"In a letter sent to HUD Secretary Alphonso Jackson, NAR President Pat
Vredevoogd Combs strongly urged action by HUD to change FHA rules and waive
the requirement that a homeowner's mortgage be "current" in order to
refinance into an FHA loan product.
"Many homeowners who were able to make timely payments under the
original terms of their loan are finding it difficult to make payments
after rate adjustments," said Combs. "We believe FHA can design a mechanism
where credit worthy borrowers could refinance subject to prudent
guidelines, and therefore avoid losing their homes."
"As the nation's leading advocate for homeownership, NAR believes that
all avenues should be reviewed and that paradigms should be shifted. The
goal for all -- government, lenders, banks, individuals, and Realtors(R) --
should be to help keep people in their homes and to avoid or minimize
foreclosures," Combs said earlier this month. In recent days, it has been reported that various lenders have
expressed a willingness to engage in this program to avoid costly
foreclosure proceedings. This would not be a bailout for lenders, but would
be a vehicle for helping prevent a number of Americans from losing their
homes. "NAR believes in a strong FHA and would support efforts to ensure
that only borrowers who truly have the capacity to repay receive the
opportunity to refinance under such changes," said Combs."
Yeah, lenders getting repaid 100% and foisting it off onto a FHA insured loan doesnt sound like a bailout at all....
When my wife and I moved to DC in 2003, I thought a condo would be a good way to trade space for cost (fine, I'll move to a small place without a yard, but I'll save some money). What was weird was that here in DC, the trade didn't exist. Houses, Condos, townhouses all cost the same. The only savings is in the rental market, where you can live in the same place at less than half the cost, leaving the bleeding to the poor sucker who went in for the get-rich sales pitch.
This Washington Post article just proves out what we knew: everyday, boring middle-classers can't afford the places at the cost. And the things are made of Styrofoam anyway. It's not like the condo is better constructed than the house.
Let's say that Richard Berner is mainstream, represents mainstream opinion.
Right now, that opinion is that even though it walks like a duck, etc., it's not a duck.
In addition, we have the slow-motion quality of the housing disaster: "It can't really be happening, because in 2007 nothing happens that slowly."
Now, if, in fact, it is a duck, and things start getting really dicey, hasn't Bernanke set himself up to be lynched?
Isn't he going to be drawn and quartered because he didn't lower interest rates a long time ago?
Isn't that a key question?
How does he avoid being the one person who everybody blames?
It's important, because it will be one of the strangest events in human history, if the leading economic power in the world crashes and burns and everybody blames one guy.
Put another way, why isn't everybody screaming for him to lower right now? That will make it easier to blame him later.
I'm honestly confused. Why isn't everybody and their uncle shouting from the highest rooftop that Bernanke should lower?
In my experience with delinquent HOA payments, all that ever happens is that the HOA slaps a lien on the property and hopes to get its payout when the home next changes hands.
Of course, if some large percentage of your properties stopped paying dues, the HOA might be in real trouble. In a foreclosure sale, would they get anything at all?
I agree that Bernanke is protecting the dollar at all costs.
But it looks like one of the costs is going to be, at the very least, his career.
If the dollar plummets, well, the carry trade will get very hairy, and I suppose the stock market will crash...as well as what's left of the housing industry. But at least he can say that he tried.
If he holds course, I truly think the peasants are going to storm the castle...peasants in this case meaning members of the press, Congress, the Administration, etc.
Bernanke probably wants the economy to slow, and wouldn't even mind a mild recession. Being new to the job, it would be like having a recession in the first year of one's presidency. You can get the pain over with and blame it on the previous administration. The longer the inevitable pain is delayed, the more clearly the fault will be assigned to Bernanke. Also, the responsible course of action is to take the medicine now, so he may have our collective best interest at heart.
What I don't understand is why he keeps insisting that the housing problems are contained and that recession is unlikely. It's like Clinton with the Monica Lewinsky affair. Why say anything, when the downside is so great?
This article informs me, again, why never to buy into a condo. Now you have to deal with an association and pay HOA fees. Bah Humbug! I would rather just pay my property taxes as with these taxes everyone is in the same boat and if it springs a leak there will be a lot of people helping get the water out of the hull. With a condo it is: Looks like you have swim jack - good luck there are sharks in those waters.
Of course, if some large percentage of your properties stopped paying dues, the HOA might be in real trouble. In a foreclosure sale, would they get anything at all?
Literally, as a matter of law? They don't get anything until the foreclosure expenses and the mortgage lender(s) are paid off. So, no, they don't get much.
Practically, as a matter of the effect of underfunded HOAs on property values? Who is going to bid more than the lender's make-whole amount for some condo in a project with weedy greenbelts, torn and ripped carpet in the lobby, an elevator with an out-of-date certificate behind cracked plastic, a pool with algae growing in it, and a window-washer last hired three years ago?
It's a downward spiral: the more delinquent dues, the less the units are worth, the less recovered in a foreclosure, the higher the assessments on the paying owners, the more likely they are to default or short sell, the worse it gets . . .
Do not forget that next year will be an election year, Soo... the FED has to do its dirty work this year in order to create the impression that its not meddling in politics.
On a similar note, in CA, property taxes are due tomorrow (4/10). Taxes are due in two installments, the first on 12/10 and the second on 4/10. I'm not aware of any other state property tax schedules.
It doesn't seem like it's a far leap to think that unpaid property taxes are a leading indicator of a borrower in distress.
Does anyone know the percentage of borrowers that have their property taxes collected by an escrow (impound) account versus those that manage their payments on their own? Better yet, is it more likely for Flippers and Subprime borrowers to manage their own payments. For those that have their taxes included in their monthly payment, what happens if they are behind on their monthly payments and their escrow account does not have enough funds to cover the full property tax payment?
I've always managed my own property tax payments so I don't know much about escrow account policies.
arbogast, Berner and Greenlaw write "The productivity slowdown is cyclical, but the trend may also have slipped."
Year-over-year the growth rate of productivity has declined now for five years. I think this is key for the Fed. If something can't get productivity going up again then won't the Fed have to cut rates to try and juice the economy?
Detroit Dan, Bloomberg TV is going to do a feature on the subprime market in Detroit either tomorrow or Wednesday (I can't remember which).
" The real problem, he thinks, is in the American economys reliance on debt. Congress doesnt weigh in on the problem because tighter lending requirements would send our Bubble economy into a tailspin, says bankruptcy attorney David Huffman.
Laziness or a desire to shirk financial responsibilities isnt the problem; homeowners who find new or second jobs still cant surmount their debt, said David Huffman. Thats because the jobs they find tend to pay lower wages and come without benefits.
Foreclosures, in and of themselves, are just a symptom of whats wrong with the economy, Huffman says.
My neighborhood, one of the nicest in Detroit, is a disaster zone with many vacancies. From my perspective, there is a big disconnect between Wall St. and Main St. But Detroit is Ground Zero I guess...
For those that have their taxes included in their monthly payment, what happens if they are behind on their monthly payments and their escrow account does not have enough funds to cover the full property tax payment?
The servicer will advance funds to keep the taxes paid, which will result in a negative escrow balance. That in turn becomes part of the expenses that are owed to the lender in a foreclosure.
Actually, the lender can force you to start making escrowed tax (and insurance) payments even if you did not originally have escrows set up, if it receives notice (as it will) that you are not paying them yourself. If you refuse to pay the new higher monthly payment with the T&I added, you will be in default and the lender can foreclose.
The Fed has learned now (I hope) through 2 experiences that, while it may cut rates, it cannot control where the newly created liquidity will go. Bubbles happen. Like a pilot making wave-off attempts at landing, the economy cannot forever bubble its way out of the previous bubble... sooner or later it has to come down somewhere.
Bernanke's worst outcome nightmare is probably stagflation - the cure for which was demonstrated by Volker: hold their heads underwater until enough of them drown; the survivors will be the better for it.
What I am interested in lately is which ocean liner is picking up which additional crew members out of what lifeboats it happens to find floating at sea . . .
what are you implying? that they are hiring incompetent people, or also that they are hiring dishonest people who "fit in" with the culture? I'm starting to wonder myself what goes on in these companies. Is it possible that some of them have an implied "don't ask don't tell" policy so as to prevent the investigation of improper behavior?
hey Yal, that Observer article you linked to is even scarier when you consider that the Belgian economist Daniel Gros thinks that housing prices in the U.K. and Australia are especially overvalued:
Steve Forbes, among others has been saying for two years that the Fed is too tight. So there's one anyway!
I think the disconnect is a fundamental disagreement over the state of the economy. The pre-supposition among many here is that the economy is headed into the crapper. Bernanke I suspect genuinley disagrees.
probert, I never claimed that the man was incompetent or dishonest.
I was merely a bit taken aback to see that FED had hired someone to manage its wholesale lending who appeared to have a fairly long track record of working for/forming/selling out of companies who folded pretty damned fast at the first whiff of market retrenchment. Once or twice that can happen to anyone with a long enough resume; I myself have a thrift on mine that no longer exists (thanks, OTS!). But that many? Some people just seem to be disaster magnets.
The fact of the matter, of course, is that given all the blowouts and the contraction in the industry, there will be a whole lot of people--the good, the bad, and the ugly--who will have to go somewhere. This kind of contraction in the industry has, certainly, happened before. So it's always interesting to see who goes where, and how a lender recruits. And what people are willing to put in press releases.
Year-over-year the growth rate of productivity has declined now for five years. I think this is key for the Fed.
Come on people, put your thinking caps on. We need to find some more labor arbitrage and we need to find it quickly!
Government seems pretty inefficient. Can we outsource some of our corruption to India maybe? Dollar for Rupee, I think our lobbying would get more bang for the buck over there.
Bernanke's worst outcome nightmare is probably stagflation - the cure for which was demonstrated by Volker: hold their heads underwater until enough of them drown; the survivors will be the better for it.
The central banker's true job description:
Culling the speculative herd*.
I was merely a bit taken aback to see that FED had hired someone to manage its wholesale lending who appeared to have a fairly long track record of working for/forming/selling out of companies who folded pretty damned fast at the first whiff of market retrenchment. Once or twice that can happen to anyone with a long enough resume; I myself have a thrift on mine that no longer exists (thanks, OTS!). But that many? Some people just seem to be disaster magnets.
I got that, but what would be an example of a scenario where a manager of this type would be such a magnet? It's in this context that I raise the questions of incompetence & dishonesty. My hunch tells me that crappy companies look for incopetent people who won't raise questions and will stick to some script, or people who are willing to cut corners, or be "taught" how it works (or, "how it works". But if it's a higher-level employee like the case with this man, then how do we look at it?
Do you see a hint of dishonesty in that face? Could the author of the "Leonard Leap" be guilty of mendacity?
This is Anti-Americanism at its worst. I am saddened, deeply saddened when I am forced to watch while someone as good-hearted, as completely honest, as much a do-gooder, as Mr. Leonard is pilloried by those who wish to poison the purity of our precious bodily fluids...our liquidity, if you will.
Wasnt there a report a few months ago that claimed subprime/poorer borrowers do not consume very much anyway? So maybe the subprime rot will have to climb much further up the credit ladder before it affects consumption.
Maybe this equals persistently high inflation even as subprime and poorer folks drown in debt. Kind of like a 2 tier Brazilian economy.
In this kind of scenario the fed would have to hold steady at least for a while or possibly hike to 6% if the labor market continues to tighten.
Maybe all the MBS risk was bought by Asian banks and large institutions to the point where it really was spread thin. I think all the financial innovations may work somewhat close to advertised
Are you implying that Mr Leonard only drinks rainwater and grain alcohol?
About one in six Americans live in a community run by a condo or homeowners association. Fees pay for such services as water, garbage removal, cleaning and repairs. . . .
Not being able to pay for garbage removal would put a bit of a crimp in resale values.
Maryland State sales tax receipts drop, worrying officials
Tax revenues declined by about $20 million last month compared with March 2006 - a drop of about 2 percent, largely because of a 3 percent drop in sales tax receipts.
"The sales tax decline is a major concern because it is the first time in four years it's declined in any month. It could be an indicator of stormy weather ahead," Franchot said.
David Roose, the head of the state's Bureau of Revenue Estimates, said what is particularly troubling about a drop in the sales tax is that it usually only happens during recessions.
....Unfortunately for the class action suits, this issue has come up before and effectively been squashed each time. What you guys need to concentrate on is the SRP (Service Release Premium, don't asked me how they came up with that stupid name.) which the direct retail lenders (wamu, Wells, CFC, etc) have hidden away from any paperworks. It is essentially the agreement between wall street and the "release" rate to the public. Therefore there is a built in premium to the market rate already. These lenders have fought tooth and nail for any disclosure whatsoever about these numbers. At least the YSP has to appear on the HUD-1 as well as the signed GFE although since the line item doesn't come from either the seller or buyer or from the homeowners, most brokers just obfuscate the facts by saying that this is a "bonus" the lenders give them for doing good business. Hahaha. Anyways the SRP is much more insiduos as the agreed to rate by the borrower may actually have both srp and ysp on there. Fun stuff huh...
``If we have a continued house-price decline, Alt-A will be more affected'' than subprime mortgages, said Howard Hill, a managing director in Springfield, Massachusetts at Babson Capital Management LLC. Hill said Alt-A lenders were more likely to combine low documentation and low down payments, and more likely to have extended mortgages to speculators, while offering less protection for bondholders.
Membership in the Greater Las Vegas Association of Realtors grew from 7,959 in January 2003 to 16,379 in January 2007. Statewide, the number of licensed real estate agents jumped from 17,718 in 2000 to 36,785 in 2006.
Mortgage Bondholders to Bear Subprime Loan Risk, Lawmakers Say
By James Tyson
April 10 (Bloomberg) -- U.S. lawmakers want to stem the rising number of mortgage delinquencies by targeting investors who finance such lending through the purchase of bonds backed by home loans.
The top Republican and Democrat on the House Financial Services Committee both said they want laws making investors that buy mortgage bonds liable for deceptive or bad loans. An agreement by lawmakers in two parties to increase investor liability for abuses in subprime lending increases the chances for legislation to pass this year.
Putting the burden on investors may deter the subprime mortgages that have pushed delinquencies to a four-year high by making it more expensive for lenders to make and sell the loans, Representative Spencer Bachus, a Republican from Alabama, said in an interview in Washington. With the legislation, investors may demand higher yields to own bonds backed by mortgages.
More money was being lent than should have been lent,'' Committee Chairman Barney Frank, 67-year-old Democrat from Massachusetts, said in an interview from Washington. Frank, who last month predicted that the House would approve such a bill this year, said growth in the market for mortgage bondsprovided liquidity without responsibility.''
The mortgage bond market is more than 50 percent bigger than the amount of government debt outstanding. Sales totaled about $2.12 trillion last year, according to the Securities Industry and Financial Markets Association, a New York-based trade group. About $540 billion of the bonds are backed by subprime mortgages, or loans to people with poor credit, up threefold since 2001, according to New York-based Bear Stearns Cos.
Curb Financing
Forcing greater liability on holders of bonds backed by subprime mortgages would raise the cost of borrowing, curbing financing for legitimate lenders and subprime homebuyers, said David Brownlee, who oversees $14 billion as head of fixed income at Sentinel Asset Management in Montpelier, Vermont. It would also reduce opportunities for the Wall Street firms that pool the home loans as securities.
Investors in bonds backed by subprime mortgages currently face sufficient liability, Brownlee said. The investment banks underwriting the bonds ``aren't idiots, they're already laying off the risk of subprime loans on investors.''
Mortgage lenders seek to minimize their risk and raise new capital by selling the loans they make to Wall Street firms, which bundle them into securities for sale to investors. Sales of bonds backed mainly by subprime loans are already down, falling 37 percent to $79.3 billion this year through March 29 from $100.9 billion a year earlier, according to Citigroup Inc.
Bachus said he favors legislation similar to a law enacted in New Jersey in 2003 enabling homeowners whose loans are the result of predatory lending to gain co
Few Americans give much thought to the Federal Reserve System or monetary policy in general. But even as they strive to earn a living, and hopefully save or invest for the future, Congress and the Federal Reserve Bank are working insidiously against them. Day by day, every dollar you have is being devalued.
The greatest threat facing America today is not terrorism, or foreign economic competition, or illegal immigration. The greatest threat facing America today is the disastrous fiscal policies of our own government, marked by shameless deficit spending and Federal Reserve currency devaluation. It is this one-two punch-- Congress spending more than it can tax or borrow, and the Fed printing money to make up the difference-- that threatens to impoverish us by further destroying the value of our dollars.
if i understand correctly the politicians finaly found the sacrifical lamb, in this case it wont be the borrower who overestimates his ability to pay for a mortgage, it wont be the appraisal who misrepresents the true market value, it wont be the lender who cares only about volume because he lives from the fees, it will be the poor old granny who has saved all her life and has her money invested in CDs at some bank.
really nice, but i think i know why they are after investors. i mean they are the only ones in this scheme that have some money, so you can sue them.
I think Bachus and Frank know something we don't know. I think they know that Fannie and Freddie are up to their eyeballs in worthless paper.
This is an effort to bail out Fannie and Freddie before the foreigners who have bought their debt realize they're worthless.
Japan and China kept their currencies low to finance their industrial development and now we're going to renege on our debt to keep our country afloat.
If you combine what Bachus and Frank are doing with what Bernanke is doing, you could come to the conclusion that the lifeboats are being cleaned up and conditioned, the life vests are being re sewn, and everything made shipshape before the USS Titanic heads for the bottom.
Bulls! Calling all bulls! I want to hear you paw the ground. It's all I've got left.
SRP (Service Release Premium, don't asked me how they came up with that stupid name.) which the direct retail lenders (wamu, Wells, CFC, etc) have hidden away from any paperworks. It is essentially the agreement between wall street and the "release" rate to the public.
Yal, this is the glistening trail of an idiot. You should stay away from these message boards if you don't have a big box of salt handy.
It is not possible to be a mortgage professional of any sort and not know what SRP is. Or why it is called SRP. I am pretty sure our CR UberNerds could puzzle it out on their own, just because they know that mortgage loan servicing rights have value, and so that when one sells a loan with the servicing released, one is paid a premium over the price for the note. As opposed to selling a loan with the servicing retained, in which case one does not get consideration for the servicing rights, because one keeps them on one's own books, where they are called MSR.
It might be fun for some folks to try to blame Wall Street for that, but non-Street mortgage buyers have been paying SRP in order to acquire whole loans since the invention of the secondary market in mortgages, which was long, long before Wall Street ever showed any interest in what was once a sleepy, low-risk, moderate-return little business with its fair share of literate participants.
Ohh you guys worry so much. The nice people at NAR, the Whitehouse and Departments of Commerce and Labor say everything is o.k. Its just an adjustment.....its all o.k. Strong jobs report, we are the freest, greatest nation with the best economy ever.......These guys with the condo problems---an aberation.
Seriously--think of the distress that is not being picked up by current data reporting. Will inevitably see uptick in secondary effects---foreclousre, larger spreads for servicing rights, etc.......
"Japan and China kept their currencies low to finance their industrial development and now we're going to renege on our debt to keep our country afloat."
There's no need for us to renege on our debt -- especially in the case of goods from China, we buy at cents on the dollar to begin with. The misconception is widespread that if the dollar drops against the yuan (or yen) the Chinese (or Japanese) will lose money. That is not the case -- they lost the money the instant that they accepted (actually, demanded) payment for their exports in dollars that could not be exchanged for goods and services of equal worth. What they accomplish by maintaining the bogus exchange rates is to avoid official recognition of the loss and to continue to subsidize their exporters (while impoverishing their citizens overall).
Another way to look at it is that they're perpetrating a vendor financing fraud on their people. Their incentive is not to stop the fraud, but rather to keep it going as long as possible.
Consider what would happen if the Chinese (Japanese) were to demand payment for their goods in yuan (yen), and their governments were to cease interfering in the foreign exchange markets. To buy their goods, American importers would have to pay in yuan (yen), and to get those yuan (yen) some Americans would have to make and export goods which Chinese (Japanese) consumers would want to buy. Export manufacturing in the US would have to expand in scale to match export manufacturing in Asia -- boom times. But goods prices here in the US would return to -- even rise above -- their levels back in the days before the Asians started shipping stuff to us at fantastic discounts.
jm's got it right... except for one thing. We have or are dismantling our capacity to produce things at all (other than real estate, financial instruments & maybe corn based ethanol)...
Meanwhile they have the modern factories and a skilled workforce. Hmmmm. Maybe they weren't so dumb.
So if they were ever to ask for goods in kind... what do we send them?
We could send them aircraft, cars, software, coal, fine furniture, stylish attire...
That they are acquiring a manufacturing base doesn't mean that we are losing the ability to manufacture, just that we won't do so while they're willing to work for, essentially, free.
"Meanwhile they have the modern factories and a skilled workforce. Hmmmm. Maybe they weren't so dumb."
But they don't pay their own people enough to buy the things they themselves make. That's why a third of their GDP is exports. If they raised wages enough that their own people could afford the stuff at current prices, their costs would be higher than those prices. And the things their own people need the most are different from what they're exporting. Those modern factories are the wrong kind of factories for their needs. By subsidizing export manufacturing through currency manipulation, they've grievously distorted their economy.
Of course, the members of the elite are getting filthy rich -- just as the elite of Detroit would if they could take the Midwest out of The Union and establish a Midwest dollar valued at 20 cents to the US dollar.
"So if they were ever to ask for goods in kind... what do we send them?"
Although the very fact that China has been able to industrialize to its current level in a very short time should give us every reason to believe that the US will be able to re-industrialize in an even shorter time when it finally needs to, that will probably come about due to China once again disintegrating politically and economically due to the accumulated stress of the hideous distortions created by the current rulers' policies. So they probably won't be in any shape to buy much from us.
I taste bile:
NAR Urges HUD to Revamp FHA Program to Help People Stay in Their Homes
"In a letter sent to HUD Secretary Alphonso Jackson, NAR President Pat
Vredevoogd Combs strongly urged action by HUD to change FHA rules and waive
the requirement that a homeowner's mortgage be "current" in order to
refinance into an FHA loan product.
"Many homeowners who were able to make timely payments under the
original terms of their loan are finding it difficult to make payments
after rate adjustments," said Combs. "We believe FHA can design a mechanism
where credit worthy borrowers could refinance subject to prudent
guidelines, and therefore avoid losing their homes."
"As the nation's leading advocate for homeownership, NAR believes that
all avenues should be reviewed and that paradigms should be shifted. The
goal for all -- government, lenders, banks, individuals, and Realtors(R) --
should be to help keep people in their homes and to avoid or minimize
foreclosures," Combs said earlier this month.
In recent days, it has been reported that various lenders have
expressed a willingness to engage in this program to avoid costly
foreclosure proceedings. This would not be a bailout for lenders, but would
be a vehicle for helping prevent a number of Americans from losing their
homes. "NAR believes in a strong FHA and would support efforts to ensure
that only borrowers who truly have the capacity to repay receive the
opportunity to refinance under such changes," said Combs."
Yeah, lenders getting repaid 100% and foisting it off onto a FHA insured loan doesnt sound like a bailout at all....
Just get in at any price?
When u can't afford the condo fees you are in deep doo doo.
The NAR president is a shameless individual.
Know a few people who got in before they were going to be priced out. Now....Sleepless nights.
When my wife and I moved to DC in 2003, I thought a condo would be a good way to trade space for cost (fine, I'll move to a small place without a yard, but I'll save some money). What was weird was that here in DC, the trade didn't exist. Houses, Condos, townhouses all cost the same. The only savings is in the rental market, where you can live in the same place at less than half the cost, leaving the bleeding to the poor sucker who went in for the get-rich sales pitch.
This Washington Post article just proves out what we knew: everyday, boring middle-classers can't afford the places at the cost. And the things are made of Styrofoam anyway. It's not like the condo is better constructed than the house.
P.T. Barnum would be proud!
I have a serious question, seriously.
Let's say that Richard Berner is mainstream, represents mainstream opinion.
Right now, that opinion is that even though it walks like a duck, etc., it's not a duck.
In addition, we have the slow-motion quality of the housing disaster: "It can't really be happening, because in 2007 nothing happens that slowly."
Now, if, in fact, it is a duck, and things start getting really dicey, hasn't Bernanke set himself up to be lynched?
Isn't he going to be drawn and quartered because he didn't lower interest rates a long time ago?
Isn't that a key question?
How does he avoid being the one person who everybody blames?
It's important, because it will be one of the strangest events in human history, if the leading economic power in the world crashes and burns and everybody blames one guy.
Put another way, why isn't everybody screaming for him to lower right now? That will make it easier to blame him later.
I'm honestly confused. Why isn't everybody and their uncle shouting from the highest rooftop that Bernanke should lower?
If Bernanke lowers interest rates, China quits buying and the debtor nation USA is "screwed"!
In my experience with delinquent HOA payments, all that ever happens is that the HOA slaps a lien on the property and hopes to get its payout when the home next changes hands.
Of course, if some large percentage of your properties stopped paying dues, the HOA might be in real trouble. In a foreclosure sale, would they get anything at all?
shastaseer:
I agree that Bernanke is protecting the dollar at all costs.
But it looks like one of the costs is going to be, at the very least, his career.
If the dollar plummets, well, the carry trade will get very hairy, and I suppose the stock market will crash...as well as what's left of the housing industry. But at least he can say that he tried.
If he holds course, I truly think the peasants are going to storm the castle...peasants in this case meaning members of the press, Congress, the Administration, etc.
arbo,
Bernanke probably wants the economy to slow, and wouldn't even mind a mild recession. Being new to the job, it would be like having a recession in the first year of one's presidency. You can get the pain over with and blame it on the previous administration. The longer the inevitable pain is delayed, the more clearly the fault will be assigned to Bernanke. Also, the responsible course of action is to take the medicine now, so he may have our collective best interest at heart.
What I don't understand is why he keeps insisting that the housing problems are contained and that recession is unlikely. It's like Clinton with the Monica Lewinsky affair. Why say anything, when the downside is so great?
Here is a link to the WaPo Benny Kass Q&A that may or may not have inspired that article: Benny L. Kass - Rising Foreclosures Endanger Condo Associations - washingtonpost.com
This article informs me, again, why never to buy into a condo. Now you have to deal with an association and pay HOA fees. Bah Humbug! I would rather just pay my property taxes as with these taxes everyone is in the same boat and if it springs a leak there will be a lot of people helping get the water out of the hull. With a condo it is: Looks like you have swim jack - good luck there are sharks in those waters.
Of course, if some large percentage of your properties stopped paying dues, the HOA might be in real trouble. In a foreclosure sale, would they get anything at all?
Literally, as a matter of law? They don't get anything until the foreclosure expenses and the mortgage lender(s) are paid off. So, no, they don't get much.
Practically, as a matter of the effect of underfunded HOAs on property values? Who is going to bid more than the lender's make-whole amount for some condo in a project with weedy greenbelts, torn and ripped carpet in the lobby, an elevator with an out-of-date certificate behind cracked plastic, a pool with algae growing in it, and a window-washer last hired three years ago?
It's a downward spiral: the more delinquent dues, the less the units are worth, the less recovered in a foreclosure, the higher the assessments on the paying owners, the more likely they are to default or short sell, the worse it gets . . .
Do not forget that next year will be an election year, Soo... the FED has to do its dirty work this year in order to create the impression that its not meddling in politics.
StreetInsider.com - Accredited Home Lenders (LEND) Largest Shareholder Liquidates Its Stake
LEND biggest shareholder (12%) liquidates their positio
On a similar note, in CA, property taxes are due tomorrow (4/10). Taxes are due in two installments, the first on 12/10 and the second on 4/10. I'm not aware of any other state property tax schedules.
It doesn't seem like it's a far leap to think that unpaid property taxes are a leading indicator of a borrower in distress.
Does anyone know the percentage of borrowers that have their property taxes collected by an escrow (impound) account versus those that manage their payments on their own? Better yet, is it more likely for Flippers and Subprime borrowers to manage their own payments. For those that have their taxes included in their monthly payment, what happens if they are behind on their monthly payments and their escrow account does not have enough funds to cover the full property tax payment?
I've always managed my own property tax payments so I don't know much about escrow account policies.
arbogast, Berner and Greenlaw write "The productivity slowdown is cyclical, but the trend may also have slipped."
Year-over-year the growth rate of productivity has declined now for five years. I think this is key for the Fed. If something can't get productivity going up again then won't the Fed have to cut rates to try and juice the economy?
Detroit Dan, Bloomberg TV is going to do a feature on the subprime market in Detroit either tomorrow or Wednesday (I can't remember which).
No way out for the leveraged US Bubble Economy
Foreclosures continue to climb-Featured Story - huffman_foreclosure_foreclosures-Troubling trend - Burlington Times News
" The real problem, he thinks, is in the American economys reliance on debt. Congress doesnt weigh in on the problem because tighter lending requirements would send our Bubble economy into a tailspin, says bankruptcy attorney David Huffman.
Laziness or a desire to shirk financial responsibilities isnt the problem; homeowners who find new or second jobs still cant surmount their debt, said David Huffman. Thats because the jobs they find tend to pay lower wages and come without benefits.
Foreclosures, in and of themselves, are just a symptom of whats wrong with the economy, Huffman says.
Bingo!
Cal says:
"Yeah, lenders getting repaid 100% and foisting it off onto a FHA insured loan doesnt sound like a bailout at all...."
This is just another example of what seems to be the standard US business plan:
Privatize profits
Socialize costs/risks
An Autopsy On The March 2007 Employment Situation Report
http://web-xp2a-pws.ntrs.com/content//media/attachment/data/econ_research/0704/document/dd040607.pdf
Thanks for the heads-up, Charlie.
My neighborhood, one of the nicest in Detroit, is a disaster zone with many vacancies. From my perspective, there is a big disconnect between Wall St. and Main St. But Detroit is Ground Zero I guess...
For those that have their taxes included in their monthly payment, what happens if they are behind on their monthly payments and their escrow account does not have enough funds to cover the full property tax payment?
The servicer will advance funds to keep the taxes paid, which will result in a negative escrow balance. That in turn becomes part of the expenses that are owed to the lender in a foreclosure.
Actually, the lender can force you to start making escrowed tax (and insurance) payments even if you did not originally have escrows set up, if it receives notice (as it will) that you are not paying them yourself. If you refuse to pay the new higher monthly payment with the T&I added, you will be in default and the lender can foreclose.
How to make 100% profit (or would you buy a used car from this guy ?)
REAL ESTATE: Use Leverage & Zero Down - Buy Your Home or Investment Property-Pt1
ML,
Jon Lansner posts on his blog about the property tax situation for the OC, it is getting worse since he has been following it.
Who sais insanity is limited to the west side of of the pond:
Want to buy but don't have a deposit? Here comes the 125 per cent mortgage |
Money |
The Observer
Who sais google count is the truth ?
google this:
"now is not a great time to buy" - 6
""now is a great time to buy" - 22,000
arbo,
The Fed has learned now (I hope) through 2 experiences that, while it may cut rates, it cannot control where the newly created liquidity will go. Bubbles happen. Like a pilot making wave-off attempts at landing, the economy cannot forever bubble its way out of the previous bubble... sooner or later it has to come down somewhere.
Bernanke's worst outcome nightmare is probably stagflation - the cure for which was demonstrated by Volker: hold their heads underwater until enough of them drown; the survivors will be the better for it.
Tanta, in another thread you said:
What I am interested in lately is which ocean liner is picking up which additional crew members out of what lifeboats it happens to find floating at sea . . .
what are you implying? that they are hiring incompetent people, or also that they are hiring dishonest people who "fit in" with the culture? I'm starting to wonder myself what goes on in these companies. Is it possible that some of them have an implied "don't ask don't tell" policy so as to prevent the investigation of improper behavior?
Thanks Tanta and Cal. I didn't see Jon's latest posts about the property tax situation. Good articles.
Thanks again.
hey Yal, that Observer article you linked to is even scarier when you consider that the Belgian economist Daniel Gros thinks that housing prices in the U.K. and Australia are especially overvalued:
CEPS - The Centre for European Policy Studies Book Store
This raises the question: Can we make money from later shorting U.K./Australian homebuilders or subprime lenders?
(I am asking because my specialty is emerging market equities not U.K./Australia.)
Arbo,
Steve Forbes, among others has been saying for two years that the Fed is too tight. So there's one anyway!
I think the disconnect is a fundamental disagreement over the state of the economy. The pre-supposition among many here is that the economy is headed into the crapper. Bernanke I suspect genuinley disagrees.
As always, time will show us who was right.
probert, I never claimed that the man was incompetent or dishonest.
I was merely a bit taken aback to see that FED had hired someone to manage its wholesale lending who appeared to have a fairly long track record of working for/forming/selling out of companies who folded pretty damned fast at the first whiff of market retrenchment. Once or twice that can happen to anyone with a long enough resume; I myself have a thrift on mine that no longer exists (thanks, OTS!). But that many? Some people just seem to be disaster magnets.
The fact of the matter, of course, is that given all the blowouts and the contraction in the industry, there will be a whole lot of people--the good, the bad, and the ugly--who will have to go somewhere. This kind of contraction in the industry has, certainly, happened before. So it's always interesting to see who goes where, and how a lender recruits. And what people are willing to put in press releases.
It's a downward spiral: ... the worse it gets . . .
Subprime. Use in a sentence.
Subprime, as in, "After they stopped receiving HOA payments, those condos went totally subprime!"
S-U-B-P-R-I-M-E
Congratulations, you have just won the Lower Manhattan Spelling Bee!
Year-over-year the growth rate of productivity has declined now for five years. I think this is key for the Fed.
Come on people, put your thinking caps on. We need to find some more labor arbitrage and we need to find it quickly!
Government seems pretty inefficient. Can we outsource some of our corruption to India maybe? Dollar for Rupee, I think our lobbying would get more bang for the buck over there.
Bernanke's worst outcome nightmare is probably stagflation - the cure for which was demonstrated by Volker: hold their heads underwater until enough of them drown; the survivors will be the better for it.
The central banker's true job description:
Culling the speculative herd*.
I was merely a bit taken aback to see that FED had hired someone to manage its wholesale lending who appeared to have a fairly long track record of working for/forming/selling out of companies who folded pretty damned fast at the first whiff of market retrenchment. Once or twice that can happen to anyone with a long enough resume; I myself have a thrift on mine that no longer exists (thanks, OTS!). But that many? Some people just seem to be disaster magnets.
I got that, but what would be an example of a scenario where a manager of this type would be such a magnet? It's in this context that I raise the questions of incompetence & dishonesty. My hunch tells me that crappy companies look for incopetent people who won't raise questions and will stick to some script, or people who are willing to cut corners, or be "taught" how it works (or, "how it works". But if it's a higher-level employee like the case with this man, then how do we look at it?
Kind of reminds me about the old joke:
A CEO is interviewing people for the CFO job.
The first interviewee sits down. Looking smart in his intelligently tailored suit, he is taken aback when the CEO asks him "What is 1+1?"
The man scratches his head and replies calmly "Whatever it needs to be to make the numbers work."
It's good to see Tanta being forced to defend her scurrilous attack on Brian Leonard.
Yes, one could easily infer the imputation of dishonesty from her diatribe.
Look at the man:
Blackjack Online Casinos Basics
Do you see a hint of dishonesty in that face? Could the author of the "Leonard Leap" be guilty of mendacity?
This is Anti-Americanism at its worst. I am saddened, deeply saddened when I am forced to watch while someone as good-hearted, as completely honest, as much a do-gooder, as Mr. Leonard is pilloried by those who wish to poison the purity of our precious bodily fluids...our liquidity, if you will.
Tanta,
This is off topic but I thought you would enjoy. You "scooped" the Post.
Housing Boom Tied To Sham Mortgages - washingtonpost.com
Wasnt there a report a few months ago that claimed subprime/poorer borrowers do not consume very much anyway? So maybe the subprime rot will have to climb much further up the credit ladder before it affects consumption.
Maybe this equals persistently high inflation even as subprime and poorer folks drown in debt. Kind of like a 2 tier Brazilian economy.
In this kind of scenario the fed would have to hold steady at least for a while or possibly hike to 6% if the labor market continues to tighten.
Maybe all the MBS risk was bought by Asian banks and large institutions to the point where it really was spread thin. I think all the financial innovations may work somewhat close to advertised
Are you implying that Mr Leonard only drinks rainwater and grain alcohol?
About one in six Americans live in a community run by a condo or homeowners association. Fees pay for such services as water, garbage removal, cleaning and repairs. . . .
Not being able to pay for garbage removal would put a bit of a crimp in resale values.
Maryland State sales tax receipts drop, worrying officials
Tax revenues declined by about $20 million last month compared with March 2006 - a drop of about 2 percent, largely because of a 3 percent drop in sales tax receipts.
"The sales tax decline is a major concern because it is the first time in four years it's declined in any month. It could be an indicator of stormy weather ahead," Franchot said.
David Roose, the head of the state's Bureau of Revenue Estimates, said what is particularly troubling about a drop in the sales tax is that it usually only happens during recessions.
Topic Galleries -- baltimoresun.com
Here kitty kitty; now where did that MEW (mortg equity withdrawal) run off to?
Housing Boom Tied To Sham Mortgages:
Housing Boom Tied To Sham Mortgages - washingtonpost.com
CR - maybe you should highlight the NAR letter it is also part of the same issue.
From Yahoo board:
....Unfortunately for the class action suits, this issue has come up before and effectively been squashed each time. What you guys need to concentrate on is the SRP (Service Release Premium, don't asked me how they came up with that stupid name.) which the direct retail lenders (wamu, Wells, CFC, etc) have hidden away from any paperworks. It is essentially the agreement between wall street and the "release" rate to the public. Therefore there is a built in premium to the market rate already. These lenders have fought tooth and nail for any disclosure whatsoever about these numbers. At least the YSP has to appear on the HUD-1 as well as the signed GFE although since the line item doesn't come from either the seller or buyer or from the homeowners, most brokers just obfuscate the facts by saying that this is a "bonus" the lenders give them for doing good business. Hahaha. Anyways the SRP is much more insiduos as the agreed to rate by the borrower may actually have both srp and ysp on there. Fun stuff huh...
ALT A is worse than "subprime":
``If we have a continued house-price decline, Alt-A will be more affected'' than subprime mortgages, said Howard Hill, a managing director in Springfield, Massachusetts at Babson Capital Management LLC. Hill said Alt-A lenders were more likely to combine low documentation and low down payments, and more likely to have extended mortgages to speculators, while offering less protection for bondholders.
American Home Mortgage Shares Fall on Profit Forecast (Update4) - Bloomberg.com
More on employment:
Membership in the Greater Las Vegas Association of Realtors grew from 7,959 in January 2003 to 16,379 in January 2007. Statewide, the number of licensed real estate agents jumped from 17,718 in 2000 to 36,785 in 2006.
"Curb financing" ??
Mortgage Bondholders to Bear Subprime Loan Risk, Lawmakers Say
By James Tyson
April 10 (Bloomberg) -- U.S. lawmakers want to stem the rising number of mortgage delinquencies by targeting investors who finance such lending through the purchase of bonds backed by home loans.
The top Republican and Democrat on the House Financial Services Committee both said they want laws making investors that buy mortgage bonds liable for deceptive or bad loans. An agreement by lawmakers in two parties to increase investor liability for abuses in subprime lending increases the chances for legislation to pass this year.
Putting the burden on investors may deter the subprime mortgages that have pushed delinquencies to a four-year high by making it more expensive for lenders to make and sell the loans, Representative Spencer Bachus, a Republican from Alabama, said in an interview in Washington. With the legislation, investors may demand higher yields to own bonds backed by mortgages.
More money was being lent than should have been lent,'' Committee Chairman Barney Frank, 67-year-old Democrat from Massachusetts, said in an interview from Washington. Frank, who last month predicted that the House would approve such a bill this year, said growth in the market for mortgage bondsprovided liquidity without responsibility.''
The mortgage bond market is more than 50 percent bigger than the amount of government debt outstanding. Sales totaled about $2.12 trillion last year, according to the Securities Industry and Financial Markets Association, a New York-based trade group. About $540 billion of the bonds are backed by subprime mortgages, or loans to people with poor credit, up threefold since 2001, according to New York-based Bear Stearns Cos.
Curb Financing
Forcing greater liability on holders of bonds backed by subprime mortgages would raise the cost of borrowing, curbing financing for legitimate lenders and subprime homebuyers, said David Brownlee, who oversees $14 billion as head of fixed income at Sentinel Asset Management in Montpelier, Vermont. It would also reduce opportunities for the Wall Street firms that pool the home loans as securities.
Investors in bonds backed by subprime mortgages currently face sufficient liability, Brownlee said. The investment banks underwriting the bonds ``aren't idiots, they're already laying off the risk of subprime loans on investors.''
Mortgage lenders seek to minimize their risk and raise new capital by selling the loans they make to Wall Street firms, which bundle them into securities for sale to investors. Sales of bonds backed mainly by subprime loans are already down, falling 37 percent to $79.3 billion this year through March 29 from $100.9 billion a year earlier, according to Citigroup Inc.
Bachus said he favors legislation similar to a law enacted in New Jersey in 2003 enabling homeowners whose loans are the result of predatory lending to gain co
"green-flagged to red-tag":
http://www.mercedeshomes.com/banners/monthly.aspx
Few Americans give much thought to the Federal Reserve System or monetary policy in general. But even as they strive to earn a living, and hopefully save or invest for the future, Congress and the Federal Reserve Bank are working insidiously against them. Day by day, every dollar you have is being devalued.
The greatest threat facing America today is not terrorism, or foreign economic competition, or illegal immigration. The greatest threat facing America today is the disastrous fiscal policies of our own government, marked by shameless deficit spending and Federal Reserve currency devaluation. It is this one-two punch-- Congress spending more than it can tax or borrow, and the Fed printing money to make up the difference-- that threatens to impoverish us by further destroying the value of our dollars.
The Federal Reserve Monopoly over Money
This is the only honest congressperson one of the whole stinking bunch.
if i understand correctly the politicians finaly found the sacrifical lamb, in this case it wont be the borrower who overestimates his ability to pay for a mortgage, it wont be the appraisal who misrepresents the true market value, it wont be the lender who cares only about volume because he lives from the fees, it will be the poor old granny who has saved all her life and has her money invested in CDs at some bank.
really nice, but i think i know why they are after investors. i mean they are the only ones in this scheme that have some money, so you can sue them.
Revro:
Interestingly, I believe you have it wrong.
I think Bachus and Frank know something we don't know. I think they know that Fannie and Freddie are up to their eyeballs in worthless paper.
This is an effort to bail out Fannie and Freddie before the foreigners who have bought their debt realize they're worthless.
Japan and China kept their currencies low to finance their industrial development and now we're going to renege on our debt to keep our country afloat.
I don't think grannie comes into the equation.
What percentage of mortgage-backed securities are owned off-shore?
If you combine what Bachus and Frank are doing with what Bernanke is doing, you could come to the conclusion that the lifeboats are being cleaned up and conditioned, the life vests are being re sewn, and everything made shipshape before the USS Titanic heads for the bottom.
Bulls! Calling all bulls! I want to hear you paw the ground. It's all I've got left.
Jobs:
Citigroup job cuts: The New York Times reported the world's top bank will cut or reassign 26,000
SRP (Service Release Premium, don't asked me how they came up with that stupid name.) which the direct retail lenders (wamu, Wells, CFC, etc) have hidden away from any paperworks. It is essentially the agreement between wall street and the "release" rate to the public.
Yal, this is the glistening trail of an idiot. You should stay away from these message boards if you don't have a big box of salt handy.
It is not possible to be a mortgage professional of any sort and not know what SRP is. Or why it is called SRP. I am pretty sure our CR UberNerds could puzzle it out on their own, just because they know that mortgage loan servicing rights have value, and so that when one sells a loan with the servicing released, one is paid a premium over the price for the note. As opposed to selling a loan with the servicing retained, in which case one does not get consideration for the servicing rights, because one keeps them on one's own books, where they are called MSR.
It might be fun for some folks to try to blame Wall Street for that, but non-Street mortgage buyers have been paying SRP in order to acquire whole loans since the invention of the secondary market in mortgages, which was long, long before Wall Street ever showed any interest in what was once a sleepy, low-risk, moderate-return little business with its fair share of literate participants.
Hi Tanta,
Thanks for your feedback this exactly why I attribute it to the "source"
Ohh you guys worry so much. The nice people at NAR, the Whitehouse and Departments of Commerce and Labor say everything is o.k. Its just an adjustment.....its all o.k. Strong jobs report, we are the freest, greatest nation with the best economy ever.......These guys with the condo problems---an aberation.
Seriously--think of the distress that is not being picked up by current data reporting. Will inevitably see uptick in secondary effects---foreclousre, larger spreads for servicing rights, etc.......
"Japan and China kept their currencies low to finance their industrial development and now we're going to renege on our debt to keep our country afloat."
There's no need for us to renege on our debt -- especially in the case of goods from China, we buy at cents on the dollar to begin with. The misconception is widespread that if the dollar drops against the yuan (or yen) the Chinese (or Japanese) will lose money. That is not the case -- they lost the money the instant that they accepted (actually, demanded) payment for their exports in dollars that could not be exchanged for goods and services of equal worth. What they accomplish by maintaining the bogus exchange rates is to avoid official recognition of the loss and to continue to subsidize their exporters (while impoverishing their citizens overall).
Another way to look at it is that they're perpetrating a vendor financing fraud on their people. Their incentive is not to stop the fraud, but rather to keep it going as long as possible.
Consider what would happen if the Chinese (Japanese) were to demand payment for their goods in yuan (yen), and their governments were to cease interfering in the foreign exchange markets. To buy their goods, American importers would have to pay in yuan (yen), and to get those yuan (yen) some Americans would have to make and export goods which Chinese (Japanese) consumers would want to buy. Export manufacturing in the US would have to expand in scale to match export manufacturing in Asia -- boom times. But goods prices here in the US would return to -- even rise above -- their levels back in the days before the Asians started shipping stuff to us at fantastic discounts.
jm's got it right... except for one thing. We have or are dismantling our capacity to produce things at all (other than real estate, financial instruments & maybe corn based ethanol)...
Meanwhile they have the modern factories and a skilled workforce. Hmmmm. Maybe they weren't so dumb.
So if they were ever to ask for goods in kind... what do we send them?
We could send them aircraft, cars, software, coal, fine furniture, stylish attire...
That they are acquiring a manufacturing base doesn't mean that we are losing the ability to manufacture, just that we won't do so while they're willing to work for, essentially, free.
"Meanwhile they have the modern factories and a skilled workforce. Hmmmm. Maybe they weren't so dumb."
But they don't pay their own people enough to buy the things they themselves make. That's why a third of their GDP is exports. If they raised wages enough that their own people could afford the stuff at current prices, their costs would be higher than those prices. And the things their own people need the most are different from what they're exporting. Those modern factories are the wrong kind of factories for their needs. By subsidizing export manufacturing through currency manipulation, they've grievously distorted their economy.
Of course, the members of the elite are getting filthy rich -- just as the elite of Detroit would if they could take the Midwest out of The Union and establish a Midwest dollar valued at 20 cents to the US dollar.
"So if they were ever to ask for goods in kind... what do we send them?"
Although the very fact that China has been able to industrialize to its current level in a very short time should give us every reason to believe that the US will be able to re-industrialize in an even shorter time when it finally needs to, that will probably come about due to China once again disintegrating politically and economically due to the accumulated stress of the hideous distortions created by the current rulers' policies. So they probably won't be in any shape to buy much from us.