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Real estate investing is different than investing in the stock market... The selection and liquidity are considerably less. I know that there are many real estate deals to select from but you can't sit at your desk and buy and sell them on a moments notice like you can with an an on line trading account using stocks. Also, the real estate market is a very local market and you should only invest in what you know so this also limits the choices. On top of that, there are transaction costs... Flipping property is expensive because of the costs associated with each buy/sell. I have never flipped properties... All my holdings are long term.
If you are interested in a specific area where you know and understand the market and pricing there will be very few properties that you might consider as an actual purchase. In my area for example I have made a connection with a real estate agent that has set me up with an email alert when there is any change in the foreclosure listings in 2 specific zones that I have specified. This is an automatic email that I receive in real time directly from the MLS data base. In my area of interest there are about 35 listings classified as "foreclosure - bank owned" and at this time there are only 2 of them that I would consider for purchase. I am very particular regarding the location and quality/style of neighborhood that I invest in. Absolutely only the highest quality neighborhoods ( not the highest price )... No junk. So this limits my selection considerably. When I make a purchase I am confident that I can hold it for the long term.
So... This process takes time and in my opinion for the person that is interested they need to stay on top of the current activity and trends in their area to be able to take advantage of an attractive property. If you don't stay current with what's going on you will find out later that you missed something that you should have done. This is a good time to be prepared with information.
Florida has been devastated... I had a vacation home in Ft. Myers that I was lucky to sell at the top of the market. There are neighborhoods in the Ft. Myers area where homes that sold for $225-250 K are now going for $50-60 K. Some of these areas have turned into instant slums where the words maintenance and property value do not even exist. I wouldn't take one of these homes if it was at zero cost. They are nothing but a money pit with unbelievable problems associated with the local clientele. A good rule I use is that if I wouldn't live there then I probably don't want to buy it. Keep in mind that the value and quality of the property will have similar value and quality in rental tenants. The high quality tenants don't live in run down junk neighborhoods. All of my rent checks are in my mail box on the first of every month... I don't have to go out asking for rent... I want to keep it that way.
Comet Elenin, your economy, and greedy fk'n banksters.
http://eleninandbankers.webs.com/
I'm with you dick. I'm looking to diversify into a vacation rental in FL where local prices are down 65%. I think I can get almost a 15% yield on it and wait for prices to slowly go back up as I build more equity in the home.
Today may not be the absolute bottom in home prices, but if you buy now, you'll probably be sitting pretty ~10 years from now. You can't expect to flip houses for 25% gains anymore, but if you can get a yield and wait for the housing market to turn...eventually you'll make money...and potentially alot of it!
Appeals Court Clarifies MERS Role in Foreclosures
The ubiquitous Mortgage Electronic Registration Systems, nominal holder of millions of mortgages, does not have the right to foreclose on a mortgage in default or assign that right to anyone else if it does not hold the underlying promissory note, the Appellate Division, Second Department, ruled Friday. “This Court is mindful of the impact that this decision may have on the mortgage industry in New York, and perhaps the nation,” Justice John M. Leventhal wrote for a unanimous panel in Bank of New York v. Silverberg, 17464/08. “Nonetheless, the law must not yield to expediency and the convenience of lending institutions. Proper procedures must be followed to ensure the reliability of the chain of ownership, to secure the dependable transfer of property, and to assure the enforcement of the rules that govern real property.” The opinion noted that MERS is involved in about 60 percent of the mortgages originated in the United States.
From the ruling…
(Emphasis added by 4F)
Decided on June 7, 2011
SUPREME COURT OF THE STATE OF NEW YORK
APPELLATE DIVISION : SECOND JUDICIAL DEPARTMENT
ANITA R. FLORIO, J.P.
THOMAS A. DICKERSON
JOHN M. LEVENTHAL
ARIEL E. BELEN, JJ.
2010-00131
(Index No. 17464-08)
[*1]Bank of New York, etc., respondent,
v
Stephen Silverberg, et al., appellants, et al., defendants.
LEVENTHAL, J.This matter involves the enforcement of the rules that govern real property and whether such rules should be bent to accommodate a system that has taken on a life of its own. The issue presented on this appeal is whether a party has standing to commence a foreclosure action when that party’s assignor—in this case, Mortgage Electronic Registration Systems, Inc. (hereinafter MERS) —was listed in the underlying mortgage instruments as a nominee and mortgagee for the purpose of recording, but was never the actual holder or assignee of the underlying notes. We answer this question in the negative.
…
On appeal, the defendants argue that the plaintiff lacks standing to sue because it did not own the notes and mortgages at the time it commenced the foreclosure action. Specifically, the defendants contend that neither MERS nor Countrywide ever transferred or endorsed the notes described in the consolidation agreement to the plaintiff, as required by the Uniform Commercial Code. Moreover, the defendants assert that the mortgages were never properly assigned to the plaintiff because MERS, as nominee for Countrywide, did not have the authority to effectuate an assignment of the mortgages. The defendants further assert that the mortgages and notes were bifurcated, rendering the mortgages unenforceable and foreclosure impossible, and that because of such bifurcation, MERS never had an assignable interest in the notes. The defendants also contend [*3]that the Supreme Court erred in considering the corrected assignment of mortgage because it was not authenticated by someone with personal knowledge of how and when it was created, and was improperly submitted in opposition to the motion.
…
Here, the consolidation agreement purported to merge the two prior notes and mortgages into one loan obligation. Countrywide, as noted above, was not a party to the consolidation agreement. ” Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation, and the mortgage passes with the debt as an inseparable incident’”
…
Therefore, assuming that the consolidation agreement transformed MERS into a mortgagee for the purpose of recording—even though it never loaned any money, never had a right to receive payment of the loan, and never had a right to foreclose on the property upon a default in payment—the consolidation agreement did not give MERS title to the note, nor does the record show that the note was physically delivered to MERS. Indeed, the consolidation agreement defines “Note Holder,” rather than the mortgagee, as the “Lender or anyone who succeeds to Lender’s right under the Agreement and who is entitled to receive the payments under the Agreement.” Hence, the plaintiff, which merely stepped into the shoes of MERS, its assignor, and gained only that to which its assignor was entitled (see Matter of International Ribbon Mills [Arjan Ribbons], 36 NY2d 121, 126; see also UCC 3-201 ["(t)ransfer of an instrument vests in the transferee such rights as the transferor has therein"]), did not acquire the power to foreclose by way of the corrected assignment.
…
In sum, because MERS was never the lawful holder or assignee of the notes described and identified in the consolidation agreement, the corrected assignment of mortgage is a nullity, and MERS was without authority to assign the power to foreclose to the plaintiff. Consequently, the plaintiff failed to show that it had standing to foreclose. MERS purportedly holds approximately 60 million mortgage loans (see Michael Powell & Gretchen Morgenson, MERS? It May Have Swallowed Your Loan, New York Times, March 5, 2011), and is involved in the origination of approximately 60% of all mortgage loans in the United States (see Peterson at 1362; Kate Berry, Foreclosures Turn Up Heat on MERS, Am. [*6]Banker, July 10, 2007, at 1). This Court is mindful of the impact that this decision may have on the mortgage industry in New York, and perhaps the nation. Nonetheless, the law must not yield to expediency and the convenience of lending institutions. Proper procedures must be followed to ensure the reliability of the chain of ownership, to secure the dependable transfer of property, and to assure the enforcement of the rules that govern real property. Accordingly, the Supreme Court should have granted the defendants’ motion pursuant to CPLR 3211(a) (3) to dismiss the complaint insofar as asserted against them for lack of standing. Thus, the order is reversed, on the law, and the motion of the defendants Stephen Silverberg and Fredrica Silverberg pursuant to CPLR 3211(a)(3) to dismiss the complaint insofar as asserted against them for lack of standing is granted.
FLORIO, J.P., DICKERSON, and BELEN, JJ., concur.
ORDERED that the order is reversed, on the law, with costs, and the motion of the defendants Stephen Silverberg and Fredrica Silverberg pursuant to CPLR 3211(a)(3) to dismiss the complaint insofar as asserted against them for lack of standing is granted.
Full opinion below…
It is well worth the read…
http://4closurefraud.org/2011/06/13/kaboom-ny-appellate-division-bank-of-ny-v-silverberg-mers-does-not-have-the-right-to-foreclose-on-a-mortgage-in-default-or-assign-that-right-to-anyone-else/
What else should you wait for? I think the foreclosure crisis will have much more immediate consequences than the inflation you anticipate....especially inflation in the housing market.
On the macro-economic level, I'm waiting at least 30 more days to see the outcome of the robo signing settlement between The Justice Department and the six largest U.S. Banks:
http://online.wsj.com/article/SB10001424052702303848104576383532492003262.html
Banks have been holding back on foreclosure petitions while they establish these new procedures, so there's a backlog of severely delinquent loans where foreclosure proceedings haven't been intitiated yet. This has created some misleading statistics and optimism about lower foreclosure rates, while the number of severely delinquent loans has remained very high:
http://blogs.wsj.com/developments/2011/05/20/foreclosures-vs-delinquencies-its-all-about-the-courts/
In "judicial states", I think there is a significant risk of continued downward pressure housing prices that could take a few more years to find a bottom......and I just don't think inflation is going to affect real estate that quickly when there's no buyers to drive the demand side of the equation.....and while they're being squeezed by inflation in other aspects of their finances.
5 New Rules of Real Estate
In the 20-odd years that I have been writing about real estate, I don't believe there has ever been a better time to buy a home.
Why? For starters, 30-year fixed-rate mortgages can be had for less than 5 percent. Recently, the 30-year rate hit 4.6 percent. If you want a 15-year mortgage, you can (for now) still get it for less than 4 percent. These are astounding rates. As Robert Fogel, a Nobel prize-winning economist from the University of Chicago, recently told me, it's like borrowing for free. That's how it feels to me, too: When my husband and I bought our first home in 1989, our interest rate was 11.75 percent.
At this point, it seems everyone wants the real estate market to get better:
• Realtors are selling a fraction of the homes they once were, taking a huge hit in income.
• Builders (at least, those that are still in business) are selling about one-eighth as many homes as they were selling in 2005.
• Appraisers continue to take some of the blame for the housing crisis, for over-appraising property in the boom years and under-appraising it now. Realtors say that more than 75 percent of the homes sales that fall apart do so because the appraisal comes in so far below the contract price that a deal can't be worked out.
• And homeowners are desperate for the housing market to rebound -- especially the more than 25 percent who are underwater with their homes -- so they can refinance or sell their homes and move on with their lives.
[Click here to check home equity rates in your area.]
There's no reason you shouldn't buy a home now and take advantage of super-low prices, historically low mortgage interest rates, and a significant supply of homes on the market. But to be successful in today's real estate market, you need to understand that the game has changed.
Here's my list of the biggest shifts:
1. R.I.P., Big Housing Price Jumps
If you want to buy a house, you have to have enough income to support the mortgage. Now, take it the next step: If everyone in a particular neighborhood earns around the same money, then all the houses in the neighborhood will be priced about the same and home values will only rise 3 percent per year.
That's about the typical raise most Americans used to get, but the decidedly old-fashioned expectation went out in the 2000s because banks told borrowers that exotic mortgages (like the infamous pay-option adjustable-rate mortgage, or ARM) would allow them to "leverage up" to a much more expensive house payment. It was a payment most clearly couldn't afford; the bulk of those loans started going delinquent within three months of closing. Now that every borrower has to have a job and some sort of down payment, and the only basic loan types available are 30-year and 15-year fixed-rate mortgages, you won't be able to leverage up with your mortgage, and housing prices will remain far more steady.
In short -- buy now, but don't expect a huge pop in home prices. It ain't going to happen.
2. Mortgage Lenders: Just Not That into You
Most home buyers don't have enough cash in their pocket to purchase a home without a mortgage. But, lenders are extremely risk-averse at the moment -- so they don't want to approve a mortgage application unless you have an extremely good FICO score (preferably 700 or higher, and at least 760 to get the best rates); you have plenty of cash in the bank (for your down payment, closing costs and a healthy cash reserve); you don't have anything weird or amiss in your financial data. And it helps if you have another loan application approved from a competing institution. Which is to say: They only want you if you don't really need them.
You'll also need to make sure the property appraises at or above the contracted price and the neighborhood is steady (without too many foreclosures).
3. The Best Deals Are in New Places
Sure, there are amazing short sales and foreclosures out there. To find them, you'll have to hire a great agent who really knows what he or she is doing, has connections with the foreclosure-sale (also known as real estate owned, or REO) departments of big lenders, and can help you navigate a tricky and frustrating negotiation cycle.
For example, if you want to buy a HUD home (an FHA foreclosure), you'll need a HUD-certified real estate agent who can help you make an offer at HUDHomeStore.com. But the agent may not tell you that short sales and foreclosures are often damaged properties that will require tens of thousands of dollars (or more) in deferred maintenance, rebuilding or renovating.
Instead, look for a property where the seller has plenty of equity and has to sell, but is confronted with a neighborhood full of foreclosures. The seller will have to price the home to compete with foreclosures, and you'll scoop up a property that is in much better shape and will, in all likelihood, require a lot less maintenance, renovation and upkeep.
4. Investing? Focus on Income
Somewhere along the way, ordinary civilians got the idea that there were massive profits to be made in real estate, if only they could flip the properties fast enough. The problem with that strategy became apparent when the real estate market crashed, and investors (who were leveraged to the hilt) couldn't get out of their properties in time. When you're paying thousands of dollars for a mortgage but don't have any income -- nor hopes of a sale -- it's a fast track to bankruptcy.
But now is an amazing time to buy investment property. Purchase a foreclosure or two (or up to 10, if you can find the financing), and focus on how much income you can get each month. If you buy a foreclosure in the Atlanta area for $75,000 and can get $800 to $1,000 per month in rent, that's a terrific return on investment.
5. Time to Think Medium Term ... at Minimum
I'm not sure where home buyers got the idea that they could buy and flip houses every 24 months and collect a king's ransom's worth of tax-free profits. But those days are over. Whether you're buying as an investor or plan to live in the property, you'll need a 7- to 10-year plan in order to make sure you won't lose money after factoring in the costs of sale.
Even those investors who are buying bottom-feeder foreclosures and fixing them up might not be able to resell them so quickly. And if they do, they might find that lenders won't finance their buyers. So come up with a long-term plan that will let you rake in money ... while the rest of the real estate market catches up.
http://finance.yahoo.com/real-estate/article/112906/new-rules-real-estate-moneywatch?mod=realestate-buy
20 Cities That Are Having An Awesome Recovery
http://www.businessinsider.com/the-20-cities-having-an-awesome-recovery-2011-5
Big supply, low prices
NEW YORK (CNNMoney) -- There's a three-year inventory of homes in foreclosure for sale, and that's devastating home prices.
Las Vegas has so many foreclosures that 53% of all the homes sold in Nevada are in some stage of foreclosure, according to a report from RealtyTrac, the online marketer of foreclosed properties.
Foreclosures represent 45% of sales in California and Arizona, and 28% of all existing home sales during the first three months of 2011.
"This is very bad for the economy," said Rick Sharga, a spokesman for RealtyTrac.
What's more, the homes are selling at steep discounts, especially so-called REOs, bank-owned homes that have been taken in foreclosure procedures.
The average REO cost on average about 35% less than comparable properties, according to RealtyTrac.
But in some areas, the discounts were ever greater: In New York State, the discount for REOs was 53% during the first quarter. And it was nearly 50% in Illinois, Ohio, and Wisconsin.
10 dirt cheap housingmarkets
Also weighing on market prices are "short sales," homes where the selling price is less than what is owed by the borrowers. These sales sold at an average 9% discount.
Including both REOs and short sales, Ohio had the biggest discount of any state, at 41%.
There were 158,000 deals involving distressed properties nationwide during the first quarter, less than half the nearly 350,000 during the same period two years earlier.
With the slowed sales pace, it will take three years to burn through the inventory of 1.9 million distressed properties, according to Sharga.
"Even if you look at REOs alone, it will take 24 months to clear them and that's without any new foreclosures at all coming into the system," said Sharga.
http://money.cnn.com/2011/05/26/real_estate/foreclosure_sales_report/index.htm
Some areas have real estate prices less than 20 years ago... And mortgage rates are in the basement as well at 4.00 to 4.50%.
This could be the once in a lifetime opportunity!
The odds of real estate and interest rates staying this low is near zero. The truck loads of money going into the economy courtesy of the US government is a perfect recipe for inflation. Higher inflation will result in higher values AND higher interest rates.
Most people will wait and buy AFTER prices and rates are higher and then complain about being screwed again.
Winners of the rental economy
( You can be a renter or a landlord. The massive amounts of money being poured into the economy will make EVERYTHING go up in value .)
Members of the Rent is Too Damn High Party beware! Residential rental prices are on the rise. Here's who wins in the new non-ownership society.
FORTUNE -- There are still many factors discouraging even the most savvy homebuyers from purchasing a home, but a new class of renters is expected to bring a bright spot to the troubled U.S. real estate market. Prices for rental apartments are expected to rise nationally – by approximately 4.5% in 2011 and up to another 3% in 2013, according to Rent.com.
rent vs buy
During the housing boom between 2001 and 2005, prices for rentals fell by nearly 10% as easy credit offered by banks lured many newcomers to homeownership. Since the bust of the housing market, rents have more than made up those declines as more people now question the financial merits of homeownership or simply can't get approved for a mortgage. From 2006 to 2009, rental prices on average increased by more than 15%, according to Moody's Analytics economist Andreas Carbacho-Burgos. Nationwide, the average rent today is $1,360 a month.
Experts predict rents will continue rising.
more...
http://finance.fortune.cnn.com/2011/05/25/winners-of-the-rental-economy/?iid=HP_LN
Asus you act evil everyday.Remember RLT@ is not board to stay on topic. The banks are not evil you are,and Bcc@ drop you off hard you fool
Belarus Just Devalued Its Currency By 56%
From the "Your Economy" board.
The people with loans on assets ( real estate ) come out smelling like a rose! The same thing is happening in the US but in a much less obvious way, by printing huge amounts of "free" money.
Tyler Durden's picture
Submitted by Tyler Durden on 05/23/2011 14:23 -0400
When it comes to currency warfare, one can be polite and gentlemanly about it, like Brazil for instance, which every day, and sometimes on several occasions during the day, will proceed to buy dollars in an attempt to keep one's own currency lower. Or one can do what the Belarus central bank just did, and officially devalue one's currency, in this case the Belarus ruble, by 56% overnight, against every currency out there.
At this point, it sucks (that is a technical term) to be holding any exposure in BYR. Luckily for those who held their "money" in the form of gold and silver, they just got an instantaneous 56% value preservation and a relative boost in their purchasing power with just one central bank announcement. Also, any and all indebted parties who have BYR-denominated debts are throwing one big party tonight, as their debt was just cut by more than half. And yes, the Greeks are jealous with envy.
From Kommersant.ru:
The National Bank of Belarus (NBB) is sharply devaluing the official rate of Belarusian ruble. The exchange rate as of May 24 was set at 4,930 rubles per dollar. a decrease of 56% from the 23 May.
The National Bank of Belarus has officially confirmed a sharp depreciation of the currency. On its website it has published the official exchange rate of Belarusian ruble: $ 1 - Br4930 (a decrease of 56,3% to the rate on 23 May), 1 Euro - Br6914, 82 (a decrease of 53,1%), 1 Russian ruble - Br173 , 95 (a decrease of 53,9%). The official rate for May 23 was set at 3,155 rubles per dollar.
Earlier, the Belarusian authorities stated that in the near future a unification of the national currency will occur in two phases. "In the first stage decisions will be made to bring down the increased demand, and upon receipt of the loan rate will be formed on the basis of supply and demand, thus lowering the expectations today are still there," - said on May 20, Prime Minister of Belarus Mikhail Myasnikovich.
Meanwhile, representatives of Belarusian banks have criticized the mechanism of devaluation. "The problem is not in the specific value of the exchange rate and in the mechanism. The question is: under whose speculative decisions did the National Bank make this choice?" - Said the agency "Interfax-West" management representative of a bank with Russian capital. In this case, the representative of a state bank believes that "this decision should be viewed as an interim measure." According to him, "the trend is obvious: the official exchange rate will move in the direction of the OTC exchange rate, rather than vice versa."
Earlier, BNB announced the termination of containment of the Belarusian ruble to the retail market: from May 12 to lift restrictions on banks to buy and sell currencies population - 2% of the official rate.
http://www.zerohedge.com/article/belarus-just-devalued-its-currency-56
Will agree that the gap between the haves and have-nots will continue to grow. I also think the most of the middle class will end up in the have-not category. But disagree that borrowing all you can to invest in real estate at this time is a good idea.
Hyper-inflation is a possibility but implying that the USA could mimic Zimbabwe is nothing but scare tactics.
Not going to get into an internet argument with you so I will stop here.
Good luck with with your strategy if you follow your suggestion.
Given the runaway money printing do think there is even a remote possibility that we won't have rampant inflation?
The odds are significantly in your favor if you borrow money right now... Make sure it's with a fixed interest rate.
Obama policies are a miserable failure.
The very people he is trying to help are being hurt the most. Inflation is the cruelest tax of them all. It shifts wealth from the lower income class to the upper income class. Those with assets are seeing their wealth increase while the poor without assets are finding it harder and harder to put food on the table. The truck loads of money that are being poured into the economy is causing everything to go up in "value". If you have stuff you will have an apparent benefit... If you don't then your life will become even more miserable. The gap between the haves and the have nots is growing wider every day.
This is what you get when you put a community organizer in charge.
You want real assets right now... Not money. In Zimbabwe they have been printing money like crazy and you can't carry enough to buy a hamburger! If you have $1 million today you won't be able to buy much with it later... That's why you need to have assets... Real estate... houses, land, anything of value other than cash will help you from being one of the "have nots". Real assets will go up in value with inflation... cash becomes less valuable.
What a great idea, get as many 30 years loans as you can then wait for inflation to bail you out.
Almost as good a plan as counting on winning a mega bucks lottery to fund your retirement.
Signing up for a 30 year fixed rate mortgage right could possibly make you very rich. If things continue the way they are going now you will be able to pay that mortgage off using peanuts. A good case can be made that a person should get as many 30 year fixed rate loans as possible. The probability of higher inflation is almost a guarantee... All real estate will be priced much higher in the future and can be paid off with cheaper dollars. Those that don't invest now will be the same people that will complain later how they are still getting screwed over by the system.
Real estate prices are down and lending rates are low... What else should you wait for?
I won't buy again because I don't trust the banks. I don't want to owe evil, and the bank is acting evil.
Len, I'm not sure where you are these days but I hope you are doing well. If you happen to read this I was curious if you had any new predictions or thoughts?
Thanks
Don
"Falling prices have made real estate the best buy in at least four decades."
The will all wait until prices are high again before they buy...
Home Ownership Declining Despite Cheapest Prices in 40 Years
Apr 19, 2011
Victoria Pauli signed a one-year lease last week to stay in her rental home in Fair Oaks, California. She had considered buying in the area, where property prices have slumped 57 percent since a 2005 peak.
In the end, she decided it wasn’t worth it.
“I know people who have watched their home values get cut in half, and I know people who are losing their homes,” said Pauli, 31, who works as a property manager for a real estate company. “It’s part of the American dream to want to own your own home, and I used to feel that way, but now I tell myself: Be careful what you wish for.”
The most affordable real estate in a generation is failing to lure buyers as Americans like Pauli sour on the idea of home ownership. At the end of 2010, the fourth year of the housing collapse, the share of people who said a home was a safe investment dropped to 64 percent from 70 percent in the first quarter. The December figure was the lowest in a survey that goes back to 2003, when it was 83 percent.
“The magnitude of the housing crash caused permanent changes in the way some people view home ownership,” said Michael Lea, a finance professor at San Diego State University. “Even as the economy improves, there are some who will never buy a home because their confidence in real estate is gone.”
Worse Than Depression
Historically, homes have been a safer investment than equities. During 2008, the worst year of the housing crisis, the median U.S. home price declined 15 percent, compared with a more than 38 percent plunge in the Standard & Poor’s 500 Index.
Americans stay in their homes for a median of eight years, according to the National Association of Realtors in Chicago. Someone who bought a home in 2002 and sold in 2010 saw a 4.8 percent increase in value, based on the annualized median price measured by the group. The average annual gain in the past 20 years was 4.2 percent.
Falling prices have made real estate the best buy in at least four decades. Housing affordability reached a record in December, according to National Association of Realtors data that go back to 1970. The group bases its gauge on property prices, mortgage rates and the median U.S. income.
The median U.S. home price tumbled 32 percent from a 2006 peak to a nine-year low in February, data from the Realtors show. The retreat surpassed the 27 percent drop seen in the first five years of the Great Depression, according to Stan Humphries, chief economist of Zillow Inc., a Seattle-based real estate information company.
Not Risk-Free
“If we’ve learned anything from this mess, it’s that housing is not a risk-free investment,” said Michelle Meyer, a senior economist at Bank of America Merrill Lynch Global Research in New York. “Everyone knows someone underwater in their mortgage or struggling to sell a home.”
About 11 million U.S. homes were worth less than their mortgages at the end of 2010, according to CoreLogic Inc., a Santa Ana, California-based real estate information company. An additional 2.4 million borrowers had less than five percent equity, meaning they’ll be underwater with even slight price declines, according to the March 8 report. The two categories add up to 28 percent of residences with mortgages.
Future Plans
The share of Americans who said they plan to purchase a home in the next six months tumbled 23 percent in March, according to the Conference Board research firm in New York. The National Association of Realtors probably will say tomorrow that existing-home sales were at a 5 million annual rate in March, up 2.5 percent after a 9.6 percent plunge in February, according to the median estimate of 74 economists surveyed by Bloomberg.
Work began on 549,000 houses at an annual pace in March, up 7.2 percent from the prior month, figures from the Commerce Department showed today in Washington. The gain failed to make up for ground lost in February, when starts fell to the lowest level in almost two years.
The drop in homebuyer confidence may be temporary. Home sales probably will rise 4.1 percent to 5.1 million in 2011, with the biggest increases in the second half of the year, the Mortgage Bankers Association said in an April 14 report. In 2012, sales may climb 5.9 percent to 5.4 million, the highest pace since 2007, the Washington-based trade group estimated.
A rebound in home sales depends on the availability of jobs, the mortgage association said. The unemployment rate probably will decline every quarter of this year and next, falling to 7.9 percent by 2012’s end, the trade group said. It was 8.8 percent last month, the lowest in two years.
Improving Employment
“We expect that purchase activity will pick up slowly as the improvement in the job market eventually leads to greater willingness to buy,” the mortgage bankers group said.
Borrowing costs are at historic lows. The average U.S. rate for a 30-year fixed mortgage was 4.69 percent last year, the lowest in annual data going back to 1972, according to mortgage financier Freddie Mac, based in McLean, Virginia. The rate in March was 4.84 percent, the company said.
By 2012’s fourth quarter, the average fixed rate may rise to 6 percent, according to the Mortgage Bankers Association.
“If you can jump through the hoops to get a mortgage, and there will be hoops, then this is an amazing time to purchase real estate,” said Robert Stein, a senior economist at First Trust Portfolios LP in Wheaton, Illinois, and the former head of the Treasury Department’s Office of Economic Policy. “There are going to be a lot of people kicking themselves a few years from now because they didn’t take advantage of the low prices and the low mortgage rates.”
Tighter Lending
Cheap financing hasn’t done enough to boost home sales in part because lenders are being more selective with applicants, according to Federal Reserve Chairman Ben Bernanke. Fed policy makers have described the housing market as “depressed” in statements following their last eight meetings.
“Although mortgage rates are low and house prices have reached more affordable levels, many potential homebuyers are still finding mortgages difficult to obtain and remain concerned about possible further declines in home values,” Bernanke said in Congressional testimony last month.
The share of banks reporting tighter mortgage standards in the first quarter rose to 16 percent, the highest since 1991, according to the Fed’s Senior Loan Officer Survey.
Federal regulators are proposing rules that may make lending even more stringent, including a requirement that banks and bond issuers keep a stake in home loans they securitize if the mortgage borrowers have imperfect credit and down payments of less than 20 percent. Borrowers who don’t meet the criteria would pay higher rates to compensate lenders for risk.
Fannie Phase-Out
As mortgage requirements rise, rates could follow as Congress and the Obama administration consider phasing out government-controlled Fannie Mae and Freddie Mac. The companies hold federal charters mandating they increase the availability of mortgages through securitization. In Fannie Mae’s case, that order goes back to the Great Depression, when it was created as part of President Franklin D. Roosevelt’s New Deal.
“There are a lot of unsettled policy issues on the table right now that, if they’re not handled right, could further set back the housing market,” said Richard DeKaser, an economist at Parthenon Group in Boston. “Fannie and Freddie have historically lowered interest rates, and eliminating them will increase the cost of home ownership.”
Lowest in Decade
The U.S. home ownership rate dropped to 66.5 percent in the fourth quarter, the lowest in more than a decade, according to the Census Department. The rate probably will retreat another percentage point by 2013, according to Meyer, of Bank of America Merrill Lynch, and Lea, the finance professor. That would put it back to a 1997 level.
“People will still aspire to own their own homes,” Lea said. “They’ll just be a lot more practical about it.”
Pauli, the California renter, said she has no such aspirations, at least for now. She pays $1,500 a month for her three-bedroom, single-family home with a two-car garage, granite kitchen countertops and stainless-steel appliances. Her neighbors who bought before the housing crash typically have mortgage payments of about $2,800 a month, Pauli said.
“I don’t see myself purchasing, even with all the great prices I see,” Pauli said. “Going to bed every night worrying about your home value doesn’t sound like a good time to me.”
ELENIN, HAARP and The Future
http://truthfrequencyradio.com/archives/3664
Special commercial free presentation of Truth Frequency on Polygraph Radio as we welcome one of our favorite guests, Brooks Agnew, to get his perspective on the “comet” ELENIN and try to decode some of the data circulating around. Is it a comet? Is it a brown dwarf? Is it an artificial space station? We can only speculate at this time but we hope to at least scratch the surface with this broadcast.
And as a special treat, we will have a 1 hour pre-show beginning at 9pm central with our good friend Nancy Wallace
What we know for sure is every-time this “comet aligns” with earth there is a major earthquake or disaster and we’ve merely seen the beginning. If this is the case then we have a devastating year to look forward and quite possibly an Extinction Level Event: (Nibiru Is Near?)
(listen to the free stream here...if limited on time(?) skip to 1 hour into the program)
http://truthfrequencyradio.com/archives/3664
Comet Elenin Compared to Others
"WOW"
Well check out this video she posted A DAY BEFORE the other prophetic video on last Tuesday.
MARCH 11-23 EVENT?! Signs and Evidence
BIG EARTHQUAKE TO COME! Get Away From the Fault Zones!!!
Uploaded by 9Nania on Mar 9, 2011
Austerity In America: 22 Signs That It Is Already Here And That It Is
Going To Be Very Painful
Over the past couple of years, most Americans have shown little
concern as austerity measures were imposed on financially troubled
nations across Europe. Even as austerity riots erupted in nations
such as Greece and Spain, most Americans were still convinced that
nothing like that could ever happen here. Well, guess what?
Austerity has arrived in America. At this point, it is not a formal,
mandated austerity like we have seen in Europe, but the results are
just the same. Taxes are going up, services are being slashed
dramatically, thousands of state and city employees are being laid
off, and politicians seem to be endlessly talking about ways to make
even deeper budget cuts. Unfortunately, even with the incredibly
severe budget cuts that we have seen already, many state and local
governments across the United States are still facing a sea of red ink
as far as the eye can see.
Most Americans tend to think of "government debt" as only a problem of
the federal government. But that is simply not accurate. The truth
is that there are thousands of "government debt problems" from coast
to coast. Today, state and local government debt has reached at an
all-time high of 22 percent of U.S. GDP. It is a crisis of
catastrophic proportions that is not going away any time soon.
A recent article in the New York Times did a good job of summarizing
the financial pain that many state governments are feeling right now.
Unfortunately, as bad as the budget shortfalls are for this year, they
are projected to be even worse in 2012 .
While state revenues, shrunken as a result of the recession, are
finally starting to improve somewhat, federal stimulus money that had
propped up state budgets is vanishing and costs are rising, all of
which has left state leaders bracing for what is next. For now,
states have budget gaps of $26 billion, by some estimates, and foresee
shortfalls of at least $82 billion as they look to next year's
budgets.
So what is the solution? Well, for state and local politicians from
coast to coast, the answer to these financial problems is to impose
austerity measures. Of course they never, ever use the term
"austerity measures", but that is exactly what they are.
The following are 22 signs that austerity has already arrived in
America and that it is going to be very, very painful .
#1 The financial manager of the Detroit Public Schools, Robert Bobb,
has submitted a proposal to close half of all the schools in the city.
His plan envisions class sizes of up to 62 students in the remaining
schools.
#2 Detroit Mayor Dave Bing wants to cut off 20 percent of the entire
city from police and trash services in order to save money.
#3 Things are so tight in California that Governor Jerry Brown is
requiring approximately 48,000 state workers to turn in their
government-paid cell phones by June 1st.
#4 New York Governor Andrew Cuomo is proposing to completely
eliminate20 percent of state agencies.
#5 New York City Mayor Michael Bloomberg has closed 20 fire
departments at night and is proposing layoffs in every single city
agency.
#6 In the state of Illinois, lawmakers recently pushed through a 66
percent increase in the personal income tax rate.
#7 The town of Prichard, Alabama came up with a unique way to battle
their budget woes recently. They simply stopped sending out pension
checksto retired workers. Of course this is a violation of state law,
but town officials insist that they just do not have the money.
#8 New Jersey Governor Chris Christie recently purposely skipped a
scheduled 3.1 billion dollar payment to that state's pension system.
#9 The state of New Jersey is in such bad shape that they still are
facing a $10 billion budget deficit for this year even after cutting a
billion dollars from the education budget and laying off thousands of
teachers.
#10 Due to a very serious budget shortfall, the city of Newark, New
Jersey recently made very significant cuts to the police force.
Subsequently, there has been a very substantial spike in the crime
rate.
#11 The city of Camden, New Jersey is "the second most dangerous city
in America", but because of a huge budget shortfall they recently felt
forced to lay off half of the city police force.
#12 Philadelphia, Baltimore and Sacramento have all instituted
"rolling brownouts" during which various city fire stations are shut
down on a rotating basis.
#13 In Georgia, the county of Clayton recently eliminated its entire
public bus system in order to save 8 million dollars.
#14 Oakland, California Police Chief Anthony Batts has announced that
due to severe budget cuts there are a number of crimes that his
department will simply not be able to respond to any longer. The
crimes that the Oakland police will no longer be responding to include
grand theft, burglary, car wrecks, identity theft and vandalism.
#15 In Connecticut, the governor is asking state legislators to
approve the biggest tax increase that the state has seen in two
decades.
#16 All across the United States, conditions at many state parks,
recreation areas and historic sites are deplorable at best. Some
states have backlogs of repair projects that are now over a billion
dollars long. The following is a quote from a recent MSNBC article
about these project backlogs .
More than a dozen states estimate that their backlogs are at least
$100 million. Massachusetts and New York's are at least $1 billion.
Hawaii officials called park conditions "deplorable" in a December
report asking for $50 million per year for five years to tackle a $240
million backlog that covers parks, trails and harbors.
#17 The state of Arizona recently announced that it has decided to
stop paying for many types of organ transplants for people enrolled in
its Medicaid program.
#18 Not only that, but Arizona is do desperate for money that they
have even sold off the state capitol building, the state supreme court
building and the legislative chambers.
#19 All over the nation, asphalt roads are actually being ground up
and are being replaced with gravel because it is cheaper to maintain.
The state of South Dakota has transformed over 100 miles of asphalt
road into gravel over the past year, and 38 out of the 83 counties in
the state of Michigan have transformed at least some of their asphalt
roads into gravel roads.
#20 The state of Illinois is such a financial disaster zone that it is
hard to even describe. According to 60 Minutes, the state of Illinois
is six months behind on their bill payments. 60 Minutes correspondent
Steve Croft asked Illinois state Comptroller Dan Hynes how many people
and organizations are waiting to be paid by the state, and this is how
Hynes responded .
"It's fair to say that there are tens of thousands if not hundreds of
thousands of people waiting to be paid by the state."
#21 The city of Chicago is in such dire straits financially that
officials there are actually toying with the idea of setting up a
city-owned casino as a way to raise cash.
#22 Michigan Governor Rick Snyder is desperately looking for ways to
cut the budget and he says that "hundreds of jurisdictions" in his
state could go bankrupt over the next few years.
But everything that you have just read is only the beginning. Budget
shortfalls for our state and local governments are projected to be
much worse in the years ahead.
So what is the answer? Well, our state and local governments are
going to have to spend less money. That means that we are likely to
see even more savage budget cutting.
In addition, our state and local politicians are going to feel intense
pressure to find ways to "raise revenue". In fact, we are already
starting to see this happen.
According to the National Association of State Budget Officers, over
the past couple of years a total of 36 out of the 50 U.S. states have
raised taxes or fees of some sort.
So hold on to your wallets, because the politicians are going to be
coming after them.
We are entering a time of extreme financial stress in America. The
federal government is broke. Most of our state and local governments
are broke. Record numbers of Americans are going bankrupt. Record
numbers of Americans are being kicked out of their homes. Record
numbers of Americans are now living in poverty.
The debt-fueled prosperity of the last several decades came at a cost.
We literally mortgaged the future. Now nothing will ever be the same
again.
The above article published by The Economic Collapse.
Hitler finds out about the DHS Emergency Alert System and the See Something Say Something program
Infowars.com
February 10, 2011
Der Führer spazzes out over Obama stealing his centralized broadcasting system...
http://www.infowars.com/hitler-finds-out-about-the-dhs-emergency-alert-system-and-the-see-something-say-something-program/
lentinman, Merry Christmas....hope all is well with you.
Full Spectrum Dominance: 8 Examples Of How The Government Is Attempting To Take Total Control Of Our Food, Our Health, Our Money And Even Our Dignity
*
The Alex Jones Channel Alex Jones Show podcast Prison Planet TV Infowars.com Twitter Alex Jones' Facebook Infowars store
The Economic Collapse
Nov 22, 2010
Over the past several decades, no matter which political party has been in power the government has continued to become a larger part of our lives. These days many people are speaking of the “nanny state” that we have created, but the reality is far worse than that. The truth is that the government has become a gluttonous, out of control behemoth that is gobbling up everything in sight and that is attempting to exert full spectrum dominance over our lives. Today, the government seems to have an insatiable hunger to watch us, track us and control us. Now they even want to feel our private parts before we get on an airplane. No matter what politicians we send to Washington D.C., it just seems to get worse and worse. Anyone who still believes that we live in “the land of the free” is completely and totally delusional.
It isn’t just in one particular area that all of this government intrusion into our lives is so offensive. What we are witnessing is the government slowly digging its fingers even deeper into our lives in a thousand different ways. Sadly, most Americans see the government as the one who is supposed to take care of them from the cradle to the grave, as the one who is supposed to fix all of the problems in society and as the one who is their ultimate authority.
This is in direct contradiction to the concept of a “limited government” that our Founding Fathers tried so desperately to enshrine in our founding documents. The American people need a big-time wake up call. The following are 8 examples of how the U.S. government is attempting to take even more control over our lives….
#1 Taking Total Control Of Our Food – S. 510 “The Food Safety Modernization Act”
S. 510, “The Food Safety Modernization Act”, is another huge power grab by the FDA and the federal government over our food supply. The bill is written so broadly and so vaguely that nobody really knows what it means. The potential for abuse of these vague new powers would be staggering. So will the government abuse these powers? Those who are in favor of the bill say that of course the government will be reasonable, but those who are opposed to the bill point to all of the other abuses that are currently taking place as evidence that we simply cannot trust the feds with vague, undefined powers.
Fortunately, the Tester Amendment has been attached to S. 510 at least for now, but big agriculture is not happy about this, and they will be doing everything they can to get it kicked out of the final version of the law. In any event, if this food safety law does get passed, tens of millions of Americans will be left wondering what they are allowed to grow in their back yards, what seeds they are allowed to save and what can and cannot be sold at farmer’s markets.
In case you think this is paranoid, just consider what is already happening. It has been documented that the feds recently raided an Amish farmer at 5 AM in the morning because they claimed that he was was engaged in the interstate sale of raw milk in violation of federal law. If the feds are willing to stoop so low as to raid Amish farmers, do you think they will have any hesitation when the time comes to raid your home?
#2 Taking Total Control Of Air Travel – The Dehumanizing Full Body Scanners And “Enhanced Pat-Downs”
Totalitarian governments throughout history have always sought to dehumanize their subjects. Sadly, that is exactly what is happening in America today. If you want to get on an airplane in the United States, you will now be forced to either let TSA agents gawk at your naked body or let TSA agents grope your entire body including your genitals.
What these TSA agents are being instructed to do to ordinary Americans is so bizarre that it is hard to believe. It is being reported that in many instances TSA agents are actually reaching down the pants of male travelers and up the skirts of female travelers. One retired special education teacher was left humiliated, crying and covered with his own urine after an “enhanced pat-down” by TSA agents. Quite a number of women that have been through these “enhanced pat-downs” have used the phrase “sexual assault” to describe the experience.
So is this what America has become? A place that is so “dangerous” that we all must be treated like prison inmates? Large numbers of Americans are swearing that they will simply not fly anymore, but what happens when these “enhanced pat-downs” start showing up at our schools, our shopping centers and our sporting events someday?
Having A Supply Of Healthy Foods That Last Just Makes Sense (AD)
Full Spectrum Dominance: 8 Examples Of How The Government Is Attempting To Take Total Control Of Our Food, Our Health, Our Money And Even Our Dignity 140410banner4
#3 Taking Total Control Of Our Health Care – The Loss Of Our Health Freedom
Once upon a time, Americans had control over their own health care decisions. That is no longer true today. Thanks to major changes in our health care laws, the health care landscape in America has been dramatically changed. Americans are now forced to participate in the officially-sanctioned health care system by purchasing health insurance. But Americans cannot just get any kind of health insurance policy that they want. Our health insurance choices are now tightly constrained by thousands of regulations.
Not only that, but doctors in America no longer have the freedom to treat patients however they see fit. Only “approved” treatments are permissible, and now the federal government is going to be telling doctors which of those “approved” treatments are “cost-effective” enough. As the new health care laws are fully implemented over the next decade, the American people are going to become truly horrified not only about how much their health insurance premiums are going up, but also about how much health freedom they have actually lost.
#4 Taking Control Of Our Money – Multiplying Taxes
Whenever one tax goes down, it seems like several other taxes either go up or get invented. The truth is that Americans are being drained by the federal government, state governments and local governments in dozens upon dozens of different ways. To our various levels of government, our primary function is to serve as a revenue source. Each year it seems like they find more ways to stick it to us. In fact, it looks like 2011 is going to be a banner year for tax increases. If you doubt this, just see my previous article entitled “2011: The Year Of The Tax Increase“.
#5 Taking Control Of Our Businesses – Thousands Of Ridiculous Regulations
Why would anyone in America even attempt to be an entrepreneur today? Most small businesses are literally being strangled by hordes of red tape.
Just consider how things have changed in America. The Federal Register is the main source of regulations for U.S. government agencies. In 1936, the number of pages in the Federal Register was about 2,600. Today, the Federal Register is over 80,000 pages long.
The following is just one example of how bizarre things have gotten in this country. The U.S. Food and Drug Administration is projecting that the food service industry will have to spend an additional 14 million hours every single year just to comply with new federal regulations that mandate that all vending machine operators and chain restaurants must label all products that they sell with a calorie count in a location visible to the consumer.
Do we really need to spend 14 million more hours telling Americans that if they keep eating hamburgers and fries that they are likely to get fat?
But it is not just the federal government that is the problem. One reader recently described how difficult it was to try to run a business in the state of California….
Had 10 employees, but one almost exclusively to deal with government regs, taxes, reporting etc, Received a $144 penalty for a .33 (yes, cents)error on my quarterly payroll taxes from Cal Franchise Tax Board. I called to ask if that was not a bit repressive, why level penalize someone for what was obvisouly a didminimus error? I was told “we would have penalized you if it was .03!” I said, I did not volunteer to be the income tax collector for the State and Fed government, you should be paying me to do all this work and insane paper pushing. Reply: “That is part of the PRIVILIGE of being a business owner!!!”
#6 Taking Control Of Our Environment – The Green Police
The government is using the “green movement” as an excuse to take an unprecedented amount of control over our lives. From coast to coast, communities have been given government grants to track our trash with RFID microchips. The following are just some of the communities that will now be using microchips to track what we throw away….
*Cleveland, Ohio
*Charlotte, North Carolina
*Alexandria, Virginia
*Boise, Idaho
*Dayton, Ohio
*Flint, Michigan
Not only that, but some cities are now starting to fine citizens for not recycling properly.
In Cleveland, Ohio if an RFID tracking chip signals that a recycle bin has not been brought out to the curb within a certain period of time, a “trash supervisor” will actually sort through the trash produced by that home for recyclables.
According to Cleveland Waste Collection Commissioner Ronnie Owens, trash bins that contain over 10 percent recyclable material will be subject to a $100 fine.
Does that sound like America to you?
Now we don’t even have the freedom to throw out trash the way we want to.
#7 Taking Away Our Independence – The Exploding Welfare State
You don’t have much freedom if you can’t take care of yourself. But in America today, tens of millions of Americans have literally become completely dependent on the government for survival. Over 42 million Americans are now on food stamps. Approximately one out of every six Americans is enrolled in a federal anti-poverty program.
The number of Americans living in poverty has increased for three consecutive years, and the 43.6 million poor Americans in 2009 was the highest number that the U.S. Census Bureau has ever recorded in 51 years of record-keeping.
The more Americans that are destitute and totally dependent on the government the easier it will be for the government to control them. Today a rapidly growing percentage of Americans fully expect the government to take care of them. But this is not what our founders intended.
#8 Taking Away Our Patriotism – We Are Even Losing The Freedom To Be Proud Of America
Do you ever think things will get so repressive in America that a group of high school students will be forbidden from singing the national anthem at the Lincoln Memorial? Well, that has already happened. Do you think that areas of our nation will ever become so anti-American that they will forbid students from riding to school with an American flag on their bikes? Well, that has already happened.
Fortunately, there was such an uproar over what happened to 13-year-old Cody Alicea that it made national headlines and he ended up being escorted to school by hundreds of other motorcycles and bicycles – most of them displaying American flags as well. The school reversed its policy and now Cody can ride his bike to school every day proudly displaying the American flag.
But what if nobody had decided to stand up?
That school would have gotten away with banning the flag if the American people had allowed them to.
Our liberties and our freedoms are under attack from a thousand different directions and they are being stripped away from us at a blinding pace.
It has gotten to the point where most of us just sit in our homes and enjoy the “freedom” of digesting the “programming” that is constantly being hurled at us through our televisions. Of course the vast majority of that programming is produced by just 6 monolithic corporations that control almost everything that we watch, hear and read.
Power and money have become more highly concentrated in America today than ever before, and yet most Americans don’t even realize it.
Most Americans are so busy just trying to survive from month to month that they don’t even have time to think about the deeper issues. At the end of the night most of them are so exhausted from serving the system that all they can do is collapse on the sofa and turn on some programming.
But the American people desperately need to wake up. Without liberty and freedom our country cannot work. But our freedoms and liberties are being stripped away a little bit more each and every day.
The America that so many of us grew up adoring is dying right in front of our eyes. If you plan on saying something about it, you better do so before it is too late.
http://www.prisonplanet.com/full-spectrum-dominance-8-examples-of-how-the-government-is-attempting-to-take-total-control-of-our-food-our-health-our-money-and-even-our-dignity.html
When will the Mother of all Ponzi schemes end??
How close are we to End Game?
Next in line for a trillion + Bernanke boondoggle bailout?
http://www.zerohedge.com/article/art-cashin-asks-if-fed-will-buy-muni-bonds-next
Nov 16 2010 Meredith Whitney predicting dramatic declines in US home prices, large layoffs at US banks and widespread defaults in the municipal bond market.
http://video.ft.com/v/677794093001/Crisis-looming-in-US-municipal-debt-market-
Home sales plunged after tax credit ended
November 11, 2010, 12:00 pm EST
Any possible housing market recovery hit a snag during the three months ended September 30, as a government tax credit for homebuyers wound down.
Home prices fell only slightly during the quarter, according to a report from the National Association of Realtors (NAR), but the number of homes sold plummeted more than 25%, compared with the previous quarter.
The fall-off in sales volume remains a troubling feature of the current housing market scene because there's rarely been a more attractive time to buy.
"Given the relationship between mortgage interest rates, home prices and median family income, the buying power in today's market is matching the highest levels we've seen dating all the way back to 1970," said NAR President Ron Phipps.
Many sales were undoubtedly happened in early 2010 as homebuyers accelerated their purchases to qualify for the tax credit, which shaved as much as $8,000 off their tax bills.
Contracts had to be signed by the end of April to qualify and the deals had to close by the end of September.
The national median price for a single-family home sold during the quarter was $177,900, down 0.2% from the same period a year ago and up 0.6% from the second quarter of 2010.
Single-family home prices rose 2.5% to $253,400 in the Northeast, the only region that showed price improvement. Midwest prices fell 3% to $145,600, prices dropped 1.9% in the South and 0.4% in the West region.
The metro area with the biggest gain was Burlington, Vt., where the median price of $286,300 was 17.6% higher than 12 months earlier. The biggest loser was Ocala, Fla., down 20% to $82,200.
San Jose, Calif., recorded the highest median price -- $628,700 -- during the quarter, just nosing out Honolulu at $628,100.
Youngstown, Ohio, the old steel town, had the lowest median sale price, at $60,400.
Condo prices fared worse than those of single-family houses. The national median fell 3.9% from 12 months earlier to $171,400.
Palm Bay, Fla., had the biggest year-over-year loss: down 32% to $73,000; Jacksonville. Fla., was off 31% to $63,200. Phoenix condo prices also plunged, down 26.6% to $73,300.
Condo prices in the New York metro area soared, up 34.5% to $400,000, the most, by far, of any city.
Real estate and the economic collapse....what inning of the ball game are we in??
http://siliconinvestor.advfn.com/readmsg.aspx?msgid=26951312
To: Little Joe who wrote (88099) 11/10/2010 8:54:45 AM
From: isopatch of 88100
Another cloud hanging over the markets gets even darker. If the wealth effect from rising home prices helped boost stocks during the long secular bull market? This 2nd smash in prices should be called the "poverty effect":
http://www.businessinsider.com/zillow-market-report-unprecedented-decline-2010-11#minneapolis-minn-has-dropped-78-yoy-1
THANK GOD we were able to sell both our Ohio home and my late fathers condo into the end of the tax incentive generated price bounce, late last Spring.
Talk about "take the money and run"?! Jeez...
Amazed the banks approved the buyers financing. Both transactions closed with nearly 100% debt and huge monthly carrying costs. Probably in negative equity already!
Tic toc...
Iso
<<"Seems there is quite an effort to make sure certain viewpoints aren't heard.">>
I wholeheartedly agree. The urge to censure is out of control here on IHUB. Original thought and viewpoints are attacked regularly. It's getting Orwellian as we head into The End Game here.
I hope Lentinman is OK(???). I give him all the credit in the world for correctly foreseeing the collapse of the phony real estate market in the USA and also the economic bubble we had here built on debt.
Of course I saw all this coming too. Reality is a bitch. Me and Len had agreed on much of what has transpired in the USA the last several years so I miss his views even though he doesn't clearly see the sinister side of all this like I do.
To blame all this mess on "simple greed" is way way too simple for me. Kind of like saying Oswald "acted alone" in killing JFK... completely RIDICULOUS if you objectively look at all the facts.
Seems there is quite an effort to make sure certain viewpoints aren't heard. I have enjoyed reading your posts. I think I am just about done here. I hope you and yours make it through what is coming. Best of luck. BTW, do you know what happened to Len. I hope he is alright. This is one of his last posts. It's strange that he would post something like this and then disappear.
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=54207299
Tent Cities Popping Up Across America
American Tent Cities Foreclosed and homeless
The financial crisis the U.S. is facing is resulting in tent cities popping up across the nation.Tent cities have sprung up outside Los Angeles in the US as people lose their homes in the mortgage crisis.Subprime meltdown threatens American dream in Southern California.Homeless "tent city" grows amid ongoing subprime lending crisis that threatens middle-class.to many who never thought they would find themselves homeless, but had nowhere else to go after being unable to find work as the economy crumbled.As the recession worsens, tent cities are sadly beginning to pop up across America. This one is in Sacramento, California.
Tent City, U.S.A.
In the wake of the housing crash, "tent cities" have been springing up in several places in California. The story is not that new. However, it has not received much mainstream press. Therefore, many are unaware this is even happening.
The quality of some of the videos is not that good. Two of the better ones are from international writers. By the way, if you have not yet seen any of these, you may be in for a shock. Let's take a look.
Huge Tent City Forming Outside Sacramento
Economic Recovery, Economy-US, In the Loop, Mortgage & Credit Crisis, Politics-US, US news
9 March 2009 :: J.E. Robertson
An array of reports show some 1,200 people living in a growing tent city outside the California capital Sacramento, as more and more people are left homeless by the housing crisis. The UKs Daily Mail on Friday detailed the community, noting echoes of the Depression era. There are an estimated 2,000 people living in such communities around Sacramento, with foreclosure and jobless rates skyrocketing.
Smaller tent cities had been reported in Los Angeles and New Orleans over the last year, but a new photo essay, published by MSBNC, highlights both the magnitude of the Sacramento tent city and its comparison to Depression-era tent cities that emerged as homelessness became a pervasive national crisis.
The news is jolting to many who are worried that the spreading foreclosure crisis and collapse in real estate values, in combination with a faltering job market, could push families with underwater mortgages into homelessness. California is one of the wealthiest states and one of the worlds largest economies, and pressure for serious efforts to combat the economic crisis is mounting.
Police officers with box cutters showed up where St. Pete's tent city residents had moved and set up. The cops slashed their tents to the ground as residents watched in shock. Now one homeless group is moving to label St. Petersburg as the 'meanest city in the nation.' Video by Tina May.
http://geraldcelentechannel.blogspot.com/
The Great Way is gateless,
Approached in a thousand ways.
Once past this checkpoint
You stride through the universe.
http://groups.yahoo.com/group/thelongemergency/messages
Big Banks Told Not To 'Fix' A Fraud
http://online.wsj.com/article/SB20001424052702304879604575582743893387762.html
By ROBBIE WHELAN
Ohio's attorney general threw a wrench into the banking industry's push to quickly restart foreclosures by fixing faulty paperwork, and pressed them to modify mortgage loans.
In two letters released Friday, Attorney General Richard Cordray criticized a number of banks and loan-servicing companies, including Wells Fargo & Co.; Ally Financial Inc.'s GMAC Mortgage; Bank of America Corp.; and J.P. Morgan Chase & Co. Mr. Cordray said the banks are trying to paper over fraud committed in foreclosures with temporary fixes that don't address underlying problems in the banks' practices.
"It is not acceptable for a party who believes they submitted false court documents to merely replace those documents. Wells Fargo and any other banks are not simply allowed a 'do-over,' " he wrote in the letter to Wells. The other letter was sent to Ohio judges, who were asked to notify Mr. Cordray when banks file substitute affidavits.
He demanded that the banks vacate any court order or motion that was based on improper paperwork. In an interview Friday, Mr. Cordray said the banks would "be well-served to work out a settlement with the borrowers to modify the loans and work out payments."
Mr. Cordray's letters come as several banks say they have reviewed their foreclosure procedures and are resuming evictions. But his insistence that they go beyond replacing affidavits by employees who have been labeled "robo-signers"—who didn't adequately review underlying foreclosure documentation—threatens to upend banks' efforts to resolve their foreclosure problems.
Mr. Cordray's strategy gives clues to the goals of a 50-state probe, which was announced two weeks ago. Led by Iowa Attorney General Tom Miller, the effort was joined by top law-enforcement officers from all 50 states in response to reports of widespread errors in foreclosure filings and allegations of robo-signing.
"The banks are committing fraud on the court, essentially perjury, and then saying 'Whoops! You caught me! Here's some different evidence and use that instead,' " Mr. Cordray said in an interview Friday. "I know a lot of judges are not going to take kindly to that."
Bank of America declined to comment. A Wells Fargo spokeswoman said Friday the company intends to cooperate with Mr. Cordray's inquiries and doesn't "believe that any of these instances led to foreclosures which should not have otherwise occurred." She added that Wells Fargo has "chosen to submit supplemental affidavits out of an abundance of caution."
Tom Kelly, a J.P. Morgan spokesman, said the company is still reviewing foreclosure documents for mistakes and hasn't refiled any new or replacement affidavits. Gina Proia, a spokeswoman for GMAC, said her company is "not proceeding with foreclosure sales in Ohio or any state using a defective affidavit."
The aims of the 50-state probe were initially unclear. Some attorneys general, however, made reference to a 2008 settlement in which Bank of America agreed to an $8.4 billion loan-modification program after its Countrywide Financial unit was probed for predatory lending practices.
Mr. Cordray declined to discuss the 50-state investigation or the conversations he has had with other attorneys general about the matter. Mr. Cordray, a Democrat, faces a Republican challenger for his office in Tuesday's general election.
Wells Fargo Chief Financial Officer Howard Atkins said in an Oct. 20 television interview that he was "confident with our policies and controls" related to foreclosures and that "the person at Wells who signs a foreclosure file is the same person as the person who reviews the file, and it is not always done that way in the industry."
But on Oct. 28, Wells announced it was resubmitting affidavits for 55,000 pending foreclosures, suggesting that some of the paperwork might be flawed. In March, a Wells Fargo employee named Xee Moua said in a sworn deposition in a Florida foreclosure case that she signed between 300 and 500 foreclosure documents a day, without reviewing the numbers on the loan files for accuracy.
Asked if she verified the appropriate information, she said, "That's not part of my job
OT: worth listening to IMO,
An hour with Jimmy Rogers
Keep Your Head Above Dollar By Peter Schiff
Euro Pacific Capital, Inc.
Posted Friday, 29 October 2010
There has been so much discussion recently about "QE 2" that you would think the entire financial sector were about to embark on a transatlantic cruise. Unfortunately, they, and we, are not so lucky. In the year 2010, "QE 2" doesn't refer to a sumptuous ocean liner, but a second, more extravagant round of "quantitative easing" - stimulus. In the past, this technique was simply called "printing money." As if the nation has not already suffered enough from the first round, Captain Ben Bernanke and the Fed are determined to compound the damage by hitting us with another monetary juggernaut. Their stated goal is to boost the economy and create jobs. However, since economic growth cannot be achieved by printing money, their QE 2 will sink just as surely as the Titanic.
The intent of QE 2 is to lower interest rates to promote job growth and avoid the apparently growing threat of deflation. But the very idea that the economy is weak because interest rates are too high is laughable. Deflation is the market's cure for the asset bubbles that have recently burst, so any attempt to avert it will only weaken the economy further.
In fact, one of the reasons the US economy is in such bad shape is that interest rates are already too low. Low rates have encouraged excess borrowing, by both individuals and governments, and discouraged saving, fueling new asset bubbles at the expense of legitimate investment. As a result, the dead weight of debt has simply overloaded our economy, and our creditors are getting nervous. What we need now is to make hard choices, not engage in more easing - to deleverage, not borrow more.
Worse still, by keeping rates too low, the Fed has enabled the US government to grow significantly larger than it otherwise could had its borrowing been restrained by higher rates. Absent these low rates, Washington likely wouldn't have passed expensive new healthcare and financial regulation reforms; they would be too busy trying to keep the lights on in the Capitol.
For this and other reasons, the bogeyman of deflation is really not a concern at all. It's not a threat because falling consumer prices could serve as a relief for many suffering from layoffs and pay cuts in the recession. Even if it were a threat, it's not even likely because so much liquidity has already been created and an infinite amount could still be created at will by the Fed. Consumer prices are already rising across the board, despite a contracting economy, so what's all this talk about deflation?
The Fed is quick to point to falling real estate prices. But a drop in real estate will no more cause consumer prices to fall than the real estate boom caused them to rise. Real estate prices are too high, and the economy will never truly recover unless they are allowed to fall. It is interesting that when real estate prices were rising, the Fed did not raise rates to bring them down, but now that they are falling, the central bank feels compelled to lower rates to prop them up. If falling real estate prices threaten deflation, why did the Fed not perceive an inflation threat when real estate prices were rising?
My thinking is that, at the end of the day, all this deflation talk is a red herring. The true purpose of QE 2 is to disguise the decreasing ability of the Treasury to finance its debts. As global demand for dollar-denominated debt falls, the Fed is looking for an excuse to pick up the slack. By announcing QE 2, it can monetize government debt without the markets perceiving a funding problem. If the truth were known, a real panic would ensue. So, the Fed pretends buying treasuries is simply part of its master plan to boost the economy, even though, in reality, it is simply acting as the buyer of last resort.
If the Fed really wanted to help the economy, it would raise rates quite dramatically. Instead of preparing for QE 2, it should be unloading the debt it purchased during QE 1. Of course, that is not so easy to do - which is precisely why I was against QE 1 from the beginning. However, even though the exit will be painful, going down with the ship will be even more unpleasant.
Higher interest rates and a commitment from the Fed to refrain from purchasing Treasury debt would force the government to dramatically reduce spending. If we combine less government spending with fewer regulations, reform our tax code in a way that stops punishing savings and investment, stop all government subsidies for real estate so that prices can fall to affordable levels, and allow all insolvent entities to fail, then a real recovery will take hold.
If the Fed refuses to set sail on QE 2, then her loyal passengers might complain, but at least the US will be on solid monetary ground as it tried to rebuild a viable economy. If instead we board QE 2 (and QE 3 and QE 4 thereafter), then we are headed to a sea full of icebergs called interest rate spikes, and all on board will surely drown in a sea of worthless Federal Reserve Notes.
Peter Schiff is president of Euro Pacific Capital and host of The Peter Schiff Show.
http://news.goldseek.com/EuroCapital/1288373559.php
Jeremy Grantham On The Ruinous Cost Of The Fed's Manipulation Of Asset Prices
http://www.zerohedge.com/article/grantham-ruinous-cost-feds-manipulation-asset-prices
The Subprime Debacle: Act 2, Part 2
Thoughts from the Frontline Weekly Newsletter
http://www.frontlinethoughts.com/
The Subprime Debacle: Act 2, Part 2
by John Mauldin
October 23, 2010
Visit John's Home Page
In this issue:
The Subprime Debacle: Act 2, Part 2
They Knew What They Were Selling
Warning to Mr. Robert Rubin and Management
Popping Through
It's Time for Some Putback Payback
The Worst Deal of the Decade?
And Now to the World Series
At the end of last week's letter on the whole mortgage foreclosure mess, I wrote:
"All those subprime and Alt-A mortgages written in the middle of the last decade? They were packaged and sold in securities. They have had huge losses. But those securities had representations and warranties about what was in them. And guess what, the investment banks may have stretched credibility about those warranties. There is the real probability that the investment banks that sold them are going to have to buy them back. We are talking the potential for multiple hundreds of billions of dollars in losses that will have to be eaten by the large investment banks. We will get into details, but it could create the potential for some banks to have real problems."
Real problems indeed. Seems the Fed, PIMCO, and others are suing Countrywide over this very topic. We will go into detail later in this week's letter, covering the massive fraud involved in the sale of mortgage-backed securities. Frankly, this is scandalous. It is almost too much to contemplate, but I will make an effort.
But first, let me acknowledge the huge deluge of emails I got over last week's letter, the most I can ever remember. I thought about just making this week's letter a response to many of them, but decided I needed to go ahead and finish the topic at hand. Maybe another time. As a side note, I quoted a letter that came to me anonymously via David Kotok. I said if I found out who wrote it, I would give them credit. It was originally written by Gonzalo Liro, at www.gonzalolira.blogspot.com.
Many of you wrote to point out that his argument about the tracking of title was not correct, but others pointed out many other issues as well. This is one of the most complex problems we face, and I got a lot of good information from readers. It just makes me wish I had our new web site finished so you could avail yourselves of the wisdom among my readers. We are close, down to final changes. And now, on to today's letter.
They Knew What They Were Selling
It's hard to know where to start. There is just so much here. So let's begin with testimony from Mr. Richard Bowen, former senior vice-president and business chief underwriter with CitiMortgage Inc. This was given to the Financial Crisis Inquiry Commission Hearing on Subprime Lending andnd Securitization andnd Government Sponsored Enterprises. I am going to excerpt from his testimony, but you can read the whole thing (if you have a strong stomach) at http://fcic.gov/hearings/pdfs/2010-0407-Bowen.pdf. (Emphasis obviously mine.)
"The delegated flow channel purchased approximately $50 billion of prime mortgages annually. These mortgages were not underwriten by us before they were purchased. My Quality Assurance area was responsible for underwriting a small sample of the files post-purchase to ensure credit quality was maintained.
"These mortgages were sold to Fannie Mae, Freddie Mac [We will come back to this - JM] and other investors. Although we did not underwrite these mortgages, Citi did rep and warrant to the investors that the mortgages were underwritten to Citi credit guidelines.
"In mid-2006 I discovered that over 60% of these mortgages purchased and sold were defective. Because Citi had given reps and warrants to the investors that the mortgages were not defective, the investors could force Citi to repurchase many billions of dollars of these defective assets. This situation represented a large potential risk to the shareholders of Citigroup.
"I started issuing warnings in June of 2006 and attempted to get management to address these critical risk issues. These warnings continued through 2007 and went to all levels of the Consumer Lending Group.
"We continued to purchase and sell to investors even larger volumes of mortgages through 2007. And defective mortgages increased during 2007 to over 80% of production."
Mr. Bowen was no young kid. He had 35 years of experience. He was the guy they hired to pay attention to the risks, and they ignored him. How could a senior manager not get such an email and not notify his boss, if only to protect his own ass? They had to have known what they were selling all the way up and down the ladder. But the music was playing and Chuck Prince said to dance and rake in the profits (and bonuses!). More from his testimony:
"Beginning in 2006 I issued many warnings to management concerning these practices, and specifically objected to the purchase of many identified pools. I believed that these practices exposed Citi to substantial risk of loss.
Warning to Mr. Robert Rubin and Management
"On November 3, 2007, I sent an email to Mr. Robert Rubin and three other members of Corporate Management... In this email I outlined the business practices that I had witnessed and attempted to address. I specifically warned about the extreme risks that existed within the Consumer Lending Group. And I warned that there were 'resulting significant but possibly unrecognized financial losses existing within Citigroup.'"
And now taxpayers own 75% of Citi, and our losses to them are huge. They are going to get worse, as we will see.
Now let's turn to the testimony of Keith Johnson, who worked for various mortgage companies and in 2006 became the president and chief operating officer of Clayton Holdings, the largest residential loan due diligence and securitization surveillance company in the United States and Europe. This is testimony he gave before the Financial Crisis Inquiry Commission. Part of the testimony is by his associate Vicki Beal, senior vice-president of Clayton. The transcript is some 277 pages long, so let me summarize.
Investment banks would come to Clayton and give then roughly 10% of the mortgages that they intended to buy and put into a security. Clayton rated them on whether the documentation was what it was supposed to be, not as to whether they thought it was a good loan. Still, 46% of the loans did not have proper documentation (out of a pool of 9 million loans) and 28% had what was determined to be level 3 disqualifications that simply had no mitigating circumstances. Understand, these were loans that were already written, and there was no effort to check the facts, just the documentation.
And ultimately 11% of these loans (39% of the level 3's) were put back in by the investment bank. And what happened to the loans that were rejected? (This might require an adult beverage and a few expletives deleted.)
Popping Through
They were put back into another pool, where again only 10% of the loans were examined. Quoting from the testimony:
"MR. JOHNSON: I think it goes to the 'three strikes, you're out' rule.
"CHAIRMAN ANGELIDES: So this was a case of - okay, three strikes.
"MR. JOHNSON: I've heard that even used. Try it once, try it twice, try it three times, and if you can't get it out, then put -
"CHAIRMAN ANGELIDES: Well, the odds are pretty good if you are sampling 5 to 10 percent that you'll pop through. When you said the good, the bad, the ugly, the ugly will pop through."
Yes, you read that right. If a loan was rejected a second time, it went back into yet another pool for a third try. The odds of coming up three times, when only 5 or 10 percent are sampled? About 1 in a thousand. Popping through, indeed.
Clayton presented their data to the ratings agencies, investment banks, and others in the industry. They were frustrated that no one was really paying attention or taking heed of their warnings.
Here is what Shahien Nasiripour, the business reporter for the Huffington Post, wrote (his emphasis). For those interested, the entire article is worth reading. ( http://www.huffingtonpost.com/2010/09/25/wall-street-subprime-crisis_n_739294.html):
"Johnson told the crisis panel that he thought the firm's findings should have been disclosed to investors during this period. He added that he saw one European deal mention it, but nothing else.
"The firm's findings could have been 'material,' Johnson said, using a legal adjective that could determine cause or affect a judgment.
"It's unclear whether the firms ended up buying all of those loans, or whether Wall Street securitized them all and sold them off to investors.
"'Clayton generally does not know which or how many loans the client ultimately purchases,' Beal said. That likely will be the subject of litigation and investigations going forward.
"'This should have a phenomenal effect legally, both in terms of the ability of investors to force put-backs and to sue for fraud,' said Joshua Rosner, managing director at independent research consultancy Graham Fisher & Co.
"'Original buyers of these securities could sue for fraud; distressed investors, who buy assets on the cheap, could force issuers to take back the mortgages and swallow the losses.
"'I don't think people are really thinking about this,' Rosner said. 'This is not just errors and omissions - this appears to be fraud, especially if there is evidence to demonstrate that they went back and used the due diligence reports to justify paying lower prices for the loans, and did not inform the investors of that."
"Beal testified that Clayton's clients use the firm's reports to 'negotiate better prices on pools of loans they are considering for purchase,' among other uses.
"Nearly $1.7 trillion in securities backed by mortgages not guaranteed by the government were sold to investors during those 18 months, according to Inside Mortgage Finance. Wall Street banks sold much of that. At its peak, the amount of outstanding so-called non-agency mortgage securities reached $2.3 trillion in June 2007, according to data compiled by Bloomberg. Less than $1.4 trillion remain as investors refused to buy new issuance and the mortgages underpinning existing securities were either paid off or written off as losses, Bloomberg data show.
"The potential for liability on the part of the issuer 'probably does give an investor more grounds for a lawsuit than they would ordinarily have', Cecala said. 'Generally, to go after an issuer you really have to prove that they knowingly did something wrong. This certainly seems to lend credibility to that argument.'
"'This appears to be a massive fraud perpetrated on the investing public on a scale never before seen,' Rosner added."
It's Time for Some Putback Payback
Investment banks large and small originated a lot of subprime garbage in the 2005-2007 era. This week PIMCO, Black Rock, Freddie Mac, the New York Fed, and - what I think is key and no one has picked up on - Neuberger Berman Europe, Ltd., an investment manager to a managed-account client, came together and sued Countrywide for not putting back bad mortgages to its parent, Bank of America. This is the first of what will be a series of suits aimed at getting control of the portfolio and peeking into the mortgages. (Text of lawsuit at http://www.ritholtz.com/blog/2010/10/full-text-of-letter-to-bofa-from-ny-fed-maiden-lane-freddie-mac-pimco-western-asset-mgmt-neuberger-berman-kore-advisors/)
Basically, if buyers of 25% or more of a mortgage-backed security can come together, they have standing to sue the mortgage servicer to do its duty to the investors and make putbacks of bad mortgages, and if they fail to do so the plaintiffs can take control of the process and take the issuer to court directly (that's a very simplistic description but roughly accurate).
There are two key take-aways. First, note that a European entity is involved. Hundreds of billions of dollars of this junk was sold to European banks and funds. And these guys get together at conferences (sometimes they even invite me to speak). So Helmut will be talking to Lars who will talk to Jean Pierre and they will realize they all own some of this junk. They will be watching with very real interest to see how the big boys at PIMCO and Black Rock and the New York Fed fare in their efforts. And then you can count on them all piling on (more later on this).
Second, little noticed this week was the fact that The Litigation Daily wrote that Philippe Selendy of Quinn Emanuel Urquhart & Sullivan has been retained by the Federal Housing Finance Agency (FHFA), which oversees Fannie Mae and Freddie Mac, to investigate billions of dollars in potential claims against banks and other issuers of mortgage-backed securities.
Who? Not on your celebrity list? Just wait. He will soon be getting the best tables everywhere. He and his firm are the guys representing MBIA in all their cases against Countrywide and Merrill Lynch. And they are kicking ass. Slowly to be sure, but very steady. That means Fannie and Freddie are getting ready to get serious.
They were sold well over $227 billion of the subprime garbage issued in 2006 and 2007. And the bad stuff started before then. But they have one advantage that the guys at PIMCO, et al. don't have: they (or actually the FHFA) are a federal agency. That means they have subpoena power. The agency has sent 64 subpoenas to issuers of mortgage-backed securities, and although they have not said who they went to, they obviously include almost everyone and clearly all the big players. (They couldn't have ignored Goldman, could they? Naah. Too obvious.)
From American Lawyer.com (I know, this website is probably already on your favorites list, but for those souls who actually have a life I provide the text):
"Through those subpoenas, the agency could gain access to the loan files for the mortgages that backed the securities it bought and thus establish whether the mortgages were what the issuers represented them to be in securities contracts. According to the Journal, the difficulty of obtaining loan files has been a big obstacle for investors trying to force issuers to repurchase bonds.
"If the FHFA were to decide down the road to initiate litigation, it would still have to have the support of a percentage (usually 25 percent) of its fellow bondholders for each issue. But given what the agency and its Quinn lawyers will be able to see before bringing suit, it probably won't be too hard to get other investors on the bandwagon." ( http://www.quinnemanuel.com/media/183456/hurricane%20warnings%20fannie%20mae%20and%20freddie%20mac%20hire....pdf)
It is tough not to jump to the conclusion, but we need one more piece of the puzzle before we get there.
The Worst Deal of the Decade?
Arguably Bank of America had Merrill shoved down their throats, but no one can say that about the acquisition of Countrywide. And Countrywide could end up costing BAC $50 billion or more in losses. That may prove to be a serious candidate for worst deal of the decade. (Although WAMU is a leading candidate too!)
Let's look at a report by Branch Hill Capital, a hedge fund out of San Francisco. And before we start on it, let me point out they are short Bank of America. You can see the full PowerPoint at http://www.businessinsider.com/bank-of-america-mortgage-report-2010-10#-1.
(And let me say a big thanks to the author of the report, Manal Mehta, for all the background material he sent me and his help with this week's letter. It helped make it a lot better. Of course, any erroneous conclusions or outrageous statements are all mine.)
First, they point out that the potential size of Bank of America's (BAC) liabilities is $74 billion (with a B). And that is just for Countrywide. That does not include Merrill, which is also large. Against that they have set aside $3.9 billion. You can count on more suits than just the PIMCO, et al. mentioned above.
In the MBIA case, the judge has ruled that the suit can proceed even though BAC has denied responsibility. Although on appeal, this is high-stakes poker. Countrywide originated over $1.4 trillion of mortgages in 2005-2007. MBIA alleges that over 90% of the defaulted or delinquent loans in the Countrywide securitizations show material discrepancies. Care to take the under in the over/under bet on that?
Further to the case on BAC, Merrill was the largest originator of subprime CDOs during the housing boom, for another $120 billion, along with about $255 billion of residential mortgage-backed securities.
And then there are all those CDOs (collaterized debt obligations). Merrill did a lot of those that went sour. This deserves it own leter, but a gentleman named Wing Chau went from making $140k a year to $25 million in just a few years, putting together CDOs from Merrill, some of which were completely bankrupt in just six months.
Countrywide has already settled with the New York pension funds for $624 million, one of the largest securities fraud settlements in US history. And the line is growing longer.
Of course, BAC CEO Brian Moynihan denied this week that there is a problem. Let's look at Moynihan's statements at the last earnings call and compare them to what the judge in the case said earlier. Moynihan:
"... we execute repurchases on a loan by loan basis... And as we learn more, and again, our perspective on this - we're going to be quite diligent as I said in defending the interest of our shareholders. This really gets down to a loan-by-loan determination and we have, we believe, the resources to deploy against that kind of a review."
Back in June the judge on the case (a Judge Bransten) said (from the transcript):
"I think that it makes all the sense in the world that you can use a sample to prove the case because otherwise I can't imagine a jury listening to 386 thousand cases. Even if you have that available, nevertheless you are not going to present that to a jury or even to a judge. I'm patient but not that patient. So therefore it is going to be a sample in the end..."
OK, let me get this straight, Brian. Your company committed fraud, with robosignings and all the rest, and you won't man up and take responsibility? You and your lawyers want to thrash this out, case by case, fighting a trench-warfare, rear-guard action? Well I'm afraid that's not going to work out for you. There are so many examples of Countrywide outright fraud that it is going to be hard to convince a jury that BAC is not on the hook. Will it take years? Of course.
You can read the PowerPoint for details. Bottom line: BAC is probably liable for putbacks that could total over a hundred billion. And that is just BAC.
Think Citi. And any of the scores of mortgage originators and investment banks. There were a couple of trillion dollars in these securitizations issued. Plus how many hundred of billions of second-lien loans? And can we forget CDOs? And CDOs squared?
And let's not forget all those completely synthetic CDOs that were written at the height of the mania. Most of it AAA, of course. Frankly, anyone stupid enough to buy a synthetic CDO should lose their money, but that is not what the courts will base their decision on. It is all about representations and warranties. And maybe a little fraud.
I picked on BAC because that is the analysis I saw. But it could be any of dozens of banks. Look at this list from the Branch Hill PowerPoint.
jm102310image001
Could we see a hundred billion in losses to the major banks? In my opinion we will for sure, over time. $200 billion? Probably. $300 billion? Maybe. $400 billion? It depends on how organized the investors in the securities get and what gets settled out of court. Out of a few trillion dollars in securitizations? It's anybody's guess. I just made mine.
But let's not forget the $227 billion sold to Fannie and Freddie. Taxpayers are on the hook for $300-400 billion in losses. Those putbacks could save us a lot. Will this threaten the viability of some banks? Maybe. But most will survive. BAC made $3 billion last quarter. A steep yield curve (with the help of the Fed) can cure a lot of evils. But it will absorb the profits of a lot of banks for a long time.
And that of course, will come back to haunt the rest of us as banks have to raise more capital and get more conservative.
Anyone who owns stocks in banks with relatively large MBS exposure is not investing, they are gambling that the losses will not be more than management is telling them. There will be no bailouts (at least I hope not) this time around. Fool me once, shame on you; fool me twice, shame on me. There will be little sympathy for shareholders or bondholders this time, if it comes to that.
One more sad point. The FDIC (read taxpayers) is liable for some of this, as they took over some of these institutions. It just keeps on coming.
Final rant. If you were part of a group that knowingly created or sold flawed and fraudulent mortgage-backed securities to pensions and insurance companies and took home tens of millions in bonuses, up and down the management chain, maybe you should consider moving yourself and your money to a country that does not honor US extradition, because my guess is that, as all this comes out, you may have to hire some very expensive lawyers and get measured for pinstripes.
And the Mozilo agreement was a sham. Sigh. That would be the equivalent of fining me $10,000 and letting me keep my tanning bed. I don't have the space to go into the fraud at Countrywide, but their internal documents show they all knew what was going on.
Your tired but contented analyst,
John Mauldin
John@FrontLineThoughts.com
Copyright 2010 John Mauldin. All Rights Reserved
losses mount on loans made for commercial property
"With 139 closures nationwide so far this year, the pace of bank failures exceeds that of 2009, which was already a brisk year for shutdowns with a total of 140. By this time last year, regulators had closed 106 banks.
The pace has accelerated as banks' losses mount on loans made for commercial property and development. Many companies have shut down in the recession, vacating shopping malls and office buildings financed by the loans. That has brought delinquent loan payments and defaults by commercial developers."
http://finance.yahoo.com/news/7-banks-closed-in-Fla-Ga-Ill-apf-1135619637.html?x=0&sec=topStories&pos=6&asset=&ccode=
'What makes this housing bubble different (besides the fact that it is the largest bubble in U.S. history) is the dangerous disconnect between home prices and the basic fundamentals that typically rule the housing market.
For example, increases in home prices typically keep pace with increases in wages. But this has not happened. National median home prices have increased by more than 45 percent in the last decade (when adjusted for inflation). Median wages per worker, on the other hand, have only increased by 10 percent in the same period.
from 2007>>>
http://efinancedirectory.com/articles/The_Dangerous_Disconnect_Between_Home_Prices_and_Fundamentals.html
Haven't heard much on the commercial defaults lately. Many months ago it was pegged to absolutely dwarf the housing crisis.
I know there's a lot of warehouses around here that are gradually emptying out. Massive new ones that are sitting idle also.
Consumer Deleveraging = Commercial Real Estate Collapse
Submitted by James Quinn on Thu, 7 Oct 2010
http://www.financialsense.com/contributors/james-quinn/consumer-deleveraging-commercial-real-estate-collapse
Damn, another great secret board! Now ive got to spend a day or two skimming from Post One. yes great call in 2005.
Still, for many American's who didn't "fall off the turnip truck" the collapse was no surprise, I've read extensively on real estate bubbles especially Florida in the 1920s. I bought a book on RE bubbles about 20 years ago!
What I didn't realize until this year was how worldwide the bubble was. Third world cesspools saw RE bubbles capable of bringing down their entire nation.
Thanks. Looks like he damn near nailed the peak. I was too busy helping fill the excessive homes with cabinets to pay close attention.
However.... I did repeat over and over and over to just about everybody that this can't last forever, better be banking some cash.
Had no idea the extreme extent of the situation though.
Feeling the pain now......
here's a chart close to the one in the I-box
http://mysite.verizon.net/vzeqrguz/housingbubble/
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