Ah the responsible oversight bodies that have been penetrated so thoroughly by industry...those guys claiming that we don't need any further oversight.
Indeed, calmo. Does anyone want to bet me that HUD's willingness to finish the investigation it just said it will start won't have something to do with the Observer's willingness to keep following up on the story?
calmo, don't forget the bills in the NC legislature last year, which all quietly disappeared.
I'm not in favor of regulating every little thing. But some of the proposals were pretty straighforward matters of accountability. Like documenting the name of the broker and appriaser on a deed of trust.
The ethical professionals were in favor of these changes. Only the hacks fear a paper trail.
Evidence, including several reports from the HUD Inspector General, suggests that no-down-payment mortgages have significantly higher default rates than those where borrowers were required to use their own funds for a down payment.
Recent performance shows that all types of FHA mortgages suffer from higher default rates than other mortgage loans. During the first quarter of 2004, conventional mortgages experienced a default rate of 2.25 percent, meaning that payments due on 2.25 percent of these mortgages were past due by 30 days or more. In contrast, FHA mortgages experienced a default rate of 11.66 percent in that same quarter, nearly five times greater. Disturbingly, the default rate on FHA loans also exceeded the default rate of conventional loans rated as sub-prime, defined as a loan made to a borrower with a below average credit record.
Reflecting a long-term deterioration in FHA loan performance, FHAs most recent default rate of nearly 12 percent compares poorly to the 1998 default rate of 8.5 percent and the 1980 default rate of 6.6 percent. In contrast, over that same period default rates on VA mortgages increased from 5.3 percent to 7.4 percent, while conventional mortgage default rates actually fell slightly, from 3.1 percent in 1980 to 2.25 percent in early 2004. These contrary performance measures suggest that the rising default problem is unique to the FHA, whose underwriting standards were significantly liberalized during the Clinton Administration, and not related to any economy-wide problems that would have affected all borrowers.
As evidence from existing no down payment FHA programs reveals, lowering the down payment to zero and insuring mortgages with negative equity will lead to even higher default rates than those typical of traditional FHA programs. In March 2000, the HUD Inspector General reviewed the performance of several special down payment assistance programs in which FHA participated in partnership with not-for-profit organizations that provided prospective borrowers with a gift of cash to cover the down payment. The best known of the nonprofit partnerships is the Nehemiah program that operates in four cities.
In its analysis of these programs, the Inspector General reported, Empirical information developed during the review shows higher default rates for loans involving down payment assistance gifts provided by nonprofit organizations than for other FHA loans. A follow-up report released in September 2002 was even more critical, noting, The defaults on these 2,261 loans have risen dramatically and, as of February 15, 2001, the default rate increased to 19.39 percent compared to a 9.7 percent default rate for FHA loans without Nehemiah assistance in the same four ci
Ask and ye shall receive. This isn't the easiest thing in the world to navigate--you'll need to read the help pages, I'm sure, if you aren't used to how HUD builds databases. But you can find all kinds of info on lenders' FHA loans. Make sure you chose the "public" site--you need to be a lender to use the other one.
Yal, the loans are insured by FHA. Would you care (as a bank or mortgage broker) what happens if the loans go bad? It is FHAs problem. "Just call my name and Ill be there" as the song goes.
Do something nice today and send a congratulatory email to the folks at The Observer. They'll appreciate it.
It's a fine series, with an interesting mix of text, video and interactive. They're sure to get an award, and be sure to tell them that The CR Team cited it.
IMHO, people are loosing intrest in the "housing bubble". The number of comments in The Housing Bubble Blog is down sharply (it used to be nearly 300 comments per blog entry)
Also mortgage banks stocks are up and it seems that everyone is just happy to continue the game.
Beazer and other builders highly incentivise buyers to use their affiliate mortgage company. for instance, there can be as much as 3-6% payment towards closing cost, buy downs, builder upgrades when using the Beazer lender. As a non Beazer mortgage lender, this always put me into a competitive disadvantage.
Many of these FHA borrowers were gifted, indirectly through Beazer, the required 3% FHA buyer DP/CC requirement. It's pitiful, because many of these buyers had zero reserves.
HUD and the taxpayers are on the sling for these homes which now are selling for less than the outstanding loan balances. Many of the residents will foreclose rather than make payments on a loan balance that exceeds current appraised value. They have ZERO RISK because they put ZERO DOWN. Where else in the world can you buy a home with ZERO down?
It would be great if these loans bad loans were put back to Beazer. The treasury dept should freeze Beazer funds, if there are any left, and make Beezer cover the losses on these loans instead of our generations to come
One of those great cycle ideas is that we proceed from a time of great distress because of inadequate regulation to a time of over regulation and repeat. After the lessons of the lack of regulation are forgotten, mainly due to the generation that suffered dying off, the new folks see regulation as a problem because of a theological viewpoint that people will act responsibility in a free market only to get blind sided by the resulting crash. Then the cycle starts anew.
I recommend that any believing in the rationality of markets read Prisoner's dilemma
In game theory, the prisoner's dilemma is a type of non-zero-sum game in which two players can "cooperate" with or "defect" (i.e. betray) the other player. In this game, as in all game theory, the only concern of each individual player ("prisoner") is maximizing his/her own payoff, without any concern for the other player's payoff. In the classic form of this game, cooperating is strictly dominated by defecting, so that the only possible equilibrium for the game is for all players to defect. In simpler terms, no matter what the other player does, one player will always gain a greater payoff by playing defect. Since in any situation playing defect is more beneficial than cooperating, all rational players will play defect.
The unique equilibrium for this game is a Pareto-suboptimal solutionthat is, rational choice leads the two players to both play defect even though each player's individual reward would be greater if they both played cooperate. In equilibrium, each prisoner chooses to defect even though both would be better off by cooperating, hence the dilemma.
Basically, the fallacy of the unregulated market is that crooked dealings maximumize profit; making all parties dishonest and thus destroying the market--no one trusts it--.
Apply this to the mortgage market and the way to maximize profits is through illicit means, forcing all parties out of the market, accepting lower profits, or illicit activity. With govt in the hands of a political party that does not like to confront business, this let to lax or non existent regulation.
The people in touble with the Beazer mortgages were only facing adjustments of a hundred dollars or so.
It ties back to what I've said before -- a few hundred bucks is still a lot of money to the "common person" when it comes from their paycheck. Those $500+ adjustments in CA and FL are going to be pure hell.
I still think that people don't really grasp how much money a $xxx,xxx home is. They are used to seeing the numbers printed, but just assumed the next buyer would pay most of it off for them when they sell.
Here's another way of thinking about it. A long time ago, I was told that an entry level home is about 6X the cost of a decent sedan, and a nice middle class home about 8X.
The average person probably can wrap their mind around a car payment and car prices. These are numbers that compare not too far away from their yearly pay. A car is something many people still do succedd in paying off, even if it's just a year or two before buying the next one.
I would say a nice car is about $25,000 now. A new Accord or Buick or something.
By that yardstick, the comps in 2006 near the old CA house I once owned, were selling for 22X the "car multiple".
To REALLY put yourself down a life path, of paying it off ON YOUR OWN, is nearly inconceivable. You HAVE to assume some other person, either with wealth or great credit will take it off your hands someday.
The people who live in Florida are worse off than Californians. In CA Prop 13 caps property tax increases and insurance is low for everything except the non-mandatory earthquake insurance that no one has. In Florida my mom tells me of her trailer park neighbors facing quadrupling of insurance rates as a first increment while at the same time property taxes are rising. (Mom paid cash, self insures, couldn't care less.) Snowbelters have $3 heating oil to look forward to this winter. 'Course California is eventually going to face some tough decisions but that ain't this year so... For perspective when Gray Davis wasrecalled for overspending the State was paying out 108.80 for every $100 in revenue. Today under the watchful eye that has changed to $109.54 per $100.
Gray Davis wasn't recalled for overspending. He was recalled because Schwarzenneger arranged with Enron for people to be overcharged for their electricity and get pissed off at Davis for deregulation.
The PMI lapdance . . . you cannot know what it is like to be the popular girl at the UberNerd ball, rattling on about insurance to a devoted crowd of admirers, while the pretty girls stand over in the corner and mope, alone . . .
The GSEs don't have a Neighborhood Watch program. I sure wish they did.
Yal, I was thinking the same thing yesterday for mortgage brokers. Make the other parties have some skin in the game for finding creditworthy borrowers.
The problem, though is I suspect the brokers and agents would sell their interests in the escrow accounts at discount, to speculators. They just want their money now.
Back in the fifties when I was a teenager the Raleigh NC News & Observer won a Pulitzer prize for an investigative report on local loan shark activity. The story was the talk on the town for months and the interest rates being charged shocked the community. I don't recall the exact rates but they were about 12%.
So much for the "Conservative" revolution.
BTW, the Speaker of the NC House is under increasing investigation for abuse so new bills may receive better treatment.
My mother is a landscape architect, she always scowls about these massive devleopments. Slab-on-grade means removing all the vigitation and topsoil, leveling the land (erosion galore), extracting maximum value from the acreage.
Yeah, capitalism in action and market efficiency and all that. But try repairing on the plubimg on a slab house. Ugh.
Is it too much to ask to leave a few trees near the lot lines, so that it will look like a mature neighborhood within a few years? Add some shade for people and help with cooling bills a bit?
Nope. Market efficiency. Can't sock the borrowers with an extra $3000 per unit, because the caterpillars took longer to grade. Gotta make those price points!
dryfly, at least people are waking up to the insanity.
There seem to be more reports of people declining job offers in expensive regions. Employers are realizing the implications of the bubble too - relocate themselves, pay higher wages, pay fat relo costs. Non are appealing options.
I think we are running out of defenders of the bubble. Even brokers and Realtors are realizing they need sales, for their sectors of the economy to function. And it is easier to get those sales when borrowers have confidence that are not overpaying.
Imagine real estate brokers will only get paid 4% and not 6%.
Better yet - imagine them & the mortgage brokers on salary... working for WalMart Real Estate. Drive up buy a case of oil for the truck (burns a little oil ya know)... pick up some brisket to burn out in the pit later... and stop in to chat & look up listings in the MLS.
My guess is that's what the market forces will ultimately lead us to. I don't think the folks screaming for more free market fully grasp this one... but that's okay with me, I like WalMart's briskets.
Anyone (like me) whose been in mfg & seen the consolidation of the whole industrial supply chain into a couple big 'portals' (WalMart, Target, Lowes, HD) and experienced the resulting price squeeze sees it though. Its like snow melting under hot spring sunshine. Inevitable.
Talking about HUD investigations, let me tell you a little story. In 2000 I refused to take a bid on a FHA repo (it was during owner occupied period) from a guy to whom I had sold a bunch of investment properties. I knew very well the guy wasnt going to live in that house.(that was FHA requirement) However, that property ended up in some other investors hands. I don`t really know if the realtor involved in that transaction was just fooled or something else. But one thing is for sure. I ended up being the only one investigated.(my investor-if you can believe that reported me to HUD). After 2 1/2 years (and threatning them with a lawsuit) finnaly they gave up.
The only thing better than a market pull-back buying opportunity is one that is based on a knee-jerk overreaction which is quickly corrected shortly after the smart money exploits the situation.
The subprimapalooza, where TAPIOCA rates havent even reached 2002 levels had the BODACIOUS effect of driving the Fed into a neutral stance, allowing Wall St. Inc. to let the weak die and buy the strong for a song, and LibDems are debating HoMoaner bailout legislation.
KAAAAAAAAAAACHING
NICE doing bidness wit you bears.
Come back ANY TIME.
Credit crunch? Not to anyone who remembers a 21% prime rate and massive unemployment. This is EXACTLY the Wall of Worry upon which the muscular and innovative US markets and economy will climb once again to new heights in 2007.
THANK YOU BEARS, and come back again anytime to CRY WOLF.
Well far away from the current topic... I follow the Your housing and credit situation from Scandinavia. What I found most amazing is the MSM-silence around the insider selling in Countrywide, mostly done by the CEO himself. The sell/buy ratio during the last two years is hilarious. I have looked up the statistics from several other big lenders and a few other companies chosen by random. By comparison CFC is exceptional. Had this ocurred here around it would have been the story of the day in all financial newspapers but in the US it is hardly mentioned even when the CEO is interviewed by CNBC Maria or very very funny Cramer. It seems very very strange. Why????
Successful parasites do not kill the host. Apparently, they also fart through silk.
I would say that the only thing that might plug the fart would be the presence of something much bigger, much darker, and much harder to make out in the waters just beyond the pilot fish.
In other words, there are parasites and there are predators. Is there a predator around this time that could care less whether the host dies?
GotaBank, hej från en avlägsen kusin i California!
Regarding Beazer, in a possibly related (or not) development, the CFO recently resigned to become CEO at a company in an unrelated industry. Good timing either way.
Also, I have to wonder if the same thing has been going on with other builders like Centex and KB Home and Lennar who sell primarily to first-time buyers.
What I found most amazing is the MSM-silence around the insider selling in Countrywide, mostly done by the CEO himself. The sell/buy ratio during the last two years is hilarious.
Capitalist Pig's been busy... guys like him know more than the insiders. KA CHING!
broker - FHA has been in business since 1934, although I think there was a name change to FHA in the late 1930's.
number2son - the Columbus Post Dispatch did a report about a year ago on Dominion Homes in Columbus. Replace Charlotte with Columbus and Beazer with Dominion, and you'd have the Post Dispatch article. HUD forced Dominion to close down their lending arm. Of course, Dominion immediately replaced that arm with a JV with Wells Fargo, but had to promise that Wells would do the underwriting. Don't know how that's working, or if anyone has even looked.
GotaBank, not only is the media in the hands of half a dozen corporations, but those CEOs, like the CEOs in the HB industry have compensation levels that do not represent ordinary standards of decency.
The reportage of insider selling/buying is legislated but easily circumvented and never headlined...not like in other more civilized parts of the world.
As close as it gets to drawing attention to the hypocrisy that is prevalent is when Ivy tells Bob Toll during his conference call (where the message was that the market had seen the worst) that he has made a lot of people who follow his trading habits wealthy.
I think many Americans believe that someone who has built a successful business has every right to cash out at some point, and the audience for main-stream-media interviews in particular is likely to have that mindset. So the interviewers have no incentive to bring the topic up, especially since it would make it more difficult to get executives to sit for interviews.
Moreover, it's not unusual to see articles in the business press about how insider sales are something to which investors should pay attention, and the data is readily available for free to anyone who bothers to look for it (just click on "Insider Transactions" on Yahoo Finance), so there is no reason for financial reporters to feel that not bring up the topic helps an executive to conceal something from the public, nor, conversely, is there any way for them make a big news splash by presenting that info.
Found this on another blog. People still think this is just an "immigrant" problem:
I am very frustrated & upset too. Upset at seeing the way subprime lenders have now found a whole new pool of such eager first time FBs thatll help them keep the RE Ponzi scheme going. And pardon my garden for saying so but; if youre not here legally you should NOT be buying real estate here either. The Mexican government sure as hell doesnt allow us to buy any RE there. They only allow arrendamientos or Long Term Leasing. And even thats allowed only within certain areas.
Reading about so many cases recently such as Carmens up above confuses me tho. I just dont get it. On one hand I hear that subprimes (the remaining ones at least) are tightening lending standards yet on the other I see that these liar loans seem to be accelerating and picking up pace. Theyre still plugging em on Spanish TV a lo loco.
As for MSM waking up -- good for them -- but the public sure could have used a lot more of this type of reporting, a lot sooner.
Alo, you can't know how grateful I am to have you here in the comments. If it weren't for you, I'd always be winning the "Someone Who Is Never Happy About The Media Regardless of What They Do" award. I'm grateful that you provide competition for me; it makes me work harder.
Of course, I never fart. Through anything. It isn't Czarina-like.
I wrote about Beazer last year. It had its own brokerage (a lot of them did), and it was offering some of the worst loans ever. I think it was a combo 3-2-1 buydown plus paying the interest on the 80/20 (20 I-O). In any case, the payments on these things shot up like skyrockets.
I believe Beazer sold the broker biz off, but I do think they have some liability for what they did.
See Beazer and Centex in CA.
Payments more than doubled on these loans. Some were neg-ams.
People are very much in denial about what was going on and the size of the impending blowback.
yal,
Mexico tried letting non-mexicans (Americans) own land in Mexico. it didnt work cuz they moved in, disobeyed all the laws, and then launched an armed inserection against the govt. The net result was that Mexico ended up losing about half of its total land area premamently (in 2 stages). Who were these "reverse wetbacks"? Guys like Davie Crockett, Jim Bowie and Sam Huston.
Tanta, happy to play bad cop for you! I admit to the satellite-sized chip on my shoulder about the press (not for everything mind ye, but sure enough for its shoddy bubble coverage).
The chip would have been smaller had the press simply just ignored the mania; but instead, so many outlets decided to cover it by cheering it on, and leading the public it is supposed to serve off a cliff. (ooh you got me started again)
That being said, N&O piece was very good -- and I am sure other papers will follow. It's about time!
You can not really compare the early eighties to today. Intrest rates where through the roof but you still had to qualify for the loan based on income. The rates where high but they where fxed. There was no such thing as an adjustable rate or intrest only mortgage ect. My first home had a 12.5 percent 30 year fixed. But we essentially could afford only what we made given our other debt obligations and credit history. $3000 down turned into $30,000 in five years. As intrest rates declined home prices went up. Unfortunately interest rates will never be this low again. ( fifteen year fixed, 4.36) that only means one thing. Falling prices.
Ah the responsible oversight bodies that have been penetrated so thoroughly by industry...those guys claiming that we don't need any further oversight.
But, I'm sure the "Free Market can self regulate" folks will find a way to dismiss this.
Indeed, calmo. Does anyone want to bet me that HUD's willingness to finish the investigation it just said it will start won't have something to do with the Observer's willingness to keep following up on the story?
calmo, don't forget the bills in the NC legislature last year, which all quietly disappeared.
I'm not in favor of regulating every little thing. But some of the proposals were pretty straighforward matters of accountability. Like documenting the name of the broker and appriaser on a deed of trust.
The ethical professionals were in favor of these changes. Only the hacks fear a paper trail.
Mozo, do you happen to know how long FHA has been in biz.? I would guess "not enough for enough regulations".
some history regarding HUD-FHA lending and info from the Inspector General Office regarding the performance of FHA
sine bits below Plus a link:
Congress's Risky Zero Down Payment Plan Will Undermine FHA's Soundness and Discourage Self-Reliance
Poor Performance and Worse
Evidence, including several reports from the HUD Inspector General, suggests that no-down-payment mortgages have significantly higher default rates than those where borrowers were required to use their own funds for a down payment.
Recent performance shows that all types of FHA mortgages suffer from higher default rates than other mortgage loans. During the first quarter of 2004, conventional mortgages experienced a default rate of 2.25 percent, meaning that payments due on 2.25 percent of these mortgages were past due by 30 days or more. In contrast, FHA mortgages experienced a default rate of 11.66 percent in that same quarter, nearly five times greater. Disturbingly, the default rate on FHA loans also exceeded the default rate of conventional loans rated as sub-prime, defined as a loan made to a borrower with a below average credit record.
Reflecting a long-term deterioration in FHA loan performance, FHAs most recent default rate of nearly 12 percent compares poorly to the 1998 default rate of 8.5 percent and the 1980 default rate of 6.6 percent. In contrast, over that same period default rates on VA mortgages increased from 5.3 percent to 7.4 percent, while conventional mortgage default rates actually fell slightly, from 3.1 percent in 1980 to 2.25 percent in early 2004. These contrary performance measures suggest that the rising default problem is unique to the FHA, whose underwriting standards were significantly liberalized during the Clinton Administration, and not related to any economy-wide problems that would have affected all borrowers.
As evidence from existing no down payment FHA programs reveals, lowering the down payment to zero and insuring mortgages with negative equity will lead to even higher default rates than those typical of traditional FHA programs. In March 2000, the HUD Inspector General reviewed the performance of several special down payment assistance programs in which FHA participated in partnership with not-for-profit organizations that provided prospective borrowers with a gift of cash to cover the down payment. The best known of the nonprofit partnerships is the Nehemiah program that operates in four cities.
In its analysis of these programs, the Inspector General reported, Empirical information developed during the review shows higher default rates for loans involving down payment assistance gifts provided by nonprofit organizations than for other FHA loans. A follow-up report released in September 2002 was even more critical, noting, The defaults on these 2,261 loans have risen dramatically and, as of February 15, 2001, the default rate increased to 19.39 percent compared to a 9.7 percent default rate for FHA loans without Nehemiah assistance in the same four ci
who are the lenders ?
Who are the lenders?
Ask and ye shall receive. This isn't the easiest thing in the world to navigate--you'll need to read the help pages, I'm sure, if you aren't used to how HUD builds databases. But you can find all kinds of info on lenders' FHA loans. Make sure you chose the "public" site--you need to be a lender to use the other one.
Neighborhood Watch - HUD
Yal, the loans are insured by FHA. Would you care (as a bank or mortgage broker) what happens if the loans go bad? It is FHAs problem. "Just call my name and Ill be there" as the song goes.
Do something nice today and send a congratulatory email to the folks at The Observer. They'll appreciate it.
It's a fine series, with an interesting mix of text, video and interactive. They're sure to get an award, and be sure to tell them that The CR Team cited it.
I think banker will be glad to read this.
IMHO, people are loosing intrest in the "housing bubble". The number of comments in The Housing Bubble Blog
is down sharply (it used to be nearly 300 comments per blog entry)
Also mortgage banks stocks are up and it seems that everyone is just happy to continue the game.
Beazer and other builders highly incentivise buyers to use their affiliate mortgage company. for instance, there can be as much as 3-6% payment towards closing cost, buy downs, builder upgrades when using the Beazer lender. As a non Beazer mortgage lender, this always put me into a competitive disadvantage.
Many of these FHA borrowers were gifted, indirectly through Beazer, the required 3% FHA buyer DP/CC requirement. It's pitiful, because many of these buyers had zero reserves.
HUD and the taxpayers are on the sling for these homes which now are selling for less than the outstanding loan balances. Many of the residents will foreclose rather than make payments on a loan balance that exceeds current appraised value. They have ZERO RISK because they put ZERO DOWN. Where else in the world can you buy a home with ZERO down?
It would be great if these loans bad loans were put back to Beazer. The treasury dept should freeze Beazer funds, if there are any left, and make Beezer cover the losses on these loans instead of our generations to come
One of those great cycle ideas is that we proceed from a time of great distress because of inadequate regulation to a time of over regulation and repeat. After the lessons of the lack of regulation are forgotten, mainly due to the generation that suffered dying off, the new folks see regulation as a problem because of a theological viewpoint that people will act responsibility in a free market only to get blind sided by the resulting crash. Then the cycle starts anew.
I recommend that any believing in the rationality of markets read Prisoner's dilemma
In game theory, the prisoner's dilemma is a type of non-zero-sum game in which two players can "cooperate" with or "defect" (i.e. betray) the other player. In this game, as in all game theory, the only concern of each individual player ("prisoner") is maximizing his/her own payoff, without any concern for the other player's payoff. In the classic form of this game, cooperating is strictly dominated by defecting, so that the only possible equilibrium for the game is for all players to defect. In simpler terms, no matter what the other player does, one player will always gain a greater payoff by playing defect. Since in any situation playing defect is more beneficial than cooperating, all rational players will play defect.
The unique equilibrium for this game is a Pareto-suboptimal solutionthat is, rational choice leads the two players to both play defect even though each player's individual reward would be greater if they both played cooperate. In equilibrium, each prisoner chooses to defect even though both would be better off by cooperating, hence the dilemma.
Basically, the fallacy of the unregulated market is that crooked dealings maximumize profit; making all parties dishonest and thus destroying the market--no one trusts it--.
Apply this to the mortgage market and the way to maximize profits is through illicit means, forcing all parties out of the market, accepting lower profits, or illicit activity. With govt in the hands of a political party that does not like to confront business, this let to lax or non existent regulation.
The people in touble with the Beazer mortgages were only facing adjustments of a hundred dollars or so.
It ties back to what I've said before -- a few hundred bucks is still a lot of money to the "common person" when it comes from their paycheck. Those $500+ adjustments in CA and FL are going to be pure hell.
I still think that people don't really grasp how much money a $xxx,xxx home is. They are used to seeing the numbers printed, but just assumed the next buyer would pay most of it off for them when they sell.
Here's another way of thinking about it. A long time ago, I was told that an entry level home is about 6X the cost of a decent sedan, and a nice middle class home about 8X.
The average person probably can wrap their mind around a car payment and car prices. These are numbers that compare not too far away from their yearly pay. A car is something many people still do succedd in paying off, even if it's just a year or two before buying the next one.
I would say a nice car is about $25,000 now. A new Accord or Buick or something.
By that yardstick, the comps in 2006 near the old CA house I once owned, were selling for 22X the "car multiple".
To REALLY put yourself down a life path, of paying it off ON YOUR OWN, is nearly inconceivable. You HAVE to assume some other person, either with wealth or great credit will take it off your hands someday.
The people who live in Florida are worse off than Californians. In CA Prop 13 caps property tax increases and insurance is low for everything except the non-mandatory earthquake insurance that no one has. In Florida my mom tells me of her trailer park neighbors facing quadrupling of insurance rates as a first increment while at the same time property taxes are rising. (Mom paid cash, self insures, couldn't care less.) Snowbelters have $3 heating oil to look forward to this winter. 'Course California is eventually going to face some tough decisions but that ain't this year so... For perspective when Gray Davis wasrecalled for overspending the State was paying out 108.80 for every $100 in revenue. Today under the watchful eye that has changed to $109.54 per $100.
Tanta -
Still owe you for the PMI lapdance - nice to finally meet a gal that has the goods and likes to deliver - will make good this week.
The HUD link was interesting. Do the other GSE provide similar databases with info by lender (i.e. delinquicies defaul(
Gray Davis wasn't recalled for overspending. He was recalled because Schwarzenneger arranged with Enron for people to be overcharged for their electricity and get pissed off at Davis for deregulation.
The PMI lapdance . . . you cannot know what it is like to be the popular girl at the UberNerd ball, rattling on about insurance to a devoted crowd of admirers, while the pretty girls stand over in the corner and mope, alone . . .
The GSEs don't have a Neighborhood Watch program. I sure wish they did.
Cramer/CNBC: Yahoo! Message Boards -
I want to make a suggestion that maybe hard to implmenet:
Imagine real estate brokers will only get paid 4% and not 6%.
Imagine that 50% of whatever they do get paid is in escrow for 2 years and they only get it the borrower does not default.
Yal, I was thinking the same thing yesterday for mortgage brokers. Make the other parties have some skin in the game for finding creditworthy borrowers.
The problem, though is I suspect the brokers and agents would sell their interests in the escrow accounts at discount, to speculators. They just want their money now.
Back in the fifties when I was a teenager the Raleigh NC News & Observer won a Pulitzer prize for an investigative report on local loan shark activity. The story was the talk on the town for months and the interest rates being charged shocked the community. I don't recall the exact rates but they were about 12%.
So much for the "Conservative" revolution.
BTW, the Speaker of the NC House is under increasing investigation for abuse so new bills may receive better treatment.
Man I sure hope they don't foreclose on my bear cave. I might be forced to buy one of those homes from those sleeze balls. The horror.
My mother is a landscape architect, she always scowls about these massive devleopments. Slab-on-grade means removing all the vigitation and topsoil, leveling the land (erosion galore), extracting maximum value from the acreage.
Yeah, capitalism in action and market efficiency and all that. But try repairing on the plubimg on a slab house. Ugh.
Is it too much to ask to leave a few trees near the lot lines, so that it will look like a mature neighborhood within a few years? Add some shade for people and help with cooling bills a bit?
Nope. Market efficiency. Can't sock the borrowers with an extra $3000 per unit, because the caterpillars took longer to grade. Gotta make those price points!
I would say a nice car is about $25,000 now. A new Accord or Buick or something.
By that yardstick, the comps in 2006 near the old CA house I once owned, were selling for 22X the "car multiple".
In my neighborhood they are still 4-6 times a Buick.
There are still lots of places like this. Probably more places than the 22X places.
Just an FYI.
dryfly, at least people are waking up to the insanity.
There seem to be more reports of people declining job offers in expensive regions. Employers are realizing the implications of the bubble too - relocate themselves, pay higher wages, pay fat relo costs. Non are appealing options.
I think we are running out of defenders of the bubble. Even brokers and Realtors are realizing they need sales, for their sectors of the economy to function. And it is easier to get those sales when borrowers have confidence that are not overpaying.
Imagine real estate brokers will only get paid 4% and not 6%.
Better yet - imagine them & the mortgage brokers on salary... working for WalMart Real Estate. Drive up buy a case of oil for the truck (burns a little oil ya know)... pick up some brisket to burn out in the pit later... and stop in to chat & look up listings in the MLS.
My guess is that's what the market forces will ultimately lead us to. I don't think the folks screaming for more free market fully grasp this one... but that's okay with me, I like WalMart's briskets.
Anyone (like me) whose been in mfg & seen the consolidation of the whole industrial supply chain into a couple big 'portals' (WalMart, Target, Lowes, HD) and experienced the resulting price squeeze sees it though. Its like snow melting under hot spring sunshine. Inevitable.
Talking about HUD investigations, let me tell you a little story. In 2000 I refused to take a bid on a FHA repo (it was during owner occupied period) from a guy to whom I had sold a bunch of investment properties. I knew very well the guy wasnt going to live in that house.(that was FHA requirement) However, that property ended up in some other investors hands. I don`t really know if the realtor involved in that transaction was just fooled or something else. But one thing is for sure. I ended up being the only one investigated.(my investor-if you can believe that reported me to HUD). After 2 1/2 years (and threatning them with a lawsuit) finnaly they gave up.
Suggested reading:
Mortgage Grapevine: How Long will companies Remain Open given the current Volume Dry Up ?
very intersting.
In fairness to HUD they did pay me back $12500 lawyers fees.
The only thing better than a market pull-back buying opportunity is one that is based on a knee-jerk overreaction which is quickly corrected shortly after the smart money exploits the situation.
The so-called ChiComm meltdown:
Chart of the Day - www.chartoftheday.com
The subprimapalooza, where TAPIOCA rates havent even reached 2002 levels had the BODACIOUS effect of driving the Fed into a neutral stance, allowing Wall St. Inc. to let the weak die and buy the strong for a song, and LibDems are debating HoMoaner bailout legislation.
KAAAAAAAAAAACHING
NICE doing bidness wit you bears.
Come back ANY TIME.
Credit crunch? Not to anyone who remembers a 21% prime rate and massive unemployment. This is EXACTLY the Wall of Worry upon which the muscular and innovative US markets and economy will climb once again to new heights in 2007.
THANK YOU BEARS, and come back again anytime to CRY WOLF.
Im FARTIN THROUGH SILK, BABY!
More indication of credit crunch:
Mortgage Grapevine: The Mortgage Store refuses to fund
Mortgage Grapevine: IT ISN'T THE LENDERS!!!!!!!!!
Well far away from the current topic... I follow the Your housing and credit situation from Scandinavia. What I found most amazing is the MSM-silence around the insider selling in Countrywide, mostly done by the CEO himself. The sell/buy ratio during the last two years is hilarious. I have looked up the statistics from several other big lenders and a few other companies chosen by random. By comparison CFC is exceptional. Had this ocurred here around it would have been the story of the day in all financial newspapers but in the US it is hardly mentioned even when the CEO is interviewed by CNBC Maria or very very funny Cramer. It seems very very strange. Why????
Successful parasites do not kill the host. Apparently, they also fart through silk.
I would say that the only thing that might plug the fart would be the presence of something much bigger, much darker, and much harder to make out in the waters just beyond the pilot fish.
In other words, there are parasites and there are predators. Is there a predator around this time that could care less whether the host dies?
Ah, have read the Freddie Mac post.
There is something everyone needs to know about Fannie and Freddie.
They are "regulated" by a Bush family fixer.
HUD ^ 1,000th power.
What comes out of Freddie and Fannie is bong water IMHO.
GotaBank, hej från en avlägsen kusin i California!
Regarding Beazer, in a possibly related (or not) development, the CFO recently resigned to become CEO at a company in an unrelated industry. Good timing either way.
Also, I have to wonder if the same thing has been going on with other builders like Centex and KB Home and Lennar who sell primarily to first-time buyers.
What I found most amazing is the MSM-silence around the insider selling in Countrywide, mostly done by the CEO himself. The sell/buy ratio during the last two years is hilarious.
Capitalist Pig's been busy... guys like him know more than the insiders. KA CHING!
They are "regulated" by a Bush family fixer.
Don't knock Bush family fixers... they know lots about show horses.
broker - FHA has been in business since 1934, although I think there was a name change to FHA in the late 1930's.
number2son - the Columbus Post Dispatch did a report about a year ago on Dominion Homes in Columbus. Replace Charlotte with Columbus and Beazer with Dominion, and you'd have the Post Dispatch article. HUD forced Dominion to close down their lending arm. Of course, Dominion immediately replaced that arm with a JV with Wells Fargo, but had to promise that Wells would do the underwriting. Don't know how that's working, or if anyone has even looked.
mort, I was just kidding. Believe me, I knew that. But thank you anyway.
Nice posts, arbogast! LOL to the point I almost farted through denim.
As for MSM waking up -- good for them -- but the public sure could have used a lot more of this type of reporting, a lot sooner.
GotaBank, not only is the media in the hands of half a dozen corporations, but those CEOs, like the CEOs in the HB industry have compensation levels that do not represent ordinary standards of decency.
The reportage of insider selling/buying is legislated but easily circumvented and never headlined...not like in other more civilized parts of the world.
As close as it gets to drawing attention to the hypocrisy that is prevalent is when Ivy tells Bob Toll during his conference call (where the message was that the market had seen the worst) that he has made a lot of people who follow his trading habits wealthy.
GotaBank,
I think many Americans believe that someone who has built a successful business has every right to cash out at some point, and the audience for main-stream-media interviews in particular is likely to have that mindset. So the interviewers have no incentive to bring the topic up, especially since it would make it more difficult to get executives to sit for interviews.
Moreover, it's not unusual to see articles in the business press about how insider sales are something to which investors should pay attention, and the data is readily available for free to anyone who bothers to look for it (just click on "Insider Transactions" on Yahoo Finance), so there is no reason for financial reporters to feel that not bring up the topic helps an executive to conceal something from the public, nor, conversely, is there any way for them make a big news splash by presenting that info.
Found this on another blog. People still think this is just an "immigrant" problem:
I am very frustrated & upset too. Upset at seeing the way subprime lenders have now found a whole new pool of such eager first time FBs thatll help them keep the RE Ponzi scheme going. And pardon my garden for saying so but; if youre not here legally you should NOT be buying real estate here either. The Mexican government sure as hell doesnt allow us to buy any RE there. They only allow arrendamientos or Long Term Leasing. And even thats allowed only within certain areas.
Reading about so many cases recently such as Carmens up above confuses me tho. I just dont get it. On one hand I hear that subprimes (the remaining ones at least) are tightening lending standards yet on the other I see that these liar loans seem to be accelerating and picking up pace. Theyre still plugging em on Spanish TV a lo loco.
Is there NO end to this madness?.
end quote.
As for MSM waking up -- good for them -- but the public sure could have used a lot more of this type of reporting, a lot sooner.
Alo, you can't know how grateful I am to have you here in the comments. If it weren't for you, I'd always be winning the "Someone Who Is Never Happy About The Media Regardless of What They Do" award. I'm grateful that you provide competition for me; it makes me work harder.
Of course, I never fart. Through anything. It isn't Czarina-like.
I wrote about Beazer last year. It had its own brokerage (a lot of them did), and it was offering some of the worst loans ever. I think it was a combo 3-2-1 buydown plus paying the interest on the 80/20 (20 I-O). In any case, the payments on these things shot up like skyrockets.
I believe Beazer sold the broker biz off, but I do think they have some liability for what they did.
See Beazer and Centex in CA.
Payments more than doubled on these loans. Some were neg-ams.
People are very much in denial about what was going on and the size of the impending blowback.
What do you expect Mozilo to do, keep all his stock until he is 80?
yal,
Mexico tried letting non-mexicans (Americans) own land in Mexico. it didnt work cuz they moved in, disobeyed all the laws, and then launched an armed inserection against the govt. The net result was that Mexico ended up losing about half of its total land area premamently (in 2 stages). Who were these "reverse wetbacks"? Guys like Davie Crockett, Jim Bowie and Sam Huston.
Tanta, happy to play bad cop for you! I admit to the satellite-sized chip on my shoulder about the press (not for everything mind ye, but sure enough for its shoddy bubble coverage).
The chip would have been smaller had the press simply just ignored the mania; but instead, so many outlets decided to cover it by cheering it on, and leading the public it is supposed to serve off a cliff. (ooh you got me started again)
That being said, N&O piece was very good -- and I am sure other papers will follow. It's about time!
You can not really compare the early eighties to today. Intrest rates where through the roof but you still had to qualify for the loan based on income. The rates where high but they where fxed. There was no such thing as an adjustable rate or intrest only mortgage ect. My first home had a 12.5 percent 30 year fixed. But we essentially could afford only what we made given our other debt obligations and credit history. $3000 down turned into $30,000 in five years. As intrest rates declined home prices went up. Unfortunately interest rates will never be this low again. ( fifteen year fixed, 4.36) that only means one thing. Falling prices.
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