Does anybody know if the new guidlines and negative equity are having any effect yet?

I.E. are more applications getting rejected now than a year ago?

In my carefully considered opinion a rise in foreclosures and decline in application approvals will mark the transition to "Phase II" of the housing bust in which we will see more rapid price declines ("Phase I" being the speculative bailout).

Oh and, tentatively, the transition to "Phase III" is marked by the puke point for homebuyers, or:

"Home prices always go down."

"The 2007 Federal Home Price Appreciation Act"

Helicopter Legislation. I don't know whether to laugh my ass off or invoke the ancient superstition against naming calls.

In my experience lenders race to the bottom; they do not race to adopt regulatory "guidelines" that have no penalties and mess up the EPS. My money, for what it's worth, says that small thrift-type institutions will start hand-wringing, mortgage bankers and medium-sized depositories will keep trying to do what Citi-Countrywide-Fargo-Mutual are doing, and C-C-F-M will follow the street firms until either MBS holders revive "vigilantism" or they get a taste of what credit risk really looks like. Then they'll back all the lenders up in a big pile when they hit the brakes. But it won't start with lenders; they're still too convinced that it's someone else's balance sheet problem. The MIs and HELOC lenders could, of course, shut the party down instantly since they're the only ones providing "down payments," but my guess is that the subprime and Alt-A RMBS will have to hit the floor first before lenders make a dramatic retrenchment. I've seen a lot of regulations come down in my time, but I've never seen any flip lenders like a switch unless they followed a crisis or some big honkin' class action suits. And yes, I thought the new guidelines were cleverly crafted to offer very little hope for class action litigants.

Of course, I still don't know how some of these outfits got out of the carry trade alive when the Fed started tightening. I fear that some of them didn't, but we aren't going to find out until the 110th congress starts because the solution was one of those life-support cross-hedges I don't want to know about. So if too many lenders wait too long to find a chair, I agree that there may be no way to find the bottom.

Thanks, ron & ac.

Reading comments from guys like AC, Tanta, of course CR, dryfly, and 4shzl, is really eye opening. I am just your average joe, a cop in San Diego, driving around and visiting these basic $700,000 houses filled with people who couldn't make $100,000 in a good year, who can't get a grip on their lives, let alone manage their finances and pay a $5000 mortgage every month. I find that most residents are tile layers, or "exporters" from Mexico, or realtors, or even other cops. They aren't financial wizards or investment bankers.... I know friends who have family incomes of about $160,000 with $800,000+ mortgages and wonder what gives. I visit domestic disputes where a boyfriend and girlfriend are arguing over money and living in a "starter" $450,000 condo they just bought. They check groceries or work construction and I wonder how they even qualified for the loan.

I bought 10 years ago for about 3X income (making $75,000 and paid $180,000 for a house that's "worth" $600,000 now)and I had to prove that I was gonna get married (they initially refused the loan because we were closing 1 month before our wedding, I had to write a letter and prove with receipts that the wedding was really gonna happen), I had to come up with a 10% down backed by my retirement and pay PMI for years.

Anyway,

I want to thank you guys for your insight and knowledge. You have given logic to the illogical and made a guy, a workin stiff, understand that I'm not missing something. My instincts were right and I'm not crazy. You may think you are talking amungst yourselves, but I'll bet alot of people out there take comfort in knowing that things look crazy to people who "know" too.

Best wishes Tanta on your health.

And Joe, be careful out there.

As for helicopters...
History class is starting...
Grover Cleveland and Sound Currency
...
This matter rises above the plane of party politics. It vitally concerns every business and calling and enters every household in the land. There is one important aspect of the subject which especially should never be overlooked. At times like the present, when the evils of unsound finance threaten us, the speculator may anticipate a harvest gathered from the misfortune of others, the capitalist may protect himself by hoarding or may even find profit in the fluctuation of values; but the wage-earner — the first to be injured by a depreciated currency and the last to receive the benefit of its correction — is practically defenseless. He relies for work up on the ventures of confident and contented capital.
...
Grover Cleveland, Aug 8, 1893 in message to Congress.
Grover Cleveland and Sound Currency [Mackinac Center]

ring ring ring

As for Lou Dobbs...
Poli Sci 101 now starting...
Did they expect the outcome of the WTO to result in anything different? How far do they think they can push the Gini coefficient before guys like Lou Dobbs start getting an audience?

Of course, the victims keep shopping at Walmart, so the lack of resolve in doing the right and difficult thing runs the full gamut of society. Unfortunately for all of us, the disaster has already happened and the popular solution will be neither the fair nor optimal solution. Socialization of cavaet emptor is another disastrous relinquishment of personal responsibility. How many of your fellow Americans understand their mortgage terms? Prepare to pay more than your fair share for the mistakes of others.

I highly recommend the Grover Cleveland reading. He clearly warned them 8 years in advance of the Panic of 1893. I guess doing the right thing has never been as easy nor as popular as attempting to cheat reality.

It was dishonest, he believed, for government to steal from people by inflating the currency. So he made sure the dollar was "as good as gold." It was dishonest, he argued, for government to pay silver miners twice what their metal was worth in the open market, so he opposed the silverites of his day. It was dishonest, he said, for government to think it could spend money better than the people who first earned it. So he cut taxes. It was dishonest, he argued, to stifle competition and consumer choice by restricting imports. So he fought to reduce tariffs. All of these positions, I might add, represent ingredients needed to ensure fiscal integrity in government. Indeed, he once asserted categorically that "Patriotism is no substitute for a sound currency."