Housing Bubble Bursting?

[Greg Bell]

Housing leads the country into and out of recessions..look it up...

 

[Randolph Kinney]

Did someone say stagflation?

http://www.marketwatch.com/news/story/higher-inflation-weaker-spending-point/story.aspx?guid=%7B23813EBF%2DFACB%2D45F5%2DA310%2D0FAE392B63D9%7D

Core inflation jumps to 2.4% year-over-year increase

WASHINGTON (MarketWatch) - The Fed's stagflation dilemma is getting tougher. Core consumer prices increased at the fastest pace in six months during February, even as consumer spending slowed to the weakest in six months, according to government data released Friday.

Consumer spending accounted for almost all the growth in the fourth quarter, but has slowed in the first quarter.

If the inflation news weren't bad enough, the report also showed that real (inflation-adjusted) consumer spending growth slowed to 0.2%, the weakest gain since August.

The Fed is thus faced with both accelerating inflation and a slowing economy.

 

[Randolph Kinney]

Home equity delinquencies rise 7% in 4Q

http://www.marketwatch.com/news/story/credit-defaults-creep-up-home/story.aspx?guid=%7B528C794D%2D7915%2D4622%2DBB51%2D2F560AC32994%7D

NEW YORK (MarketWatch) - The rate of delinquencies on home equity loans rose about 7% in the fourth quarter from the third quarter in the latest sign of cracks in the credit business attached to real estate and consumer borrowing in general.


But the rise in delinquencies will undoubtedly cause further concern for market watchers who worry that weakening consumer debt trends could cause problems for the broader economy.

The level of consumer debt in the country is growing faster than GDP. He said over the last decade, nominal GDP has grown at a 5.1% rate while credit market debt outstanding grew 8.4%.

"Therein lies the problem," Bove said . "The economy must generate the increased incomes to pay the interest on this debt. The economy is not generating the incomes necessary to pay the interest on the debt. If the long term rate were to rise further or incomes grow at slower rates then it seems highly likely that there would be a rash of defaults throughout the economy," he concluded.

 

[moh malekpour]

Wall street is suing sup-prime lenders, such an irony.

It was Wall Street that fed the sub-prime voracious lenders with money and credit that created the housing and mortgage bubble market. Now that the sub-prime is in the verge of collapse, the Wall Street wants its money back. It looks like it is the King Kong VS. Godzilla movie.

http://www.msnbc.msn.com/id/17860982/

Credit Suissehas filed lawsuits against at least three US subprime mortgage lenders, marking an escalation of efforts by Wall Street banks to use legal action to purge themselves of bad housing loans.

DLJ Mortgage Capital, a unit of Credit Suisse, is separately suing the three mortgage companies for more than $30m, claiming the lenders failed to honour obligations relating to loans that it purchased from them. EMC Mortgage Corp, a unit of Bear Stearns, has filed at least one $70m lawsuit against a lender. Other suits are expected.

 

[moh malekpour]

equal opportunity foreclosures for the rich and the poor

http://today.reuters.com/news/artic...S-USA-SUBPRIME-FORECLOSURE.xml&src=rss&rpc=22

NEW YORK (Reuters) - Sheriff Leo McGuire presides over foreclosure auctions in Bergen County, New Jersey, where the bidding for a home reached $1.2 million last June -- a record for one of the wealthiest counties in the nation.

Homes sold on the auction block for as much as $852,000 this month -- more than quadruple the median home price in the United States. County officials believe they are close to setting another record soon.

 

[moh malekpour]

Fed Risks Moral Hazard as Housing Market Melts

http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_gilbert&sid=apKbQNSz4iXs

March 30 (Bloomberg) -- ``Interest-Only Mortgage Payments and Payment-Option ARMs -- Are They for You?'' asks the U.S. Federal Reserve in a November brochure on its Web site.

The answer should have been a resounding ``No.'' Instead, cash-strapped Americans embraced loans offering low initial payments, praying that rising house prices would build a refinancing buffer before the monthly rates become unaffordable.

The hangover from that borrowing binge is beginning to hurt. Evidence is building that the U.S. economy is slowing sufficiently to warrant a soothing reduction in interest rates from the Federal Reserve. That poses an interesting dilemma for Fed Chairman Ben Bernanke.

Cut too soon, and he will stand accused of ignoring inflation in an attempt to rescue the housing market. Leave it too late, and he risks tainting his second anniversary at the helm of the world's biggest economy by overseeing a recession.

All four legs of the U.S. housing market are wobbling precariously. The mortgage lenders who funded the boom are going bust or shutting up shop. The homebuilders who slapped together the bricks and mortar are seeing their earnings plummet. The financial alchemy used to repackage home loans into tradable securities is starting to unravel.

 

[Randolph Kinney]

It was Wall Street that fed the sub-prime voracious lenders with money and credit that created the housing and mortgage bubble market. Now that the sub-prime is in the verge of collapse, the Wall Street wants its money back. It looks like it is the King Kong VS. Godzilla movie.

http://www.msnbc.msn.com/id/17860982/

Gee Moh, it seems like more of the same - Wall Street is purposely causing these subprime lenders to go bust so they can have ALL the subprime business to themselves. Imagine that, suing the very lenders you bought no good loans from because they defaulted. I wouldn't be a bit surprised to learn that credit to these same lenders are being denied.

Wasn't that what Brad and Hank have said that was behind all these subprime lenders going broke?:new_all_coholic:

 

[Randolph Kinney]

Bernanke Says Hard to Separate `Good,' `Bad' Lending

http://www.bloomberg.com/apps/news?pid=20601206&sid=ac7Ow4xhYn8U&refer=realestate

March 30 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said lower-income neighborhoods that were shut out from credit 30 years ago must now cope with ``bad'' lending, an issue that will challenge regulators for a while.


``Recent problems in mortgage markets illustrate that an underlying assumption of the CRA -- that more lending equals better outcomes for local communities -- may not always hold,'' Bernanke said in a speech about the Community Reinvestment Act of 1977. ``How to try to differentiate `good' from `bad' lending in the CRA context is an issue that is likely to challenge us for some time.''

Under the Community Reinvestment Act, the Fed and other U.S. banking regulators give ratings to banks based on how well they serve their entire communities. The law provides guidelines for ways to increase lending to underserved segments of local economies and populations.


Last week, Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, said at a hearing that the Fed failed to act on early signs of trouble in the subprime mortgage market. Members of a House subcommittee levied similar criticisms at the Fed and other regulators during a March 27 hearing.


``The CRA is clearly far from perfect,'' Bernanke said. Other issues to deal with in coming years including how to define a bank's ``local community'' given that many banks have regional, national or Internet domains, and whether the law should be extended to cover non-bank lenders, the chairman said.

 

[Randolph Kinney]

Subprime Crisis, Stricter Lending Rules, May Hurt Home Sales, say Realtors

http://www.bloomberg.com/apps/news?pid=20601206&sid=a8.mgZ_tnbjE&refer=realestate

March 30 (Bloomberg) -- U.S. home sales could fall further as the subprime mortgage crisis spurs stricter lending standards and foreclosed homes add to an already crowded marketplace, the National Association of Realtors said.


Home sales may decline as much as 3 percent a year in the next two years, the Washington-based group said today in a news release distributed by PRNewswire. That translates to up to 250,000 houses, the group said.


Congress is considering regulations that would tighten lending standards for subprime mortgages, which are sold to people with bad or limited credit histories. Declining home prices have made it more difficult for homeowners to refinance their adjustable rate loans, resulting in a record number of foreclosures and more than 20 mortgage companies going bankrupt or being sold.


``Tougher lending standards imposed by the marketplace and the regulators are necessary, but we need to be mindful of overcorrection,'' David Lereah, the association's chief economist, said in the statement. ``Responsible lending practices are what the doctor ordered, not practices that cause a credit crunch.''


Lereah warned that ``overreaction'' may help prolong the worst housing slump in 15 years. Sales of new homes fell to a seven-year low last month and the supply of unsold homes climbed to their highest in 16 years as the so-called spring selling season failed to materialize.


More than 130,000 homes entered the foreclosure process last month, according to Irvine, California-based RealtyTrac, an online listing of foreclosed properties. The first two months of 2007 saw the highest number of foreclosures since RealtyTrac began collecting data in January 2005.

About one in five mortgages last year was subprime, compared with one in 20 in 2001, according to the Washington-based Mortgage Bankers Association.


Lereah said on March 13 that homebuilders would feel ``additional pain'' due to problems in the subprime marketplace. Prime borrowers -- those with good credit -- are not likely to be affected by the subprime crisis, he said.

 

[Randolph Kinney]

Subprime Fallout: Home Owners vs. Banks

http://www.realtor.org/RMODaily.nsf/pages/News2007032603?OpenDocument

Financially-strapped and bankrupt home owners are pointing the finger at banks and mortgage brokers for selling them on the idea of subprime mortgages.

Doug Duncan, chief economist for the Mortgage Bankers Association in Washington, D.C., acknowledges that in some cases aggressive lenders obscured facts and made loans that borrowers couldn't afford. But he, like other lenders, says it was the responsibility of borrowers to read and understand what they signed.

About 50 percent of the subprime mortgages were "stated income loans," with no verification of borrowers' incomes, says Paul Leonard, director of the California office of the Center for Responsible Lending.

Last year, the Mortgage Asset Research Institute sampled 100 such loan applications and reported that 90 percent listed significantly higher incomes for borrowers than they had reported on their tax returns.