers in an income qualification calculator. How many people here in LA would qualify???

Home price: $700,000
Down Payment: $0
Taxes: $7,000
Interest Rate: 7%
Non-Mortgage Payments: $1,000

Monthly P & I = $4657.12
Total Payment = $6240.45
REQUIRED SALARY: $224,590.75

Just how many people could “HONESTLY” qualify???? I can’t wait for all Hell to break loose!!

 
Comment by dan_manfre
2007-08-13 20:14:24

Really makes you think that the 70-80% gain may dissapate.

Comment by Neil
2007-08-13 21:06:19

Really makes me think that those gains might implode!

Got popcorn?
Neil

 
Comment by FP
2007-08-13 23:52:13

Jumbo loans =$417,000+
Jumbo Rates= 8.0%+ (IF YOU HAVE PERFECT CREDIT AND A 20% down) More if you are average.
Ca (Bay Area) Home Prices= $700,000+
Qualified buyers=ZERO
Buyers=ZERO
Home Sales starting Aug 15th=ZERO (actually, I’m curious what the numbers is going to be like anything over $417,000)

BA housing prices should drop like a ton of bricks!

 
 
 
Comment by dolby_down
2007-08-13 18:41:23

“‘This is the first recession (in the housing market) that isn’t being driven by job losses,’ said Steve Delva, president of the South Bay division of Standard Pacific Corp. ‘Somebody called (the housing bubble of 2005-06) a perfect storm of cheap interest rates, a lack of supply and rampant speculation. Then, when the air went out of the bubble, everybody turned back into pumpkins.’”

Gotta say, I’m getting really sick of seeing people cry about “perfect storms”. It seems whenever anything goes wrong nowaways, it’s implied it was because of some “perfect storm” that couldn’t reasonably be anticipated.

It’s especially annoying when the very people who went out of their way to create (and profit from) volatility complain about the results of it…

Comment by Jim D
2007-08-14 10:54:50

This is the first recession (in the housing market) that isn’t being driven by job losses

No, it’s the second one. The first one started in ‘27. Look how that turned out :-(

 
 
Comment by rentor
2007-08-13 18:43:25

I didn’t mean to but I hacked all those messages. I am god among men. I would strike and say dog but I might do more damage.

 
Comment by mrincomestream
2007-08-13 18:48:01

Is everybody else seing the strike through or is it just me

Comment by tg
2007-08-13 18:53:23

I am seeing it

 
Comment by lainvestorgirl
2007-08-13 20:50:00

Reminds me of those red-lined loan documents I used to have to mail out in 10 pound bundles.

 
 
Comment by joe momma
2007-08-13 18:53:20

Not sure anyone will read this with all the strike throughs…but is this an awesome time or what?

Wall Street Gangsters Imploding Big Time!

 
Comment by Curt
2007-08-13 19:02:33

 
Comment by Curt
2007-08-13 19:03:07

TESTING

 
Comment by Sam
2007-08-13 19:04:40

testing

 
Comment by Sam
2007-08-13 19:07:37

still common man is in illusion that fed will bail out whole economy,housing. every thing will be normal in few weeks. interest rate cut will cure every thing. house prices will start going up again.

 
Comment by Sam
2007-08-13 19:11:12

mike feber is right on spot about emerging markets. in india RE and stock markets went up so much. 2500sft house bangalore suburbs is 500k - 750k. there are not many people in there who can afford those prices at 13 - 14% intereast

Comment by Chad
2007-08-14 08:40:34

Are you kidding? 500K to 750K rupees, right?

Comment by Jim D
2007-08-14 10:57:11

No, dollars. Crazy, eh? But they come with servants quarters …

 
 
 
Comment by Housing Wizard
2007-08-13 20:31:21

On the CNBC business show they had a program about millionaires advising the sheep on how to get rich by buying real estate or stocks and how to get rich in retirement . Of course all these millionaire hacks on the show were people who made money during this long lasting bull run ,so they were giving advice as if we were going into a bull-run. I got the feeling they were trying to excite the sheep so they could get out of their investments . In fact the real estate get rich quick lady said that a person needs to buy a investment property within the next 6 months by taking equity out of ones home . The stock guy was pushing stock .

Of course these get rich quick creeps that they rounded up to testify can’t get nailed by the SEC for testifying and giving bad investment advice . Why didn’t they just blast ADVERTISMENT on the screen during the whole program.
Anyway ,this show was a perfect example of the spin doctors trying to get joe6pack to get in on the ponzi scheme ,or the new asset bubble . My guess is that the market needs the average consumer to get hot about the stock market because the big investors have been burned and they need a rally ,just like the real estate market needs a rally ,they can’t seem to get .

 
Comment by cactus
2007-08-13 20:40:03

Stupid RE I gave notice on the 9th I”l be leaving my month to month rental and assumed I would pay 30 days to the 9th of sept. RE company wants all of sept rent. Lease has only a reference to a link to AZ landlord and tenant act ARS 33-1322 were I found “tenant must give at least 30 days notice before the rent is due. ” Pretty weak its not in the lease so here i post this for all renters. personally I don’t think I’ll pay Sept rent and will accelerate my departure to be out by Sept 1. Have them keep the security deposit for sept even though I bet thats not legal. Another day in renters paradise, still the money amounts are so small compared to owning I have to laugh. Maybe I’ll turn off the drip system just for fun. :)

Comment by az_lender
2007-08-13 21:05:49

I have a new landlord. Things were a little dicey, but he is going to keep the rent the same. Monthly is about 0.2% of his purchase price. I believe he will kick me out eventually, probably wants to live here on the shore himself. But he has another house to get rid of. Rotsa ruck…

 
Comment by ChrisO
2007-08-14 09:47:34

That’s actually typical in most states, cactus. The rent period is typically from the first to the last of the month, and most times you are on the hook for the entire month, if you give notice in the middle of the previous month. That’s why it’s best to give notice right at the end of the current month and move out at the end of the next month.

 
 
Comment by AKRon
2007-08-13 20:47:54

Some news from Alaska… I was talking with a general contractor in Anchorage the other day. Apparently business is quite good… for now. The new residential housing market has collapsed, but there is a huge amount of commercial building and residential upgrades/repairs that is making up for the lost residential market. Personally I expect a commercial building slowdown in the next few months, but whether it does is highly dependent on military spending and oil prices…

Comment by Darrell_in_PHX
2007-08-14 04:57:57

AZ Repugnant ran an article yesterday about 15 million sqft of retail space that is curently underconstruction in greater PHX. Most amoutn of retail construction of any city in the country.

SO, what happens when all that retail space opens?

Ummm? Maybe construction STOPS!!!

So, who will be shopping in that new retail space as our biggest industry stops?

 
 
Comment by jbunniii
2007-08-13 20:51:09

‘It’s gone from the most liberal financing I’ve ever seen a few years ago to the most foreclosures and delinquencies I’ve ever seen now

Uh yeah, wasn’t that a fairly obvious outcome?

“It’s gone from a rock that I threw really high up into the air to one that is hurtling back down to the ground now.”

Comment by Jim D
2007-08-14 10:59:54

“At my head”.

 
 
Comment by joeyinCalif
2007-08-13 21:11:19

“He added, ‘It’s much better dealing with people if they’re going to make a profit.’”

Professional gamblers have an old saying: Money not lost spends the same as money won.

 
Comment by luvs_footie
2007-08-13 21:40:42

Mortgage market in ‘downward spiral’

“Underscoring the shaky conditions in housing, Stifel Nicolaus said its earlier forecast calling for home-price deprecation between 10% and 15% may prove optimistic.”

http://www.marketwatch.com/news/story/us-mortgage-housing-markets-seen/story.aspx?guid={F21EA14D-E00C-46C7-9291-424B724864FE}&siteid=yahoomy

 
Comment by OB_Tom
2007-08-13 22:35:23

For those of you familiar with the Ocan Beach area, here’s a good laugh. This property is in Loma Portal, right smack in the middle of the flight path from Lindberg field:
http://sandiego.craigslist.org/rfs/395507996.html
“$25000000 SUPER STAR STATUS, BASKETBALL CT, POOL, GOLF AREA
Celebrity status is what this house is! 29,000 sq ft lot fully equiped with brand new black and red basketball ct, brand new pool with jacuzzi, views to ocean and city. Faces North west. Wood floors, granite, movie theatre in progress, 2 car garage, master suit with 2 balconies. Owner ready to sell moving onto other ventures. If you would like to see this dream home and are a serious qualified buyer please call Nicol 858-361-2377. I will have pictures available by Tuesday if you would like to see them please shoot me an email. NO AGENTS OR SOLICITING PLEASE!!!!!”

A 29,000 sq-ft lot wouldn’t bring in more than 4 x $2.5M = $10M if it was ocean front at Sunset Cliffs. This area is more like $500k per 7,000 sq-ft lot. What the hell is she smoking? $25M???? Hello Nicol!

 
Comment by aflurry
2007-08-14 09:15:35

a little off topic, but:
“For California’s home builders, it has gone from a perfect storm to a pathetic one. Each week, it seems, there is more bad news as potential buyers stay away in droves.”

Ghad, the writing in the Chronicle is bad.

“Instead of leaving, they’re staying in droves!” Hedley Lamarr - Blazing Saddles.

 
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