Housing Bubble Bursting?

[cworthy]

Is the Current Financial Crisis So Different?

""For the five most catastrophic cases (which include episodes in Finland, Japan, Norway, Spain and Sweden), the drop in annual output growth from peak to trough is over 5 percent, and growth remained well below pre-crisis trend even after three years. These more catastrophic cases, of course, mark the boundary that policymakers particularly want to avoid."
Carmen Reinhart and Kenneth Rogoff, January 14, 2008

http://calculatedrisk.blogspot.com/2008/02/is-current-financial-crisis-so.html


This blog is pretty doom and gloom, but it all makes sense.

 

[Riick]

Bear Stearns Makes $1 Billion Bet on Continued Subprime Woes

"Bear Stearns, bitten badly by the housing crash, is short more than $1 billion on subprime mortgage securities — a big bet by the investment bank that the woes that have driven a historic collapse in the mortgage market are likely to continue.

"Bloomberg reported that Bear CFO Sam Molinaro said Friday that the New York firm’s “short” positions have jumped from $600 million at the end of November as the company has trimmed its positions in CDOs and underlying RMBS bonds."

woohoo "Buy some beans & ammo"

 

[Randolph Kinney]

A new wave of defaults not because of affordability

Who will pay the mortgage when the homeowner walks? You

California's housing market may be entering a scarier phase: the point at which homeowners walk because the house isn't appreciating, not because they can't afford it. Banks are worried.

A Federal Reserve survey in January 2008 found that loan officers "are concerned with borrowers' reduced motivation to retain possession of their properties."

And Calculated Risk, a blog, posted a quote from Wachovia Bank's January 2008 conference call: "One of the challenges is... a lot of these current losses have been coming out of California... from people that have otherwise had the capacity to pay, but have basically just decided not to because they feel like they've lost equity, value in their properties, and ... we're just going to have to see how the patterns unfold here."

Bank of America CEO Kenneth Lewis said, "There's been a change in social attitudes toward default ... We're seeing people who are current on their credit cards but are defaulting on their mortgages ... I'm astonished that people would walk away from their homes."

If income indicates ability to pay, down payment is an incentive to pay - skin in the game.

In California, lenders are generally barred from getting money from a defaulting borrower. The lender gets the house and that's it, even if the borrower has $1 million in the bank. Only judicial foreclosure allows the lender to get the borrower's other assets, but it's slow, expensive and encourages a defense of loan origination fraud.

California is an administrative foreclosure state. You don't need to go to court and have a judicial foreclosure where if anything is owed to the lender, including cost, a deficiency judgment is entered and follows you.

Instead, the trustee files with county recorder that there will be a trustee sale and any one can bid on it. That is how the bank gets the property back, when no one bids higher than the default bid (loan amount, accrued interest and expenses).

It is coming true now in California that people who are marginally upside down in their mortgage, even though they have the ability to pay the mortgage, they choose not too. Instead, they let the foreclosure happen. The penalty? Bad credit for a period of time. Does it stop them from using their credit card? No. Income tax liability? No. Live rent free for 8 months or more until you are evicted. Get a lease on another house to rent, it will be cheaper than the mortgage payments.

Visit www.uwalkaway.com, a company that sells kits explaining a homeowner's right to walk if the house isn't a good deal anymore. And "60 Minutes" recently featured a couple who explained they could afford their mortgage payments, but the house was "worth less," so why pay?

 

[Greg Bell]

Yes , and in Trust Deed states like California there are no deficiency judgments because it's out side the court system.If all the borrowers in trouble knew that one they would be running from those over bloated storage bins..

 

[Randolph Kinney]

Yes , and in Trust Deed states like California there are no deficiency judgments because it's out side the court system.If all the borrowers in trouble knew that one they would be running from those over bloated storage bins..

We call them dog houses because no one is home during the day except the dog. They are either too busy working or too busy playing leaving the dog all alone at home.

I suppose if they choose to walk away, the dog goes with the house. :laugh:

 

[Greg Bell]

This is only a satire , don't panic..


FDIC Begins "Death Watch" of US Banks, Plans to Lower Insurance to $10,000 and Give Vouchers for Hamburgers or Tacos
Written by Felix Minderbinder
Story written: 09 February 2008
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Tacos now a FDIC benefit WASHINGTON (FMLiveWire) - The Federal Deposit Insurance Corporation (FDIC) has begun a "death watch" on dozens of failing US banks which are drowning in their own debts and piles of worthless subprime, derivative and other investments.

"The FDIC has never supervised a bank failure with more than 175,000 accounts," an FDIC spokesman stated. "So the avalanche of bank failures we anticipate starting this year will challenge us to repay millions upon millions of depositors, making our job pretty well impossible."

The spokesman indicated the only way to pay anyone out of FDIC proceeds is to reduce insured deposits from $100,000 to $10,000 or less which is about all the FDIC fund could afford.

But acting with several American corporations, the FDIC will also give away vouchers entitling those who have lost their life savings to an added bonus of up to 10 free McDonald's hamburgers or up to 20 free Tacos at Taco Bell.

"There's going to be an unprecedented wave of bank closures in the US and the only way to hold on to your life savings is to invest in gold and silver," added the spokesman. "The situation is deteriorating very quickly."

A spokesman at Taco Bell stated that their company is "thrilled to become an integral part of the FDIC program. It is our patriotic duty."

"Tacos are nutritious and we will help put those losers back on their feet," she added.

--Copyright Felix Minderbinder Live Wire

 

[Riick]

^^^^
GREG....
This reads so true that I'm having a problem deciphering;
Which part is the satire .. McDonalds or Taco Bell ???

 

[EVAUSA]

Los Angeles and Ventura, CA, steady decline since summer 07, depending on the area. It is VERY NORMAL in my market area to see a sale for $680K in 2006, and now be listed for $450. I'd call that bursting, not deflating...

 

[njriverman]

HUD and VA Foreclosures

HUD and VA Foreclosures don't seem to crazy in Pennsylvania, New jersey or Delaware.

NJ Statewide List
http://www.pennjersey.info/forums/n...sures-sale-available-purchasing.html#post4428

PA Statewide List
http://www.pennjersey.info/forums/p...HUD-foreclosures-sale-available.html#post4422

DE Statewide List
http://www.pennjersey.info/forums/o...D-foreclosures-sale-available-purchasing.html

 

[Riick]

Reuters: "Euros Accepted" signs pop up in New York City

"In the latest example that the US dollar just ain't what it used to be, some shops in New York City have begun accepting euros and other foreign currency as payment for merchandise.
"The increasingly weak US dollar, once considered the king among currencies, has brought waves of European tourists to New York with money to burn and looking to take advantage of hugely favorable exchange rates.
"'We had decided that money is money and we'll take it and just do the exchange whenever we can with our bank,' Robert Chu, owner of East Village Wines, told Reuters television. 'We didn't realize we would take so much in and there were that many people traveling or having euros to bring in. But some days, you'd be surprised at how many euros you get,' Chu said."
Source: Bill Berkrot, Reuters, February 6, 2008.