The Moulin Rouge Housing Bubble: 3 Fascinating Stories. Who Moved my Compensation Package? Free Spouse and Granite Countertop with Home Purchase. You Mean You Still Had Those Horrible Loans?
Posted by: admin in Real-estate news“One should always play fairly when one has the winning cards.” -Oscar Wilde Take a deep breath. The first half of the year has officially come to an end. Talk about a brutal time for the markets. The housing market is still in a deep slump and oil jumped from $99.62 a […]
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“One should always play fairly when one has the winning cards.” -Oscar Wilde
Take a deep breath. The first half of the year has officially come to an end. Talk about a brutal time for the markets. The housing market is still in a deep slump and oil jumped from $99.62 a barrel in January to the current $140 price tag. A stunning 40% jump in crude in 6 months. At this rate, we’ll be nearing $200 come New Year’s Eve. With this high price tag, U.S. automakers have been struggling to keep their fuel inefficient cars on the road and airlines struggle to remain viable. On top of that, the American consumer is facing evaporating equity, higher food costs, a worsening housing market, and a massively declining dollar. But there is some good news. CEOs that engineered a large part of the credit garbage and mortgages that went along with it are making out just fine!
Americans are reeling from the Great American Garbage Mortgage Experiment (GAG-ME), the one that included loans where you had the ability to pick your own payment and some that allowed you to cash out every year as if your house was an ATM. The engineers of these products are doing just fine while some of their companies are quickly going into penny stock territory quickly following many that signed onto these loans.
As people become more desperate, you are starting to see some of the weirdest parts of human nature emerge. Money problems have a way of doing this to folks. That is why one of the stories we’ll highlight today is simply stunning. A realtor in Florida is trying to sell her home and trying to get married, all in one shot. This isn’t the way your mom and pop met, you can rest assured.
We are also going to discuss Wachovia’s press release in which they are waiving the pre-payment fee associated with their Pick-A-Payment loan and also their discontinuation of pay option products including negative amortization loans. You mean those where the family is ecstatic on TV since they get the option of picking their payment as if they were ordering off the McDonald’s dollar menu? One of the many reasons why the $500 billion Pay Option ARM disaster is going to be one of the major stories of the second half.
Someone is Still Making Money and it Ain’t You!
Most Americans are feeling the bitter sting of this economic prosperity. I call this prosperity because we can’t officially call it a recession. Yeah, home prices are down 15% on a national level and in California, the median price is now down 35% but all is well. In fact, those stimulus checks boosted spending a bit! Yet this is tantamount to giving a heroine addict a “little taste for old time sake” before hitting rehab. And by the way that “stimulus” was pulled out of thin air since we are running bigger deficits so it wasn’t like we went to WaMu and withdrew some money. Speaking of WaMu, some people are getting big pay for those Pay Option ARMs:
Chairman and CEO, Kerry Killinger
Salary: $1,000,000
Vested Stock Awards: $669,104*
Vested Option Awards: $3,183,914*
All Others: $397,752
SEC Total: $5,250,770
There is another calculation from the AFL-CIO’s own estimates:
*Grant Date Fair Value of Stock and Option Awards: $12,967,131
AFL-CIO Total: $14,364,883
Not bad for running a company that has nearly half of their loans in option-adjustable mortgages with the bulk being in imploding California!
“(wiki-invest) In early 2006, the Home Loans Group was strategically focused on building its non-traditional mortgage origination and investment; in particular, the Home Loans portfolio consisted of 46% option-adjustable rate mortgages (option-ARMs) and 11% subprime mortgages.”
But this post has come to an end:
“(ABC news June 19, 2008) Mounting losses caused the thrift this year to slash its dividend and raise $7 billion of capital that diluted existing shareholders. The thrift this month stripped Chief Executive Kerry Killinger of his role as chairman, after a majority of shareholders voted to name an independent director as chairman.
Washington Mutual has said it may still need to charge off $12 billion to $19 billion of its $187 billion one-family residential home loan portfolio within four years.”
The current market cap of WaMu is $5.21 billion and they have a $187 billion home loan portfolio? Talk about maximum leverage! Those loss estimates are extremely optimistic given the banana republic nature of California and that fact that we probably won’t see a state budget until August or September.
Who else is making tons of money while you aren’t? That loveable Angelo Mozilo from Countrywide is racking in the dough. Now there is nothing wrong with making money but making money from toxic destructive products that have put our nation’s financial security at risk is. Have these products really improved the lives of Americans or added value to the health of our economy? Let us look at the compensation here:
Chairmen and CEO Countrywide (2006 Compensation), AFL-CIO
Salary: $2,866,667
Vested Stock Awards: $1,103,745
Vested Option Awards: $23,047,104
Non-equity Incentive Plan Compensation: $20,461,473
Changes in Pension Value and Non-Qualified Deferred Compensation Earnings: $10,961
All Others: $286,257
SEC Total: $48,133,155
Good job Bank of America is helping out this poor company. I mean how did people ever live without interest only, pay option arm, 2/28, 3/27, and other exotic mortgages? Whenever you feel bad about the economy which was caused by this hyper easy credit and housing speculation, you can look at these compensation packages and you’ll certainly feel better. But if you are having problems selling your home may I suggest holy matrimony?
I Do…After you Sign That Mortgage Contract.
In one of the more interesting cases of deal making, a divorced realtor in Florida is offering her home for sale…she’s included:
*Click to watch video and new definition of “housewife”
I love how the media is playing this up as “woman selling home, hand in marriage on EBay” as if this was a case of finding “true” love. Now I don’t want to be the anti-Romeo here but give me a freaking break! Next we are going to see ads like:
“Great deal on slightly used Hummer. Free massage and gas card with purchase.”
Bwahahaha! This is as much about finding love as the Moulin Rouge is about visiting a confessional. I have an uneasy feeling with this one. I’ve gotten a few e-mails from readers showing me some “realtors” on Myspace with provocative photos. Now let us not kid ourselves and pretend that sex does not sell. Sex does sell. My issue with this story is the romanticism the media is trying to spin on this. Do you folks really believe this is a love story or a desperate ploy to avoid financial ruin? Also, has marriage become so baseless that all it takes is an eBay ad to commit to someone? In addition, I’m sure most of you are financially savvy and realize that the number one reason for divorce is financial issues. Now using your logic, why would you get involved with a realtor that is now in a major negative equity position? Look at her reasoning:
“(team sugar) I figured, let’s combine the ad because I’m looking for love and I’m looking to sell the house,” said Trabosh.
“Marry a Princess Lost in America,” Trabosh wrote in the ads posted on eBay and Craigslist last week. She describes a life of romance and travel and a home with vaulted ceilings, upgraded tile and a soaking tub in a gated community with a pool and tennis courts.
Trabosh, a licensed real estate agent who hasn’t practiced in years, knew she would struggle to sell the home in the troubled real estate market, but insists her fairy-tale ad isn’t just a sales gimmick.
“I’m struggling … I don’t want to lose my house, and I want to find somebody,” Trabosh said. “So I came up with this dream plan because I’ve always dreamt about being a fairy-tale princess.”
And Santa Clause is going to give all of us gold bricks because we’ve been good boys and girls. Seriously folks, what are your thoughts with this?
Pick a Nose Loans Just Got Tastier
The most toxic loans as I have referenced many times on this site, are the Pay Option ARM mortgages. These are the most toxic since they give people the ability to pay from a menu of options. You can pay the fully 30-year fixed amount, an interest only amount, or the ever popular negative amortization amount. By the way, many reports estimate that 80 percent of people elected to pay the absolute minimum.
Most people by now should know that these loans should be avoided at all costs. So Wachovia announcing that they are eliminating their Pick-A-Payment loans is as shocking as someone telling us water is wet:
“(Yahoo!) Effectively immediately, Wachovia is waiving all prepayment fees associated with its Pick-A-Pay mortgage to allow customers complete flexibility in their home financing decisions. This includes all Pick-A-Pay mortgages on 1-4 unit residences.
Additionally, for all new loan originations, Wachovia is discontinuing offering products that include payment options resulting in negative amortization.
Wachovia continues to be actively engaged in assisting customers through a number of programs to provide mortgage relief to help them avoid foreclosure. Over the past 12 months, Wachovia has worked with approximately 18,000 homeowners to help them stay in their homes and make payments that are more manageable under their current circumstances.”
Too bad a large amount of these loans are in California. Who in their freaking right mind would refinance a home that is underwater in this state? The only one nutty enough to do such a thing is the government and that is why they are trying to pass that absurd bailout plan. After all, the median price is now down 35% and shows no signs of letting up! I’ve already talked about how $1 trillion in write-downs are estimated to come down the pipe-line and we’ve only seen $391 billion so far.
Needless to say, another mortgage lender suspected of easy lending, IndyMac is now riding in the penny stock range hitting an all time low of .62 cents. Sure is a far cry from that $48 a few years ago:
Be safe with your money and stay away from the charlatans and credit addicts that are trying to suck in those who responsibly stayed out of this smoke and mirrors bubble. You thought the first half way insane? Just wait until the next few months with the upcoming election, acceleration in foreclosures, state craptastic budgets, and further write-downs. And some still believe there will be a second half recovery. Now that is the true fairy-tale.
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Related Posts:
■Putting Home Sellers on the Couch: The Psychology of why Sellers Refuse to Lower Prices.
■The Short Sale Report: Volume 2 – Record 10,000+ Short Sales in Southern California.
■Cultural Spending Neurosis: How a Nation Went From Prudence to Financial Decadence.
■Ode to the Housing Market: Learning to Love the Housing Bubble.
■People Still Asking for Nothing Down Loans: This Free Bus is Coming to a Stop.
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