I hadn't heard that FDIC was now insuring all checking accounts, regardless of balance!
Good news! Citibank is participating in the FDIC's Temporary Liquidity Guarantee Program. Through December 31, 2009, all of your non-interest and interest bearing checking deposit account balances are fully guaranteed by the FDIC for the entire amount in your account. *
And as a reminder, in October the FDIC increased the amount of insurance on eligible savings accounts -- such as savings, market rate, money market accounts, club and holiday accounts, and certificates of deposits -- from $100,000 to $250,000 through December 31, 2009.**
Those asterisks:
* Coverage under the Temporary Liquidity Guarantee Program is in addition to and separate from the coverage available under the FDIC's general deposit insurance rules.
** The deposit insurance coverage limits refer to the total of all deposits that an account holder (or account holders) has at each FDIC-insured bank.
Does this really surprise anyone? The problem always was that the principal part of the loan was too high, and no loan mod other than a cram-down can fix that. AFAIK, there have been no cram-downs yet in residential. Please correct me if I'm wrong about that.
Big surprise here...people are so far underwater. Personal anecdote...my wife told me over the weekend that a couple in our neighborhood are getting their ARM reset in Feb. They don't want to default and want to try a short sale but of course the bank won't talk to them until they are delinquent. I told my wife they should consider just stop making payments and wait for the bank to kick them out. It's the same old story...they couldn't find anything that they could afford with a regular mortgage, so when the realtor suggested the ARM, they jumped at it. Gambling that the market would go up...sad.
Keeping people in houses they cannot afford does nothing to address the problem of people in houses they cannot afford.
I am continually astounded by the twin assumptions that stabilizing asset prices (be they houses or stocks) is either a good thing or even a possible thing.
What's next? I paid $1.859 this morning at the same pump I paid $4.279 earlier this year. Why aren't we seeking to stabilize prices?
At least its a dampening equation. Theoretically eventually we'll reach zero for any given population entering the fun and exciting game of real estate.....
It is not gambling if it never goes down. These people weren't gambling. Houses prices always go up. That is what they do. I suppose you would call buying AAA rated MBS gambling, too. They are rated AAA, man.
Elvis writes:
I think if the modify it to renting the default rate wouldn't rise.
Elvis
I disagree. The precedent has already been set by the "foreclosure moratoriums". There really seems to be no negative consequence for failure to pay anymore. I think people will just continue to view the payment as "optional".
nades writes:
At least its a dampening equation. Theoretically eventually we'll reach zero for any given population entering the fun and exciting game of real estate.....
Casey Serin? No, there is no end to the theoretical re-leveraging available to the extant population as long as that population is born and bred to the task.
Just a reflection of reality here. The houses build were too many, too fancy, and too big. Very few could afford their houses at the (crazy) market price. But, even at "fair" prices they're too expensive and many still can't afford them. So they default.
There will be a new wave of knife catchers foreclosing in a couple of years too, unless the govt abolishes income tax and prints enough dollars to pay off all our debtors - which might happen too. Budget surplus, 2010! Starbucks coffee, 2010: $78.59.
I'm not surprised. A guy that works in our mail room is having problems and I've been trying to help him through it. He's getting hit left and right with info from everyone BUT his mortgage company. He thinks it's form his lender because they use their logo, but a quick search shows the company with the 888 number is a third party. (reporting that one to the FTC) I wonder how many of these "modifications" are done by third parties that are actually the same independent brokers that originated these loans.
His mortgage company told him he didn't qualify for a modification but they aren't including the 2nd in calculating his mortgage payment even though they hold both loans. He didn't think it counted toward his housing cost because when he was sold the home, the broker only used the base mortgage payment to show him why "buying is cheaper than renting."
He knows it's his fault, because we talk about the mistakes he made, but this is crazy. I know it's only one example, but we're not even a "bubble" state (TX). Glad my family is still renting.
Um...when they give the "re-default' rate, what is the time span we're talking about? "Re-defaulted" within a month, 6 months, a year?
And who's to say that the 50% remaining won't "re-default" in the future? I'm thinking with all the financial shenannigans, we can get that "re-default" rate up to 150%
I figure in about 3 years, the US goobermint will be "re-defaulting"
Why do we keep ignoring the time and tested ~ 30% of income metric for a mortgage w/ 20% down? Even that metric is questionable given the likelihood of continued falling real incomes against a backdrop of global wage arbitrage.
Japan's real estate prices have fallen ~ 90% since 1990. Who is to say that can't happen here.
The U.S. government is permanently entering the residential rental market. Mark my words.
Fed: You need to loan.
Citi: But you just said I need to recapitalize.
Fed: Yes, do both.
Citi: Are you crazy? We can't do both.
Fed: Sure, we guarantee it.
Citi: Guarantee what? That when we commit suicide you'll make sure the blood is mopped up?
There's a new lending environment as illustrated here in this post. Real Estate lending is both unprofitable and diminishes company solvency.
I miss Casey. Yes he's a criminal but I think it would be so much more criminal if he got prosecuted and Thain, Mack et. al. did'nt...
There is very little innocence amount any all of the participants. Of course the ones that stayed away get punished just the same. Not sure what the moral of all of this is...
I am reminded of governement workers in France. They have learned how to game the system so that they 1) get 35 hour work weeks and 2) get early and generous pensions and 3) work their holidays and sick days and vacation days into 3 month vacations during the summer.
So, now the US is gaming its own systems as much as Old Europe. Great. Mortgage modification do not work because owners are simply buying time until the final default - where they will buy their own home at 50 cents on the dollar.
Chill Bear - I wonder what would happen if you went to your landlord and just flatly declared that you were only paying rent every other month from now on? For all we know, he might take it. I expect a lot of landlords right now are getting nervous about keeping some kind - any kind - of cash flow going. All these foreclosures are eventually going to get thrown on the market for whatever the market will bear, and the professional landlords will snatch them up and turn them into cheap rentals. The competition will be cutthroat, especially for the "amateur" landlords, the ones with a day job who just got into it for a little passive income...Especially if he paid bubble price for the crib.
I am reminded of governement workers in France. They have learned how to game the system so that they 1) get 35 hour work weeks and 2) get early and generous pensions and 3) work their holidays and sick days and vacation days into 3 month vacations during the summer.
I thought that was the case for all French workers, to one degree or another. And they end up more productive too, in the long run.
My wife and I are in the same situation. We don't make enough money to afford a house, because our spending habits prevent have prevented us from acquiring a large downpayment. Once we saw that 100% financing was available, we found many homes we could suddenly afford. We finally chose one that needed a little fixing up (adding a pool, media room, gym, and enlarging the garage to park our Excursion), so we found a very friendly lender who helped us obtain 125% financing, giving us the means to pay for our additions.
But things are a mess for us now. What started out as easy to handle $1300/mnth payments has quickly run up to $4900/mnth payments. This is crazy, we feel taken advantage of.
I am reminded of governement workers in France. They have learned how to game the system so that they 1) get 35 hour work weeks and 2) get early and generous pensions and 3) work their holidays and sick days and vacation days into 3 month vacations during the summer.
Time is the only thing you can't buy more of. Americans have completely forgotten this fact.
Freddie Portfolio Expands at 44% Rate in October (Update2)
By Dawn Kopecki
Nov. 24 (Bloomberg) -- Freddie Macs portfolio of mortgage assets grew at an annualized rate of 44 percent in October after regulators directed the government-run company to ramp up purchases to ease constraints on the U.S. housing market.
The portfolio rose to $763.7 billion for the first full month that Freddie was under federal control, adding $26.8 billion in net new purchases of home loans and mortgage bonds, the McLean, Virginia-based company said in its monthly volume summary today. Freddie had cut its holdings by $61.4 billion in August and September as it struggled to remain independent, Jim Vogel, a debt analyst at FTN Financial wrote in a note today.
He owns my 4-plex and many, many others outright, and the rental market in the East Bay is fairly strong. My rent is right at or slightly below market price for similar units. He would polity ask me to move out immediately.
Of course, it's about 1/3 purchase equivalent, but the RE crunch hasn't really hit my neighborhood.
"Dante Alighieri writes:
It's contained, though, so we have that going for us. Contained to the planet, at least. So far."
Signor Aligheri, now I have a chance to tell you how much I admire your inspiration. Canto 33 of the Paradiso is my favorite. I don't think I want to know, however, where everyone is headed. Eventually up, one hopes.
Because you could kiss half of the coastal RE goodbye...
Cali and Boswash would be toast...
Again, where is income for real estate appreciation going to come from? Japan propped up banks with cash too, yet real estate prices kept falling.
You'll never here the fed, treasury or CONgress discuss falling real incomes. They have no solution. Monetary inflation will only make matters worse for the majority as we'll be less competitive globally.
We need a lower cost structure, not a higher one. That's the real conundrum. High asset prices don't allow us to be competitive globally, yet with falling asset prices our financial system implodes.
Obama, Jamie Gore-lick, and Geithner will save us. Yeah, right.
Go ahead and bail out Citigroup- no strings attached, and flip a big middle finger to the US auto industry.
I wonder it this means that the IRS will collect on Citi's bad debt? You know, all of the 10s of thousands of credit cards issued to illegal aliens with no SS#s. Maybe they can bill the Mexican government for the billions in defaulted debt. No wonder BHO wants Jamie Gore-lick, the one who pushed sub-prime lending- she's an expert on it.
"And they are hearing from the Realtors they talk to that the re-default rate on a lot of these loan modifications are running at 50% - that is half those of modifications aren't working."
Shouldn't the statement be:
"50% - that is half those modifications have demonstrably failed."
The irony is as Geithner takes a bow, he crafts yet anbother boondoggle for the taxpayer. And Obama gets in front of the mike looking wobbly and claims there can be no wall street vs. main street. Of course no one in the press asks the obvious question: PO/O could you comment on how your adminsitration intends to ensure that taxpayers are adequately compensated for the risks they are assuming in these never ending bailouts? Would you commit to ensuring all the executives are fired and shareholders are given market terms?
If you don't have the money, you can't pay the bill. Doesn't matter what you spent it on, we each see different needs. And yes some are better at budgeting than others, but maybe not as good in other things besides budgeting which are equally as important.
Point being, uncle sam needs to give these people who were refinanced a payment that they REALLY CAN afford, and not just what the banks want. They already got theirs, now it time for ours.
I think they are hoping for more of a "slow deleveraging". IE prices dont increase for 10 years. Its way better than suddenly dropping everyone's house value by 10%+ all at once. That would be chaos.
I'm not denying your theory that this could be Japanese-like. I just hope it doesn't.
Other crazy ideas that should be implemented but wont be is losing the mortgage interest deduction.
It does nothing but allow people to lever up more....
But the citizens must do something. How can we just sit and wait while the financial monopolists smother the economy to death in order to protect their wealth and privileges? The least they could do is declare a moratorium on debt payment until the economy is functioning again or cancel the most egregious types of debt-abuse, such as credit card or student debt.
But they are not likely to do this either. So citizens can be forgiven if they simply stop paying. Many home purchasers are already doing thisturning in the keys to their homes and driving away. Who can blame them?
But the worst of the debt may be credit card debt, where the controls on interest rates and penalty charges were lifted long ago and the government stopped providing a tax deduction for interest paid. In many cases, interest on credit cards is 28 percent or more, which means that even by making the minimum required payment, consumers see their balances grow each month. That the politicians could continue to allow such evil to exist is astounding but proves who their masters are.
So until real relief is forthcoming, citizens who are in distress should simply destroy their credit cards and stop paying the monthly bills. People are already doing this. Arrearages and defaults are climbing, and credit card debt is starting to be viewed as the next bubble to burst. But so what? If people have to use a credit card, that means they cant really afford to buy whatever it is they think they want. If they can afford it, they should use a debit card instead.
Then tell the credit card company you cannot pay. Ask them to write off some or all of the debt, and if they want to take you to court, go on your own and defend yourself. You dont need a lawyer, and you dont need anyones permission. You also dont need to go through the horrendous reformed bankruptcy system the credit card companies got Congress to pass in 2005. Failure to pay credit card debt is not, thank God, a crime in this country, and there are no debtors prisonsyet.
Besides, if people do not pay credit card debt, that money remains in circulation. So default is actually a form of patriotism in todays trying circumstances. And the credit card companies really dont lose anything, since the money didnt exist before they lent it to people who are now broke.
But the citizens must do something. How can we just sit and wait while the financial monopolists smother the economy to death in order to protect their wealth and privileges? The least they could do is declare a moratorium on debt payment until the economy is functioning again or cancel the most egregious types of debt-abuse, such as credit card or student debt.
But they are not likely to do this either. So citizens can be forgiven if they simply stop paying. Many home purchasers are already doing thisturning in the keys to their homes and driving away. Who can blame them?
But the worst of the debt may be credit card debt, where the controls on interest rates and penalty charges were lifted long ago and the government stopped providing a tax deduction for interest paid. In many cases, interest on credit cards is 28 percent or more, which means that even by making the minimum required payment, consumers see their balances grow each month. That the politicians could continue to allow such evil to exist is astounding but proves who their masters are.
So until real relief is forthcoming, citizens who are in distress should simply destroy their credit cards and stop paying the monthly bills. People are already doing this. Arrearages and defaults are climbing, and credit card debt is starting to be viewed as the next bubble to burst. But so what? If people have to use a credit card, that means they cant really afford to buy whatever it is they think they want. If they can afford it, they should use a debit card instead.
Then tell the credit card company you cannot pay. Ask them to write off some or all of the debt, and if they want to take you to court, go on your own and defend yourself. You dont need a lawyer, and you dont need anyones permission. You also dont need to go through the horrendous reformed bankruptcy system the credit card companies got Congress to pass in 2005. Failure to pay credit card debt is not, thank God, a crime in this country, and there are no debtors prisonsyet.
Besides, if people do not pay credit card debt, that money remains in circulation. So default is actually a form of patriotism in todays trying circumstances. And the credit card companies really dont lose anything, since the money didnt exist before they lent it to people who are now broke.
Commissar Rob Dawg @ 12:28 pm
That's right, they're all idjots. I own some antique furniture I inherited from my grandparents. Why can't the gov stabilize THAT market for me?
Elvis @ 12:33 pm
You got that right and I'm getting pissed. I sold my town house last year and moved to a rented apartment. Who's gonna come to my aid if the rent goes up? Couldn't we stabilize rents at their present level? Would help a lot of voters.
Angry Saver @ 12:38 pm
Damn straight. When I bought my first house in 1968, I put 20% down, stretched price to 3.1 x my income, and got 30 years at 5.25% (which our parents thought was scandalously high). About two years ago I mentioned these numbers on this blog and asked why those ideas no longer held. I was lambasted as a dinosaur who couldn't understand the benefits of modern finance.
I wondered then and I wondered now: are those who bought second homes, flipper homes, mini-mansions, etc. REALLY better off under the "modern finance"? Are their lenders?
And so it goes.
I just received an update letter from CITI. They're raising CC rates to 19.99% or prime + 13.99, whichever is greater. (so 19.99 sticks right now).
This is daylight robbery rates.
And I have sparkling credit. I pay off in full monthly and never "use" credit.
I shudder to imagine the family who had to NOT pay in full. 19.99 will destroy my family's finances if we had anything significant in balance.
This is the company the Fed bailed out.
Where do I sign up to be a slave? That seems to be a certainty now, might as well be one of the first to do it while there's still some early signer's benefit.
hc: debtors prisons are the logical end game. We already have one class of debtors in proson now ("deadbeat dads"). Won't be too much of a stretch to imprison more.
In a deflationary environment with ZIRP, the only option left is to throw large amounts of money at it. No matter how one looks at it, this does not end well for all parties. Agree with angry, no free lunch.
What a shock- people who defaulted before are likely to default again. Someone should write this up in a paper- will be sure to win the Nobel Prize at some point.
Really, what is next? To lower the redefault rate, will we thrown in extra cash for the first year's worth of mortgage payments?
The 45% of sales weren't necessarily all "Forclosures", but rather "Distressed Sales". That makes more sense. Still disturbingly high, but also still a really rough estimate.
Pavel C., I'd be curious about the details. Japan has had DEFLATION, therefore the pensioners might be better off. Japan also has government financed health care, so their older people aren't paralyzed by trying to assess 16 different prescription plans. Public transportation is easy, homes are small and mostly paid for. Just the peace of mind would be an intangible, but real benefit, compared to older Americans worried about having to go without medicine.
I'd think there might be a better case for young people being worse off, but I'm not sure.
We are going to repeat the Japanese scenario with residential real estate, guaranteed. ZIRP plus quantitative easing plus massive oversupply of housing plus stagnant wages means population growth and wage increases are the only sources of real absorption of excess supply. That will take a really long time.
[The problem always was that the principal part of the loan was too high, ]
Rate adjustments make substantially more of an impact than a principal reduction at the "problem" rate.
[He thinks it's form his lender because they use their logo, but a quick search shows the company with the 888 number is a third party. (reporting that one to the FTC)]
Lenders have been doing "endorsed" third-party mailings for a few years now. This is not new.
Word on the street from Ladera Ranch, California, a lovely subdivision entirely carved from the hills east the 5 freeway in south OC over the past 10 years.
Coventry Hills - 5600 sf house that originally sold for $1.6M, later sold at peak for $3.2M, at about $640 per square foot.
Now listed at.... $999,000 - something like $178 per square foot.
"Such a deal" I heard.
My comment - it's like the anchor breaking the ice... and don't buy yet because there are lots of links in that chain to follow it down.
In a deflationary environment with ZIRP, the only option left is to throw large amounts of money at it. No matter how one looks at it, this does not end well for all parties. Agree with angry, no free lunch.
If economic problems could be solved by more borrowing and spending and throwing money around, there would be no failed economies. Every nation in history would be an economic miracle.
The idea that we can simply spend our way to prosperity is at odds with the entire history of modern civilization.
Standard of living in Japan vs US, even after throwing out credit fueled consumption is not even close. Cramped apartments, expensive food and extensive pollution make life in Japanese cities unappealing if you're from somewhere else. Most Japanese rent or have some kind of mortgage. There are thousands of sites where low-end seven-story concrete walk ups sit in rows. Peeling paint, massive spiderwebs and layers of dust. If you think being stuck in traffic on a freeway is bad, try being on a commuter train where the RR has employees whose job is to stuff as many people into a railcar as they can. You couldn't fall over if you were drunk and sound asleep, because you are like sardines in a can.
C is having trouble keeping momentum. It seems like shareholders are starting to realise this is the first bailout of many and their stakes will be worth zero 'fore long.
Thank you Zombie - those are the details I was interested in. Do you know whether those conditions are the case outside of Tokyo as well? If every a country needed a falling population, it is Japan!
WHY do people persist in congregating in large urban areas? Why don't companies build headquarters, or at least put the majority of their workers and staff, out in the sticks, really? The crowding in a Mexico City or even New York City is ridiculous.
try being on a commuter train where the RR has employees whose job is to stuff as many people into a railcar as they can. You couldn't fall over if you were drunk and sound asleep, because you are like sardines in a can.
It's so stuffed, men are raping women, and nobody even notices. When packed in like a sardine, you have a tendency to tune out and shut down what's going on around you.
The excess housing inventory published at over 10 months supply will continue to force price's down. The shadow inventory keeps building the number of folks with 2nd and 3rd homes bought as investments will dribble onto the market along with recast option ARM, 50% forclousure mod defults plus the normal I need to move due to divorce,death and job change or job loss.
Grim!
There is a synergy when you get large groups of like-minded people together. Part of why San Francisco and Silicon Valley are so successful is having Berkeley on one end and Stanford on the other. This is not the same as having, say, Tennessee Tech, in Cookeville.
hc writes:
I just received an update letter from CITI. They're raising CC rates to 19.99% or prime + 13.99, whichever is greater. (so 19.99 sticks right now).
This is daylight robbery rates.
And I have sparkling credit. I pay off in full monthly and never "use" credit.
My Citi MC is still at 7.99% for purchases. Haven't received any rate increase letter yet.
Brookstone is offering gift card holders from other retailers 15% Off if they surrender their gift cards. So, if you currently have a gift card from another retailer, with a value as low as $5 or $10, you can trade it in for a one-time, 15 percent Brookstone store discount toward a purchase of an item from Brookstone, regardless of the price of the item. Offer begins on November 24th. Certain restrictions apply. Click here for details.
Most major Japanese cities resemble Tokyo in terms of transit systems and real estate conditions. In Japan, people moved to the cities because that is where the economic opportunities have been. Farmland is scarce in Japan relative to the population. Rural towns in Japan may be quieter, but they lean toward a very aged demographic. Japanese save a lot because in part they expect to have to pay their own way after retirement.
From the article I linked: "Home prices were pushed down by a large number of foreclosures and distress sales, which distorts the comparison to last year's October median price", said NAR spokesman Walter Molony.
No. It. Doesn't. This probably the one disagreement I have with Tanta. There is no such thing as a "distressed sale market" which is independent from the "rest of the market" for homes. There is just one market, with varying levels of distressed sellers over time.
also: "About 45% of all sales in October were distressed sales," Molony said.
CNBC reporting that 45% as "foreclosures" really is misleading. The 45% in fact includes arrangements such as short sales, which by definition are being done in order to avoid a foreclosure.
Re-Defaults are based on the same fraud that went into round one, thus round two and three restructuring just wastes cash and adds to deflation ... piss off!
Angry Saver wrote:
"You'll never here the fed, treasury or CONgress discuss falling real incomes. They have no solution. Monetary inflation will only make matters worse for the majority as we'll be less competitive globally."
I agree 100 percent. All those that say inflate our way out of the debt do not grasp the fact that that will bankrupt the middle class; and therefore will not be a solution for politicians.
The only way to inflate away the debt is by inflating wages as well and the ability to increase wages isn't what it once was with a global work force. Just look at the last five years: tremendous monetary inflation, but virtually no wage inflation.
So, the market is set by distressed sales. This was known. If prices somehow rise, there will probably be a flood of sellers to bring them back down, so a sustained rise is unlikely. About half of loan mods quickly redefault, so this appears to be no solution, though it's the FDIC's main initiative. The market is not being allowed to find a rational level, though it will eventually reach one with maximum pain.
Nov. 24 (Bloomberg) -- The U.S. government is prepared to lend more than $7.4 trillion on behalf of American taxpayers, or half the value of everything produced in the nation last year.
The worst financial crisis in two generations has erased $23 trillion, or 38 percent, of the value of the worlds companies.
U.S. financial firms have taken writedowns and losses of $666.1 billion since the beginning of 2007, according to Bloomberg data.
(Looks like the devil is taking his due, but still seems as if there is hell to pay
Maybe....depends on how horny they are, but it is definately a recipe for civil unrest and ultimately war.
No matter how horny those men are I highly doubt that it'll cause overpopulation if there aren't women! sure, there can be lots of "action" but I doubt it will result in procreation!
and civil unrest/war would also decrease population.
long ago China put in policies to reduce (or slow) population growth, and they are clearly seeing the fruits of their labor.
No. It. Doesn't. This probably the one disagreement I have with Tanta. There is no such thing as a "distressed sale market" which is independent from the "rest of the market" for homes. There is just one market, with varying levels of distressed sellers over time.
very true..also much crying about how the medium price now distorts the true RE value picture but it only indictates where the sales are really coming from and they are mostly investor driven in the lower bracket.
During the dot.com bubble RE medium price in the Bay Area skyrocketed since all the fresh money was out buying expensive neighborhoods. It tells us were the sales velocity is and is not, that's all.
Unless the loan mods guarantee people jobs and income with which to pay these loans..then..well..I think we see the problem.
And lenders can never have any accurate idea of what their assets are worth as long as this game continues. And investors can only invest based on the guess of future government action.
Owners of Treasuries may soon get paid to borrow as the U.S. tries to break a logjam in the $7 trillion-a-day repurchase market.
Treasuries are in such high demand that investors are lending cash for next to nothing to obtain the securities as collateral through so-called repos, which dealers use to finance their holdings. The problem is many parties involved in repos arent delivering the bonds because there is no penalty for not doing so, causing fails to exceed $5 trillion, according to the Federal Reserve Bank of New York.
Do we actually have solid evidence that the foreclosure sales are "mostly investor driven"? Or is that just speculation?
From my local experience, I have seen that the bulk of sales are on the low end, including a high percentage of foreclosures, not so much due to investors "snapping up deals", as much as it is first-time homebuyers, because they can't afford anything higher, especially with things like down-payments coming back into vogue.
long ago China put in policies to reduce (or slow) population growth, and they are clearly seeing the fruits of their labor.
Of course they did, and that's why they now have a gender imbalance, however, it will take a substantial amount of time to significantly reduce their ridiculous population numbers. If you can only have one child, males are preferred....females are aborted or given up for adoption.
I'm not sure, but I though I heard that China is relaxing the one child rule. If so, each family could theoretically have more children, thus maintaining population levels even with a gender imbalance. Also, considering the economic downturn, poverty thends to increase the birthrate, so if the children can manage to stay alive to adulthood, once again, population maintains. As for war, they can spare tens of millions and still not be significantly impacted.
Also, it was tongue in cheek that they are responsible for our rampant consumerism.
The devil is in the details (no pun intended, dark one) of just which 'distressed sales' we are looking at. For short sales there are probably plenty of first-time homebuyers buying.
But for actual foreclosure auction sales and REO properties, buyers really have to know what they're doing, which takes more than watching Carlton Sheets' latest foreclosure investing how-to DVD.
They've gotta define "modification" when throwing out a statistic like that. Did the failed modifications reduce the payment? Or did they only put the arrears back into the mortgage? Did they fix an adjustable rate from rising for the long term? How many reduced principle? Credit Suisse came out a few months ago and said that 75% of their mods were current 6 months after the mod started. More details all around regarding the "mystery" of what one considers a modification would be nice.
DK @11.24.08 - 12:52 pm wrote:
You know, all of the 10s of thousands of credit cards issued to illegal aliens with no SS#s. Maybe they can bill the Mexican government for the billions in defaulted debt.
DK, president Hussein's Commissar of PC may pay you a visit. One must not say illegal aliens but "documentarily challenged" or visally challenged and that applies to Visa as well as visas.
Do we actually have solid evidence that the foreclosure sales are "mostly investor driven"? Or is that just speculation?
Good point: in my area Northern Calif the bulk have been investor driven which is based on RE agents info and my own experience in looking at REO property. I hav't met a 1st time homebuyer yet when looking at REO's but encounter investors that have purchased several doing rehab and renting them out. When I did bid on a REO many were purchased as all cash offers by RE investor groups, many of these were local folks who formed a corp to do the buying and rehab, also find many RE agents that cherry pick these REO's do the rehab and live in them for awhile and will try and sell them down the road, very common. I read from time to time about families buying REO's in the local paper but it seems to be the exception not the rule.
Also my RE has given me access to MLS info that shows what price the property sold for and some of the transaction details so I do get a drift from that info what is happening, esp. on all cash buys.
In the future somebody will write a book called "The Worst Generation". A tribute to apathy, greed, and those who abandoned their country for personal gains.
But for actual foreclosure auction sales and REO properties, buyers really have to know what they're doing, which takes more than watching Carlton Sheets' latest foreclosure investing how-to DVD.
That's for sure..the lastest fad is looking at the properties that don't sell at auction since the banks are finally getting the hint that they are way overpriced and have big problems. The other thing is that these investment pools are doing a quick rehab and trying to resell these as rent to own or lease to own and putting up a bigger price tag, don't know how that business will work out longterm as the economy slides into a deeper recession. Don't know how long this investor rental market can go so somewhere down the line the REO market may actually have to be a 1st time buyer market with somekind of gov't assit in rehab and financing which is available via FHA but the REO's are currently over priced when you consider the cost of the rehab in relation to the neighborhood value which is still declining.
Ok thanks -- I was curious because I can see something like bulk investor purchases in a place like california, where there are very sharp foreclosure discounts and lots of empty homes, but I know that where I am at, in MA, the vast majority of homes available below the median ( < $400K) are foreclosures and short sales, which tend to be discounted only around 10 -20%. All of the first-time homebuyers I know are looking for foreclosures, not so much because they are a bargain, but because they simply can't afford anything higher.
Right now it is cause for an interesting disconnect in the market: foreclosures and short sales are getting sold, mostly less than $300K, which I still think is high, but with a median household income in my county of about 90K, it's down to overpriced, as opposed to ridiculously overpriced. Meanwhile new home construction and sellers who are not distressed are all looking for over $400K, and few are biting. This leads to lots of discounts from the $300s into $200s, and even $200s into $100s, as that is what will get houses sold, while anything over $400 is pretty much staying put. I think the obvious -- and inevitable -- solution to the disconnect here is the same percentage discount begins to be applied to > $400K homes, as the sellers start to become desperate, which will bring down the overpriced $300s and $200s now, as nicer homes come into the same price range.
Naturally a large percentage of modifications may not work -- the economy is still in the toilet, and until layoffs stop happening, and people feel the basics of consumer confidence, home values will continue downwards, and people affiliated with the housing industry will not have stable incomes.
That's a good idea..people who rent out houses should go to their landlord and ask for a rent modification. Or skip a month or two of rent. Your landlord's not going to evict you if the process takes so long he loses the home.
Every cramdown loan mod is a write-down. Any mod that re-defaults is a second write-down, one that wouldn't have happened had a foreclosure been taken instead. At a sufficiently high default rate (probably >25%), loan mods could end up costing banks more than straightforward foreclosure.
18 months of free rent is not a real solution. Imagine if you could stick it to your landlord for that long.
In fact, if your landlord is in default, you probably can.
Bottoming process.
Nemo!
Seems a little high.
GEITHNER WILL SAVE US!
Do the lenders generally book the losses on modifications when they are made, or do the assets live on in their books as unimpaired.
I wonder if Summers tried to veto appointing the chick as CEA chair.
OT:
I hadn't heard that FDIC was now insuring all checking accounts, regardless of balance!
Good news! Citibank is participating in the FDIC's Temporary Liquidity Guarantee Program. Through December 31, 2009, all of your non-interest and interest bearing checking deposit account balances are fully guaranteed by the FDIC for the entire amount in your account. *
And as a reminder, in October the FDIC increased the amount of insurance on eligible savings accounts -- such as savings, market rate, money market accounts, club and holiday accounts, and certificates of deposits -- from $100,000 to $250,000 through December 31, 2009.**
Those asterisks:
* Coverage under the Temporary Liquidity Guarantee Program is in addition to and separate from the coverage available under the FDIC's general deposit insurance rules.
** The deposit insurance coverage limits refer to the total of all deposits that an account holder (or account holders) has at each FDIC-insured bank.
great a bunch of Kenyesians to piss away more money. At what point does the dollar just die
Mr. Market hated that "bottom up" economic line by President Elect Obama. Oh noez, the plebes can haz nothing!
Re-default rate. Classic.
At least Citigroup won't have to worry about those anymore.
I'm so pissed.
I have this image of Summers giving Romer a pat on the butt and saying, "Nice work, toots"
Reminds me of the quote "Obey gravity, it's the law". Unless they fix the underlying issue people will continue to default.
"Re-Default Rate 50% of Modifications"
Does this really surprise anyone? The problem always was that the principal part of the loan was too high, and no loan mod other than a cram-down can fix that. AFAIK, there have been no cram-downs yet in residential. Please correct me if I'm wrong about that.
The ASF recently put the figure at 44% for what it's worth.
Shittygroup has to be kind of smiling about that now that someone else is on the hook.
Shouldn't the pirate talk be starting up about now?
Or strip bar?
Big surprise here...people are so far underwater. Personal anecdote...my wife told me over the weekend that a couple in our neighborhood are getting their ARM reset in Feb. They don't want to default and want to try a short sale but of course the bank won't talk to them until they are delinquent. I told my wife they should consider just stop making payments and wait for the bank to kick them out. It's the same old story...they couldn't find anything that they could afford with a regular mortgage, so when the realtor suggested the ARM, they jumped at it. Gambling that the market would go up...sad.
I think if the modify it to renting the default rate wouldn't rise.
Keeping people in houses they cannot afford does nothing to address the problem of people in houses they cannot afford.
I am continually astounded by the twin assumptions that stabilizing asset prices (be they houses or stocks) is either a good thing or even a possible thing.
What's next? I paid $1.859 this morning at the same pump I paid $4.279 earlier this year. Why aren't we seeking to stabilize prices?
Idjits, all of them idjits.
At least its a dampening equation. Theoretically eventually we'll reach zero for any given population entering the fun and exciting game of real estate.....
Citigroup was run so bad that even a multi-billion dollar government bailout won't be enough to save it.
Market to C: +57.29%
Yea!
Exit --
Shouldn't the pirate talk be starting up about now?
"Z I arrrrr P", something like that?
"Gambling that the market would go up...sad."
It is not gambling if it never goes down. These people weren't gambling. Houses prices always go up. That is what they do. I suppose you would call buying AAA rated MBS gambling, too. They are rated AAA, man.
Elvis writes:
I think if the modify it to renting the default rate wouldn't rise.
Elvis
I disagree. The precedent has already been set by the "foreclosure moratoriums". There really seems to be no negative consequence for failure to pay anymore. I think people will just continue to view the payment as "optional".
Wish my rent were optional.
nades writes:
At least its a dampening equation. Theoretically eventually we'll reach zero for any given population entering the fun and exciting game of real estate.....
Casey Serin? No, there is no end to the theoretical re-leveraging available to the extant population as long as that population is born and bred to the task.
So, looking to fix at my dreadful household finances, and following Obama's wise economic team plan, I should provide STIMULUS to my budget.
A jolt...that's the ticket! I should borrow from all my Chaaaaaaarge cards to jolt my bottom line.
It's all so easy, realy. Why didn't I think about such an obvious solution? I AM truly a
"I disagree."
I didn't really say anything to disagree with.
I have the same problem with my ARM, in order to get help I have to go delinquent. Of course delinquent won't be a choice soon anyway...
If you don't have a mortgage anymore, and only rent, how can you default on your mortgage?
Hoocoodanode?
Does every downtick feel like it's the start of a major roller coaster ride?
Comrade Kristina --
I have the same problem with my ARM
You mean "ARRRRRRRRM".
Just a reflection of reality here. The houses build were too many, too fancy, and too big. Very few could afford their houses at the (crazy) market price. But, even at "fair" prices they're too expensive and many still can't afford them. So they default.
Overshoot is inevitable.
There will be a new wave of knife catchers foreclosing in a couple of years too, unless the govt abolishes income tax and prints enough dollars to pay off all our debtors - which might happen too. Budget surplus, 2010! Starbucks coffee, 2010: $78.59.
I'm not surprised. A guy that works in our mail room is having problems and I've been trying to help him through it. He's getting hit left and right with info from everyone BUT his mortgage company. He thinks it's form his lender because they use their logo, but a quick search shows the company with the 888 number is a third party. (reporting that one to the FTC) I wonder how many of these "modifications" are done by third parties that are actually the same independent brokers that originated these loans.
His mortgage company told him he didn't qualify for a modification but they aren't including the 2nd in calculating his mortgage payment even though they hold both loans. He didn't think it counted toward his housing cost because when he was sold the home, the broker only used the base mortgage payment to show him why "buying is cheaper than renting."
He knows it's his fault, because we talk about the mistakes he made, but this is crazy. I know it's only one example, but we're not even a "bubble" state (TX). Glad my family is still renting.
Um...when they give the "re-default' rate, what is the time span we're talking about? "Re-defaulted" within a month, 6 months, a year?
And who's to say that the 50% remaining won't "re-default" in the future? I'm thinking with all the financial shenannigans, we can get that "re-default" rate up to 150%
I figure in about 3 years, the US goobermint will be "re-defaulting"
(From MarketWatch):
12:27 p.m. Obama names team to begin work on economy immediately
Seriously, how hard is it to be an economic advisor?
Here are the steps to fix the economy:
1) Spend lots of taxpayer and borrowed dollars.
2) Bend over to the banks.
The end.
Elvis writes:
"I disagree."
I didn't really say anything to disagree with.
Elvis
Sorry, I thought you were saying that if their loans were modified to market rent values, that defaults would decline. I guess I misunderstood.
Why do we keep ignoring the time and tested ~ 30% of income metric for a mortgage w/ 20% down? Even that metric is questionable given the likelihood of continued falling real incomes against a backdrop of global wage arbitrage.
Japan's real estate prices have fallen ~ 90% since 1990. Who is to say that can't happen here.
The U.S. government is permanently entering the residential rental market. Mark my words.
Elvis writes:
"I disagree."
I didn't really say anything to disagree with.
Elvis | 11.24.08 - 12:32 pm | #
Not true.
Fed: You need to loan.
Citi: But you just said I need to recapitalize.
Fed: Yes, do both.
Citi: Are you crazy? We can't do both.
Fed: Sure, we guarantee it.
Citi: Guarantee what? That when we commit suicide you'll make sure the blood is mopped up?
There's a new lending environment as illustrated here in this post. Real Estate lending is both unprofitable and diminishes company solvency.
I wonder what the re-default rate is at the black jack table in Vegas?
Dawg,
I miss Casey. Yes he's a criminal but I think it would be so much more criminal if he got prosecuted and Thain, Mack et. al. did'nt...
There is very little innocence amount any all of the participants. Of course the ones that stayed away get punished just the same. Not sure what the moral of all of this is...
Where are the mortgage wonks? Is Shnaps the only one left? Just cause Tanta's on hiatus doesn't mean we don't want to hear from you.
It's contained, though, so we have that going for us. Contained to the planet, at least. So far.
I am reminded of governement workers in France. They have learned how to game the system so that they 1) get 35 hour work weeks and 2) get early and generous pensions and 3) work their holidays and sick days and vacation days into 3 month vacations during the summer.
So, now the US is gaming its own systems as much as Old Europe. Great. Mortgage modification do not work because owners are simply buying time until the final default - where they will buy their own home at 50 cents on the dollar.
Angry Saver writes:
Why do we keep ignoring the time and tested ~ 30% of income metric for a mortgage w/ 20% down?
Because you could kiss half of the coastal RE goodbye...
Cali and Boswash would be toast...
"Starbucks coffee, 2010: $78.59."
Tastes like burnt peanut shells. The best coffee around here - DC area - is served by expatriate Ethiopians.
In fact, maybe immigrants, those who have skills and drive - are some kind of solution.
Chill Bear - I wonder what would happen if you went to your landlord and just flatly declared that you were only paying rent every other month from now on? For all we know, he might take it. I expect a lot of landlords right now are getting nervous about keeping some kind - any kind - of cash flow going. All these foreclosures are eventually going to get thrown on the market for whatever the market will bear, and the professional landlords will snatch them up and turn them into cheap rentals. The competition will be cutthroat, especially for the "amateur" landlords, the ones with a day job who just got into it for a little passive income...Especially if he paid bubble price for the crib.
Does that mean their credit score gets trashed twice? It oughta.
I am reminded of governement workers in France. They have learned how to game the system so that they 1) get 35 hour work weeks and 2) get early and generous pensions and 3) work their holidays and sick days and vacation days into 3 month vacations during the summer.
I thought that was the case for all French workers, to one degree or another. And they end up more productive too, in the long run.
OT:
Taser Jumps on Record U.K. Order for 10,000 Stun Guns (Update1)
By Matt Jarzemsky
Nov. 24 (Bloomberg) -- Taser International Inc., the worlds biggest stun-gun maker, jumped as much as 32 percent in U.S. trading on the announcement of U.K. funding for a record purchase of 10,000 weapons.
Taser Jumps Most in 7 Years on U.K. Stun Gun Decision (Update2) - Bloomberg.com
My wife and I are in the same situation. We don't make enough money to afford a house, because our spending habits prevent have prevented us from acquiring a large downpayment. Once we saw that 100% financing was available, we found many homes we could suddenly afford. We finally chose one that needed a little fixing up (adding a pool, media room, gym, and enlarging the garage to park our Excursion), so we found a very friendly lender who helped us obtain 125% financing, giving us the means to pay for our additions.
But things are a mess for us now. What started out as easy to handle $1300/mnth payments has quickly run up to $4900/mnth payments. This is crazy, we feel taken advantage of.
I am reminded of governement workers in France. They have learned how to game the system so that they 1) get 35 hour work weeks and 2) get early and generous pensions and 3) work their holidays and sick days and vacation days into 3 month vacations during the summer.
Time is the only thing you can't buy more of. Americans have completely forgotten this fact.
"Catch up move?!"
Freddie Portfolio Expands at 44% Rate in October (Update2)
By Dawn Kopecki
Nov. 24 (Bloomberg) -- Freddie Macs portfolio of mortgage assets grew at an annualized rate of 44 percent in October after regulators directed the government-run company to ramp up purchases to ease constraints on the U.S. housing market.
The portfolio rose to $763.7 billion for the first full month that Freddie was under federal control, adding $26.8 billion in net new purchases of home loans and mortgage bonds, the McLean, Virginia-based company said in its monthly volume summary today. Freddie had cut its holdings by $61.4 billion in August and September as it struggled to remain independent, Jim Vogel, a debt analyst at FTN Financial wrote in a note today.
Freddie accelerated around corners last month to rebuild its balance sheet in a major catch-up move, Vogel, who is based in Memphis, Tennessee, told clients in a research note.
Freddie’s Portfolio Expands by $42 Billion to Record (Update3) - Bloomberg.com
It wouldn't surprise that most of rural America over the age of 55 lives almost entirely on credit cards.
Trail:
He owns my 4-plex and many, many others outright, and the rental market in the East Bay is fairly strong. My rent is right at or slightly below market price for similar units. He would polity ask me to move out immediately.
Of course, it's about 1/3 purchase equivalent, but the RE crunch hasn't really hit my neighborhood.
It's really only monopoly we're throwing around.
Nice reginald .... I give that a 9.5+ on creative storytelling and a 10 for baiting!
"Dante Alighieri writes:
It's contained, though, so we have that going for us. Contained to the planet, at least. So far."
Signor Aligheri, now I have a chance to tell you how much I admire your inspiration. Canto 33 of the Paradiso is my favorite. I don't think I want to know, however, where everyone is headed. Eventually up, one hopes.
o need for such quantities of stun guns....the sheeple are stunned into placidity already
otoh, there's the kids, how will they react to no more $200 shiny things?
Blowout sale on GS puts right now. Huge discounts. Get them while they're hot!
Because you could kiss half of the coastal RE goodbye...
Cali and Boswash would be toast...
Again, where is income for real estate appreciation going to come from? Japan propped up banks with cash too, yet real estate prices kept falling.
You'll never here the fed, treasury or CONgress discuss falling real incomes. They have no solution. Monetary inflation will only make matters worse for the majority as we'll be less competitive globally.
We need a lower cost structure, not a higher one. That's the real conundrum. High asset prices don't allow us to be competitive globally, yet with falling asset prices our financial system implodes.
No free lunches.
Diana Olick's looks are dwindling along with the housing market. There was a time when I dreamt about doing nice things with her inside a house.
Shiela will save us, just you bet. Why with the FDIC forcing remods, hey, if the re-re-re-default occurs, there's always re-re-re-re-default.
Obama, Jamie Gore-lick, and Geithner will save us. Yeah, right.
Go ahead and bail out Citigroup- no strings attached, and flip a big middle finger to the US auto industry.
I wonder it this means that the IRS will collect on Citi's bad debt? You know, all of the 10s of thousands of credit cards issued to illegal aliens with no SS#s. Maybe they can bill the Mexican government for the billions in defaulted debt. No wonder BHO wants Jamie Gore-lick, the one who pushed sub-prime lending- she's an expert on it.
"Z I arrrrr P", something like that?
Nemo | Homepage | 11.24.08 - 12:29 pm | #
LOL
Zippity doo dahhhhhrrrr
"And they are hearing from the Realtors they talk to that the re-default rate on a lot of these loan modifications are running at 50% - that is half those of modifications aren't working."
Shouldn't the statement be:
"50% - that is half those modifications have demonstrably failed."
The irony is as Geithner takes a bow, he crafts yet anbother boondoggle for the taxpayer. And Obama gets in front of the mike looking wobbly and claims there can be no wall street vs. main street. Of course no one in the press asks the obvious question: PO/O could you comment on how your adminsitration intends to ensure that taxpayers are adequately compensated for the risks they are assuming in these never ending bailouts? Would you commit to ensuring all the executives are fired and shareholders are given market terms?
If you don't have the money, you can't pay the bill. Doesn't matter what you spent it on, we each see different needs. And yes some are better at budgeting than others, but maybe not as good in other things besides budgeting which are equally as important.
Point being, uncle sam needs to give these people who were refinanced a payment that they REALLY CAN afford, and not just what the banks want. They already got theirs, now it time for ours.
lama: Shouldn't the statement be:
"50% - that is half those modifications have demonstrably failed."
You are such a pessimist! I bet we see the headline: Half of all mods keep people in homes.
No free lunches.
Angry Saver
I think they are hoping for more of a "slow deleveraging". IE prices dont increase for 10 years. Its way better than suddenly dropping everyone's house value by 10%+ all at once. That would be chaos.
I'm not denying your theory that this could be Japanese-like. I just hope it doesn't.
Other crazy ideas that should be implemented but wont be is losing the mortgage interest deduction.
It does nothing but allow people to lever up more....
We're all hedge funds now!
Angry B:
Uncle Sam needs to let stupid and foolish people pay the price for their stupidity and foolishness.
Anything else, ultimately, is madness.
Does this mean America is up shit creek without a paddle?
Unlike beans, I doubt mortgages get better each time you re-fry them.
Hopeless: could be. We will know in hindsight.
Rewarding stupidity, ignorance and foolishness is not sustainable.
People do not appear to be suffering in Japan. Could it be argued that their economy has reached a sensible, sustainable equilibrium?
But the citizens must do something. How can we just sit and wait while the financial monopolists smother the economy to death in order to protect their wealth and privileges? The least they could do is declare a moratorium on debt payment until the economy is functioning again or cancel the most egregious types of debt-abuse, such as credit card or student debt.
But they are not likely to do this either. So citizens can be forgiven if they simply stop paying. Many home purchasers are already doing thisturning in the keys to their homes and driving away. Who can blame them?
But the worst of the debt may be credit card debt, where the controls on interest rates and penalty charges were lifted long ago and the government stopped providing a tax deduction for interest paid. In many cases, interest on credit cards is 28 percent or more, which means that even by making the minimum required payment, consumers see their balances grow each month. That the politicians could continue to allow such evil to exist is astounding but proves who their masters are.
So until real relief is forthcoming, citizens who are in distress should simply destroy their credit cards and stop paying the monthly bills. People are already doing this. Arrearages and defaults are climbing, and credit card debt is starting to be viewed as the next bubble to burst. But so what? If people have to use a credit card, that means they cant really afford to buy whatever it is they think they want. If they can afford it, they should use a debit card instead.
Then tell the credit card company you cannot pay. Ask them to write off some or all of the debt, and if they want to take you to court, go on your own and defend yourself. You dont need a lawyer, and you dont need anyones permission. You also dont need to go through the horrendous reformed bankruptcy system the credit card companies got Congress to pass in 2005. Failure to pay credit card debt is not, thank God, a crime in this country, and there are no debtors prisonsyet.
Besides, if people do not pay credit card debt, that money remains in circulation. So default is actually a form of patriotism in todays trying circumstances. And the credit card companies really dont lose anything, since the money didnt exist before they lent it to people who are now broke.
But the citizens must do something. How can we just sit and wait while the financial monopolists smother the economy to death in order to protect their wealth and privileges? The least they could do is declare a moratorium on debt payment until the economy is functioning again or cancel the most egregious types of debt-abuse, such as credit card or student debt.
But they are not likely to do this either. So citizens can be forgiven if they simply stop paying. Many home purchasers are already doing thisturning in the keys to their homes and driving away. Who can blame them?
But the worst of the debt may be credit card debt, where the controls on interest rates and penalty charges were lifted long ago and the government stopped providing a tax deduction for interest paid. In many cases, interest on credit cards is 28 percent or more, which means that even by making the minimum required payment, consumers see their balances grow each month. That the politicians could continue to allow such evil to exist is astounding but proves who their masters are.
So until real relief is forthcoming, citizens who are in distress should simply destroy their credit cards and stop paying the monthly bills. People are already doing this. Arrearages and defaults are climbing, and credit card debt is starting to be viewed as the next bubble to burst. But so what? If people have to use a credit card, that means they cant really afford to buy whatever it is they think they want. If they can afford it, they should use a debit card instead.
Then tell the credit card company you cannot pay. Ask them to write off some or all of the debt, and if they want to take you to court, go on your own and defend yourself. You dont need a lawyer, and you dont need anyones permission. You also dont need to go through the horrendous reformed bankruptcy system the credit card companies got Congress to pass in 2005. Failure to pay credit card debt is not, thank God, a crime in this country, and there are no debtors prisonsyet.
Besides, if people do not pay credit card debt, that money remains in circulation. So default is actually a form of patriotism in todays trying circumstances. And the credit card companies really dont lose anything, since the money didnt exist before they lent it to people who are now broke.
Commissar Rob Dawg @ 12:28 pm
That's right, they're all idjots. I own some antique furniture I inherited from my grandparents. Why can't the gov stabilize THAT market for me?
Elvis @ 12:33 pm
You got that right and I'm getting pissed. I sold my town house last year and moved to a rented apartment. Who's gonna come to my aid if the rent goes up? Couldn't we stabilize rents at their present level? Would help a lot of voters.
Angry Saver @ 12:38 pm
Damn straight. When I bought my first house in 1968, I put 20% down, stretched price to 3.1 x my income, and got 30 years at 5.25% (which our parents thought was scandalously high). About two years ago I mentioned these numbers on this blog and asked why those ideas no longer held. I was lambasted as a dinosaur who couldn't understand the benefits of modern finance.
I wondered then and I wondered now: are those who bought second homes, flipper homes, mini-mansions, etc. REALLY better off under the "modern finance"? Are their lenders?
And so it goes.
Sue:
We suffer under the delusion that we must have growth at any cost.
Madness.
Prudent people, such as myself, have recognized this madness for what it is and planned for the next few years, a few years ago.
I just received an update letter from CITI. They're raising CC rates to 19.99% or prime + 13.99, whichever is greater. (so 19.99 sticks right now).
This is daylight robbery rates.
And I have sparkling credit. I pay off in full monthly and never "use" credit.
I shudder to imagine the family who had to NOT pay in full. 19.99 will destroy my family's finances if we had anything significant in balance.
This is the company the Fed bailed out.
Where do I sign up to be a slave? That seems to be a certainty now, might as well be one of the first to do it while there's still some early signer's benefit.
lama: Shouldn't the statement be:
"50% - that is half those modifications have demonstrably failed so far"
hc: debtors prisons are the logical end game. We already have one class of debtors in proson now ("deadbeat dads"). Won't be too much of a stretch to imprison more.
Seems a little high.
Both figures strike me as very high - from the NAR of all sources, this makes no sense. I'd like to get the full report? Anyone have it?
I'm curious to know their data and/or methodology for the 50% redefualt figure on mods.
Eventually up, one hopes.
Pavel Chichikov |
Pavel,
It's all downhill from here (in this world at least).
"People do not appear to be suffering in Japan."
Don't think that's quite right. Pensioners, for starters.
Not that re-la-tors are very good at assembling or reporting data...
This is not news.
We've known this for quite some time.
Some of us, however, have average recidivism rates that are a fraction of the average.
But you don't get good recidivism rates when you don't have a substantial amount of counseling, intervention, and follow-up...
A stern "Come to Jesus" talk helps, as well.
"Streamlined" modifications will only increase the rate of repeats.
In a deflationary environment with ZIRP, the only option left is to throw large amounts of money at it. No matter how one looks at it, this does not end well for all parties. Agree with angry, no free lunch.
What a shock- people who defaulted before are likely to default again. Someone should write this up in a paper- will be sure to win the Nobel Prize at some point.
Really, what is next? To lower the redefault rate, will we thrown in extra cash for the first year's worth of mortgage payments?
"Pavel,
It's all downhill from here (in this world at least).
Dante Alighieri "
Maestro, we are all falling leaves. But hope is our profession, in more than one sense.
LOL Yancey and here I sit current in my payments and can't get a modification to cancel the ARM reset...go figure. I'm also not underwater...
a-ha.
The 45% of sales weren't necessarily all "Forclosures", but rather "Distressed Sales". That makes more sense. Still disturbingly high, but also still a really rough estimate.
Pavel C., I'd be curious about the details. Japan has had DEFLATION, therefore the pensioners might be better off. Japan also has government financed health care, so their older people aren't paralyzed by trying to assess 16 different prescription plans. Public transportation is easy, homes are small and mostly paid for. Just the peace of mind would be an intangible, but real benefit, compared to older Americans worried about having to go without medicine.
I'd think there might be a better case for young people being worse off, but I'm not sure.
We are going to repeat the Japanese scenario with residential real estate, guaranteed. ZIRP plus quantitative easing plus massive oversupply of housing plus stagnant wages means population growth and wage increases are the only sources of real absorption of excess supply. That will take a really long time.
This is getting boring.
We need CR to declare "talk like a Somali pirate day" on his blog.
Allahu Akbarrrrrrr!
C is approaching low of the day.
now they are saying it is 45% of all existing home sales
So a halt in foreclosures might mean a 45% drop in home sales?
Inflation/deflation both piss me off. I want my labor to retain a constant value, not get manipulated for some BS government feel good growth fantasy.
hoooocoodanode it
[The problem always was that the principal part of the loan was too high, ]
Rate adjustments make substantially more of an impact than a principal reduction at the "problem" rate.
[He thinks it's form his lender because they use their logo, but a quick search shows the company with the 888 number is a third party. (reporting that one to the FTC)]
Lenders have been doing "endorsed" third-party mailings for a few years now. This is not new.
The ASF recently put the figure at 44% for what it's worth.
Either way, deadbeat recidivism is going to be a major factor going forward.
Agree with angry, no free lunch.
TANSTAAFL!!!
Word on the street from Ladera Ranch, California, a lovely subdivision entirely carved from the hills east the 5 freeway in south OC over the past 10 years.
Coventry Hills - 5600 sf house that originally sold for $1.6M, later sold at peak for $3.2M, at about $640 per square foot.
Now listed at.... $999,000 - something like $178 per square foot.
"Such a deal" I heard.
My comment - it's like the anchor breaking the ice... and don't buy yet because there are lots of links in that chain to follow it down.
Have you heard the good news?
FREE LUNA
You've probably already read this in Bloomberg, but I thought Clusterstock summed it up quite well.
Our $7.4 Trillion Bailout
7.4 trillion baby
Casino Capitalism where the house (WS) always wins...
In a deflationary environment with ZIRP, the only option left is to throw large amounts of money at it. No matter how one looks at it, this does not end well for all parties. Agree with angry, no free lunch.
If economic problems could be solved by more borrowing and spending and throwing money around, there would be no failed economies. Every nation in history would be an economic miracle.
The idea that we can simply spend our way to prosperity is at odds with the entire history of modern civilization.
It is a childish and dangerous fantasy.
To poster above re: FHA loans..
FHA-Backed Loans: The New Subprime
FHA-Backed Loans: The New Subprime - BusinessWeek
amazing how we just let the fall of america happen on our watch...
Inflation/deflation both piss me off. I want my labor to retain a constant value, not get manipulated for some BS government feel good growth fantasy.
your labor is being replaced and grown at 60million units/year. given 12 years of experience, your obsolete. get with the program and Buy
Standard of living in Japan vs US, even after throwing out credit fueled consumption is not even close. Cramped apartments, expensive food and extensive pollution make life in Japanese cities unappealing if you're from somewhere else. Most Japanese rent or have some kind of mortgage. There are thousands of sites where low-end seven-story concrete walk ups sit in rows. Peeling paint, massive spiderwebs and layers of dust. If you think being stuck in traffic on a freeway is bad, try being on a commuter train where the RR has employees whose job is to stuff as many people into a railcar as they can. You couldn't fall over if you were drunk and sound asleep, because you are like sardines in a can.
Plus, the earthquakes.
C is having trouble keeping momentum. It seems like shareholders are starting to realise this is the first bailout of many and their stakes will be worth zero 'fore long.
Thank you Zombie - those are the details I was interested in. Do you know whether those conditions are the case outside of Tokyo as well? If every a country needed a falling population, it is Japan!
WHY do people persist in congregating in large urban areas? Why don't companies build headquarters, or at least put the majority of their workers and staff, out in the sticks, really? The crowding in a Mexico City or even New York City is ridiculous.
try being on a commuter train where the RR has employees whose job is to stuff as many people into a railcar as they can. You couldn't fall over if you were drunk and sound asleep, because you are like sardines in a can.
It's so stuffed, men are raping women, and nobody even notices. When packed in like a sardine, you have a tendency to tune out and shut down what's going on around you.
Why is CNBC interviewing Fr. Guido Sarducci about the Citi bailout?
Anyone see Alaweed on CNBC? Guy looks like he just stepped out of Studio 54 circa 1978.
If every a country needed a falling population, it is Japan!
And China. China's to blame for all of this mess. They made us the relentless consumers we are today. They have too many people and too many males.
The excess housing inventory published at over 10 months supply will continue to force price's down. The shadow inventory keeps building the number of folks with 2nd and 3rd homes bought as investments will dribble onto the market along with recast option ARM, 50% forclousure mod defults plus the normal I need to move due to divorce,death and job change or job loss.
Grim!
Sue,
There is a synergy when you get large groups of like-minded people together. Part of why San Francisco and Silicon Valley are so successful is having Berkeley on one end and Stanford on the other. This is not the same as having, say, Tennessee Tech, in Cookeville.
Morocco - too many males is a remedy for overpopulation.
Ruthless Serial Borrowers?
hmmmm
hc writes:
I just received an update letter from CITI. They're raising CC rates to 19.99% or prime + 13.99, whichever is greater. (so 19.99 sticks right now).
This is daylight robbery rates.
And I have sparkling credit. I pay off in full monthly and never "use" credit.
My Citi MC is still at 7.99% for purchases. Haven't received any rate increase letter yet.
I'd love to visit the Fed meeting with a Taser and a bucket of water.
Arrrrr....There Re-Dafaulting to be done...Arrrr!
Nostrovia,
Morocco - too many males is a remedy for overpopulation.
Maybe....depends on how horny they are, but it is definately a recipe for civil unrest and ultimately war.
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Sue,
Most major Japanese cities resemble Tokyo in terms of transit systems and real estate conditions. In Japan, people moved to the cities because that is where the economic opportunities have been. Farmland is scarce in Japan relative to the population. Rural towns in Japan may be quieter, but they lean toward a very aged demographic. Japanese save a lot because in part they expect to have to pay their own way after retirement.
Alwaleed dishing the dirt: People apologized to me for appointing Prince.
I think he had three camels behind him bathed in orange CNBC floodlights.
Metamessage: I bring incense and myrrh.
I want a CC for $300B backed by Uncle Sugar.
Nostrovia,
Within my soul there woke such keen distress, Such terror, byher horrid mien inspired, Hope died within me ...
What was the third thing? Sandalwood? 25 Billion?
From the article I linked: "Home prices were pushed down by a large number of foreclosures and distress sales, which distorts the comparison to last year's October median price", said NAR spokesman Walter Molony.
No. It. Doesn't. This probably the one disagreement I have with Tanta. There is no such thing as a "distressed sale market" which is independent from the "rest of the market" for homes. There is just one market, with varying levels of distressed sellers over time.
also: "About 45% of all sales in October were distressed sales," Molony said.
CNBC reporting that 45% as "foreclosures" really is misleading. The 45% in fact includes arrangements such as short sales, which by definition are being done in order to avoid a foreclosure.
Re-Defaults are based on the same fraud that went into round one, thus round two and three restructuring just wastes cash and adds to deflation ... piss off!
Also, don't forget, in Japan, the hand is used like a knife.
Angry Saver wrote:
"You'll never here the fed, treasury or CONgress discuss falling real incomes. They have no solution. Monetary inflation will only make matters worse for the majority as we'll be less competitive globally."
I agree 100 percent. All those that say inflate our way out of the debt do not grasp the fact that that will bankrupt the middle class; and therefore will not be a solution for politicians.
The only way to inflate away the debt is by inflating wages as well and the ability to increase wages isn't what it once was with a global work force. Just look at the last five years: tremendous monetary inflation, but virtually no wage inflation.
Does anyone think Bush could write a single paragraph about the terms of Citi's bailout?
SOMALI PIRATES: 50% OF RANSOM FINANCING RESULTING IN DEFAULT; PAYMENTS ONLY ACCEPTED IN PIECES OF EIGHT FORM AFTER JANUARY 20, 2009.
So, the market is set by distressed sales. This was known. If prices somehow rise, there will probably be a flood of sellers to bring them back down, so a sustained rise is unlikely. About half of loan mods quickly redefault, so this appears to be no solution, though it's the FDIC's main initiative. The market is not being allowed to find a rational level, though it will eventually reach one with maximum pain.
Where is the good news? (Rhetorical question)
FED SAYS THEY HAVE MORE MEATBALLS
By Mark Pittman and Bob Ivry
Nov. 24 (Bloomberg) -- The U.S. government is prepared to lend more than $7.4 trillion on behalf of American taxpayers, or half the value of everything produced in the nation last year.
The worst financial crisis in two generations has erased $23 trillion, or 38 percent, of the value of the worlds companies.
U.S. financial firms have taken writedowns and losses of $666.1 billion since the beginning of 2007, according to Bloomberg data.
(Looks like the devil is taking his due, but still seems as if there is hell to pay
Unless the loan mods guarantee people jobs and income with which to pay these loans..then..well..I think we see the problem.
NINJA loans true to form, even after "modification" just keep coming back for the kill.
Arrrr....So mod's are a good thing?...Arrr
Nostrovia,
Gotta love the continued high volatility and the money making opportunities it creates. At least that's one plus.
Maybe....depends on how horny they are, but it is definately a recipe for civil unrest and ultimately war.
No matter how horny those men are I highly doubt that it'll cause overpopulation if there aren't women! sure, there can be lots of "action" but I doubt it will result in procreation!
and civil unrest/war would also decrease population.
long ago China put in policies to reduce (or slow) population growth, and they are clearly seeing the fruits of their labor.
now india on the other hand...
Hope Later Alliance?
No. It. Doesn't. This probably the one disagreement I have with Tanta. There is no such thing as a "distressed sale market" which is independent from the "rest of the market" for homes. There is just one market, with varying levels of distressed sellers over time.
very true..also much crying about how the medium price now distorts the true RE value picture but it only indictates where the sales are really coming from and they are mostly investor driven in the lower bracket.
During the dot.com bubble RE medium price in the Bay Area skyrocketed since all the fresh money was out buying expensive neighborhoods. It tells us were the sales velocity is and is not, that's all.
Darth Paulson writes:
Unless the loan mods guarantee people jobs and income with which to pay these loans..then..well..I think we see the problem.
And lenders can never have any accurate idea of what their assets are worth as long as this game continues. And investors can only invest based on the guess of future government action.
Owners of Treasuries may soon get paid to borrow as the U.S. tries to break a logjam in the $7 trillion-a-day repurchase market.
Treasuries are in such high demand that investors are lending cash for next to nothing to obtain the securities as collateral through so-called repos, which dealers use to finance their holdings. The problem is many parties involved in repos arent delivering the bonds because there is no penalty for not doing so, causing fails to exceed $5 trillion, according to the Federal Reserve Bank of New York.
Kona Surrenders,
Linkage?
I don't know why everyone is complaining- after all 50% of the mods are working.
Geez, 100% loss versus 50%.
I know what the banks will take everytime. Now the trustees of the CDO's need to face reality.
Someday this war's gonna end...
Ron,
Do we actually have solid evidence that the foreclosure sales are "mostly investor driven"? Or is that just speculation?
From my local experience, I have seen that the bulk of sales are on the low end, including a high percentage of foreclosures, not so much due to investors "snapping up deals", as much as it is first-time homebuyers, because they can't afford anything higher, especially with things like down-payments coming back into vogue.
What I don't understand is why are 50% of the midified loans still defaulting?
If lenders modify the mortgage payments to 38% of their gross, aren't the borrowers now able to make the payments?
long ago China put in policies to reduce (or slow) population growth, and they are clearly seeing the fruits of their labor.
Of course they did, and that's why they now have a gender imbalance, however, it will take a substantial amount of time to significantly reduce their ridiculous population numbers. If you can only have one child, males are preferred....females are aborted or given up for adoption.
I'm not sure, but I though I heard that China is relaxing the one child rule. If so, each family could theoretically have more children, thus maintaining population levels even with a gender imbalance. Also, considering the economic downturn, poverty thends to increase the birthrate, so if the children can manage to stay alive to adulthood, once again, population maintains. As for war, they can spare tens of millions and still not be significantly impacted.
Also, it was tongue in cheek that they are responsible for our rampant consumerism.
Geez, 100% loss versus 50%.
50% have failed already. Other 50% will fail in the future.
Geez, 100% loss versus 50%.
That's 50% for now.....the other 50% is yet to come.
Lucifer's Inverted Hammer -
The devil is in the details (no pun intended, dark one) of just which 'distressed sales' we are looking at. For short sales there are probably plenty of first-time homebuyers buying.
But for actual foreclosure auction sales and REO properties, buyers really have to know what they're doing, which takes more than watching Carlton Sheets' latest foreclosure investing how-to DVD.
They've gotta define "modification" when throwing out a statistic like that. Did the failed modifications reduce the payment? Or did they only put the arrears back into the mortgage? Did they fix an adjustable rate from rising for the long term? How many reduced principle? Credit Suisse came out a few months ago and said that 75% of their mods were current 6 months after the mod started. More details all around regarding the "mystery" of what one considers a modification would be nice.
DK @11.24.08 - 12:52 pm wrote:
You know, all of the 10s of thousands of credit cards issued to illegal aliens with no SS#s. Maybe they can bill the Mexican government for the billions in defaulted debt.
DK, president Hussein's Commissar of PC may pay you a visit. One must not say illegal aliens but "documentarily challenged" or visally challenged and that applies to Visa as well as visas.
[If lenders modify the mortgage payments to 38% of their gross, aren't the borrowers now able to make the payments?]
38% of gross is usually around 50% of take-home. We need to get real if we think that's sustainable.
[Credit Suisse came out a few months ago and said that 75% of their mods were current 6 months after the mod started.]
A DS News article on the report said "By March 2008, two-thirds of the loan modifications from the first half of 2007 were delinquent."
Lucifer's Inverted Hammer writes:
Ron,
Do we actually have solid evidence that the foreclosure sales are "mostly investor driven"? Or is that just speculation?
Good point: in my area Northern Calif the bulk have been investor driven which is based on RE agents info and my own experience in looking at REO property. I hav't met a 1st time homebuyer yet when looking at REO's but encounter investors that have purchased several doing rehab and renting them out. When I did bid on a REO many were purchased as all cash offers by RE investor groups, many of these were local folks who formed a corp to do the buying and rehab, also find many RE agents that cherry pick these REO's do the rehab and live in them for awhile and will try and sell them down the road, very common. I read from time to time about families buying REO's in the local paper but it seems to be the exception not the rule.
Also my RE has given me access to MLS info that shows what price the property sold for and some of the transaction details so I do get a drift from that info what is happening, esp. on all cash buys.
In the future somebody will write a book called "The Worst Generation". A tribute to apathy, greed, and those who abandoned their country for personal gains.
Shnaps writes:
Lucifer's Inverted Hammer -
But for actual foreclosure auction sales and REO properties, buyers really have to know what they're doing, which takes more than watching Carlton Sheets' latest foreclosure investing how-to DVD.
That's for sure..the lastest fad is looking at the properties that don't sell at auction since the banks are finally getting the hint that they are way overpriced and have big problems. The other thing is that these investment pools are doing a quick rehab and trying to resell these as rent to own or lease to own and putting up a bigger price tag, don't know how that business will work out longterm as the economy slides into a deeper recession. Don't know how long this investor rental market can go so somewhere down the line the REO market may actually have to be a 1st time buyer market with somekind of gov't assit in rehab and financing which is available via FHA but the REO's are currently over priced when you consider the cost of the rehab in relation to the neighborhood value which is still declining.
A very slippery slope for the average homebuyer.
Ron,
Ok thanks -- I was curious because I can see something like bulk investor purchases in a place like california, where there are very sharp foreclosure discounts and lots of empty homes, but I know that where I am at, in MA, the vast majority of homes available below the median ( < $400K) are foreclosures and short sales, which tend to be discounted only around 10 -20%. All of the first-time homebuyers I know are looking for foreclosures, not so much because they are a bargain, but because they simply can't afford anything higher.
Right now it is cause for an interesting disconnect in the market: foreclosures and short sales are getting sold, mostly less than $300K, which I still think is high, but with a median household income in my county of about 90K, it's down to overpriced, as opposed to ridiculously overpriced. Meanwhile new home construction and sellers who are not distressed are all looking for over $400K, and few are biting. This leads to lots of discounts from the $300s into $200s, and even $200s into $100s, as that is what will get houses sold, while anything over $400 is pretty much staying put. I think the obvious -- and inevitable -- solution to the disconnect here is the same percentage discount begins to be applied to > $400K homes, as the sellers start to become desperate, which will bring down the overpriced $300s and $200s now, as nicer homes come into the same price range.
I'm guessing that loan mod defaults will spike up to 60% soon.
Naturally a large percentage of modifications may not work -- the economy is still in the toilet, and until layoffs stop happening, and people feel the basics of consumer confidence, home values will continue downwards, and people affiliated with the housing industry will not have stable incomes.
Remember Catch-22?
"Within my soul there woke such keen distress, Such terror, byher horrid mien inspired, Hope died within me ..."
'And a she-wolf, that with all hungerings
Seemed to be laden in her meagreness,
And many folk has caused to live forlorn!'
--- trans. Longfellow
Hungerings
That's a good idea..people who rent out houses should go to their landlord and ask for a rent modification. Or skip a month or two of rent. Your landlord's not going to evict you if the process takes so long he loses the home.
Extortion at its finest.
....."the beatings will continue, until morale improves".
.
Pavel Chichikov writes:
Maestro, we are all falling leaves. But hope is our profession, in more than one sense.
Pavel,
I certainly appreciate your presence here. There is so much gloom and doom - your perspective is very valuable to me.
Every cramdown loan mod is a write-down. Any mod that re-defaults is a second write-down, one that wouldn't have happened had a foreclosure been taken instead. At a sufficiently high default rate (probably >25%), loan mods could end up costing banks more than straightforward foreclosure.
18 months of free rent is not a real solution. Imagine if you could stick it to your landlord for that long.
In fact, if your landlord is in default, you probably can.
Fantastic!!!
This means that out of 10 people, 6 of those 10 should never have bought a house to begin with.
This is AWESOME. Please continue.
bobn writes:
.
Pavel Chichikov writes:
Maestro, we are all falling leaves. But hope is our profession, in more than one sense.
"Pavel,
I certainly appreciate your presence here. There is so much gloom and doom - your perspective is very valuable to me."
Thank you, bobn. Your comment is very valuable to me, especially at this particular moment.