2009 January | money blog

31 01 2009

Got a Mortgage or Credit Card? Don’t Pay Them

Posted by: admin in mortgage industry

Finally something that we can all get behind: Don’t pay your bills. It’s not my idea, although it has appeal. It’s the Fed’s and it’s the cornerstone of the new Homeownership Preservation Policy. To qualify for aid, the homeowner must be at least 60 days past due on his or her mortgage payments. (This program is for mortgages acquired from Bear Stearns and AIG rescues. Another program begun in December 2008 required that the homeowner be 90 days late.) At the same time, the mortgagee must be able to make a reduced monthly payment, therefore, must have some income, presumably a job. The having a job part might be tough; the missing two payments part, easy.

And more good news for mortgage delinquents; several mortgage lenders have suspended foreclosures, at least through January 2009. Among them are: Fannie Mae and Freddie Mac—together a good half of the market; Bank of America/Countrywide; Citi; and several foreign banks. If your mortgage is not held by one of these lenders, you still may be in luck. Several cities and states have suspended enforcing foreclosures; to name a few: Chicago, Philadelphia, Baltimore and Illinois and Florida. Initially, delayed-foreclosure preference was given to mortgagees who lived in their houses. It now has been extended to having an occupant in the house. An unintended consequence: what’s this going to do to the rental market and the commercial mortgagee’s ability to make payments? They will be subjected to the full force of the free market I guess.

Those who do not have mortgages must be asking: What about me, what can I not pay? Here’s a suggestion—credit cards. And there’re a slew of them not to pay: bank, store, gas, travel. You did your patriotic duty by running up this debt in the first place. Now join your neighbours and default.

The approximate $2.6 trillion in consumer-credit outstanding as of November 2008 is at serious risk. Charge-offs are expected to rise from the current 5.62% to as high as 13%, according to Nouriel Roubini. The all-time high was 7.85% in 2002. Consumer-credit defaults are tied to unemployment. Some banks have increased their assumptions on 2009 unemployment to 8.7%, which is as much as they say they can handle; beyond this level they would be in trouble. Well, they’re in trouble. According to the BLS, the rate of unemployment as measured in U-6 is already 13.5%, well into the banks’ danger zone. And this number is far below the almost 18% computed by Shadow Stats (the people who came up with the definition of recession that is universally accepted), which also puts us in depression territory.

The televised Congressional Hearings/Jerry Springer Show on the new stimulus bill carried on all day. They should give up on everything except social programs at this point. Little of what they’ve done has worked. The trigger for the next major leg down will be out of their control by definition and could even come from outside the US.

P.S. Just found out the stimulus bill passed. They’re going to send me a check and broadband will be brought out to my summer place. I take back all the bad stuff I just said.

Source [blownmortgage]

31 01 2009

Bloggers Under Attack - Part 2

Posted by: admin in mortgage industry

I wrote a year ago about the site, Mortgage Lender Implode-O-Meter, being sued by a mortgage company for damages allegedly tied to the company’s listing on the site’s imploded lender list. The claims were fanciful, with the lender claiming that their bank accounts had been drained by institutional warehouse lenders and other sorts of malarky that made the suit look exactly as it was: an attempt to simply shut-up the good folks at Implode by a brute force legal battle where they figured to have the upper-hand in capital to silence the critics.

The good news for all of us? The community around Implode donated to the tune of $20,000 (subsidizing about half the legal costs incurred) and the site and it’s owners had good legal representation that settled the case out of court. The critics lost - they could not silence the new newsmakers and their reportage simply because it made them look bad.

But the battle was far from over, as more bloggers have been sued for critical remarks and coverage of the seedy underbelly that was the mortgage industry. Companies have been sending threatening letters, making menacing phone calls, and dragging these individuals to court at an alarming rate to silence them and protect their company name.

The folks at Implode have soldiered on and in the meantime have become the de facto number 1 news source about the mortgage industry. And because of this they remain under attack.

In October Implode was sued again for an expose that uncovered a scheme that used FHA downpayment assistance, affiliation with Indian Reservations and some creative financing to provide a seller-funded downpayment grant program that seemed to run outside the law - at least according to Forbes and other sources. I’m not an expert on the matter but the article itself seemed well-researched and documented to me and you can judge for yourself at: What the SFDPA Administrators Don’t Want You To Know: Part 1, The Penobscot Indian Tribe Down Payment Grant Program

Once again the owners of the company under the spotlight reacted with threats and eventual legal action against Implode. You can read about the full suit here.

This is sending us all who write and comment on the industry down the dangerous path of simply being bludgeoned to silence by those that would rather bury the bodies and move on, without dealing with the consequences of the greed and malfeasance that permeated the industry over the last decade. It cannot be tolerated or appeased and all of those who responsibly seek to uncover the truths of the past must be protected and supported against those who wish to silence them.

While the site isn’t actively fundraising for this battle, I urge you to support Implode and the people there who have become the preeminent information source on the industry meltdown in their goal to uncover and bright to light the ridiculous systems and schemes that were set up to generate millions of dollars during the boom from unsuspecting (or suspecting) participants. Please give whatever you can. Free speech is our most basic right, and ensuring that the industry is reformed is the only way to keep another housing-fueled meltdown from bringing this country to its knees again.

Source [blownmortgage]

Continue reading Chasing Value: Berkshire - you’re selling, I’m buying!

31 01 2009

Chasing Value: Berkshire - you’re selling, I’m buying!

Posted by: admin in Stocks Money News

Filed under: Rants and raves, General Electric (GE), Berkshire Hathaway (BRK.A), Goldman Sachs Group (GS), Chasing Value, Best Stocks for 2008

It was only seven weeks ago that I posted Chasing Value: Considering Berkshire Hathaway… again. At the time, Berkshire Hathaway (NYSE: BRK.B) was trading around $3,850 for the “B” shares.

Well, I think the time for consideration is over and this morning I placed a limit order for the stock. I think the time is right when stories like Berkshire Hathaway at Lowest Close Since Feb. 2007 and my colleague Peter Cohan’s Warren Buffett is not perfect are being trumpeted in the media.

For those who have followed “my pal Warren” Buffett for years, or even decades, these cautionary stories of him losing his edge are as silly as trying to predict where the DJIA will be on a given date. As for Peter suggesting that he was early buying into Goldman Sachs Group (NYSE: GS) or General Electric (NYSE: GE) three weeks ago, well my gosh, it has only been three weeks!

I understand that the prevailing wisdom seems to be running against the buy and hold approach. But three weeks is kind of short to be passing judgment, don’t you think? The DJIA is down 42% while Berkshire is only down 31% from its high of $5059.

Perhaps investors have punished the stock because GS and GE are down. Maybe it is because Berkshire has been buying up railroads and that strategy is less important with oil prices falling 55% since the summer high of $147 a barrel. It could also be because people have lost their minds — who knows?

Chasing Value: Berkshire - you’re selling, I’m buying! originally appeared on BloggingStocks on Tue, 28 Oct 2008 14:10:00 EST. Please see our terms for use of feeds.

Continue reading Chasing Value: Berkshire - you’re selling, I’m buying!

31 01 2009

Chasing Value: Berkshire - you’re selling, I’m buying!

Posted by: admin in Stocks Money News

Filed under: Rants and raves, General Electric (GE), Berkshire Hathaway (BRK.A), Goldman Sachs Group (GS), Chasing Value, Best Stocks for 2008

It was only seven weeks ago that I posted Chasing Value: Considering Berkshire Hathaway… again. At the time, Berkshire Hathaway (NYSE: BRK.B) was trading around $3,850 for the “B” shares.

Chasing Value: Berkshire - you’re selling, I’m buying! originally appeared on BloggingStocks on Tue, 28 Oct 2008 14:10:00 EST. Please see our terms for use of feeds.

31 01 2009

With house prices down 16.6%, consumer confidence at lowest level in 41 years

Posted by: admin in Stocks Money News

Filed under: Consumer experience, Housing, Recession, Financial Crisis

Are you better off than you were a year ago? Probably not. Since then, global markets have lost roughly half, or $30 trillion worth of their value. House prices fell 16.6% between August 2007 and August 2008 and 3.4 million people are expected to have foreclosed on their houses by the end of 2009. So you can’t retire as soon as you thought and if you still own it, you can’t borrow money against your house.

Looking ahead to the holiday season and witnessing thousands of people losing their jobs could put you in a bad mood. After all, median income is down since 2000 while it still costs much more to fill your gas tank than it did back then — not to mention pay for health care. So it should come as no surprise to learn that consumer confidence is lower than it has been in the last 41 years.

But consumers are not smart. As John McCain advisor, Phil Gramm has said, Americans are whiners. And McCain himself has made it clear that the economic fundamentals are strong. After all, McCain (or more likely his wife) owns seven houses and thirteen cars. So the point is that his economic fundamentals are strong. And that’s all that really matters.

As for American workers, let them eat cake.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

With house prices down 16.6%, consumer confidence at lowest level in 41 years originally appeared on BloggingStocks on Tue, 28 Oct 2008 12:32:00 EST. Please see our terms for use of feeds.

Real Homes of Genius Special Edition: Today we Salute you Southern California. 6 Counties and 6 Homes.

31 01 2009

Real Homes of Genius Special Edition: Today we Salute you Southern California. 6 Counties and 6 Homes.

Posted by: admin in Real-estate news

Dreams do come true. In the ongoing saga of Ed McMahon’s housing troubles on his Beverly Hills home, yesterday Ed’s realtor stepped up to plate asking for someone to come purchase the home before it would be foreclosed in the next two weeks. Well as it turns out none other than real estate mogul Donald […]
Related Posts:
■Real Homes of Genius: Today we Salute you Pacoima. Zillow says $457,000 but Listed at $225,000?
■Real Homes of Genius: Today We Salute you Huntington Park. Tweedledum and Tweedledee of housing. $500,000 Homes in Wonderland.
■Real Homes of Genius: $438,000 for 816 square feet in Pico Rivera! Another Example of Manic SoCal Housing!
■Real Homes of Genius: Today we Salute you Stanton.
■Real Homes of Genius: Today we Salute you Baldwin Park. When you Only Need to Show Concrete to Sell at $400,000+.

Dreams do come true. In the ongoing saga of Ed McMahon’s housing troubles on his Beverly Hills home, yesterday Ed’s realtor stepped up to plate asking for someone to come purchase the home before it would be foreclosed in the next two weeks. Well as it turns out none other than real estate mogul Donald Trump will be purchasing the home according to the L.A. Times. The agreed upon price is currently undisclosed but Ed has lowered the price on the home from $7.7 million to $4.6 million. Either way, we’ll find out soon enough what the agreed upon price is. The Donald does have a sweet spot for the 90210 zip code.

Today in a very special Real Homes of Genius we are going to look at the 6 counties that make up the Southern California market and give you a taste of what is happening on the ground. These homes will range from super prime homes to something akin to the $1 home that sold in Detroit:

*Source: Zillow

You’ll love the aerial satellite view from Zillow before the place was stripped naked like a Playboy photo shoot. This may in fact be the ultimate Real Home of Genius and you can only imagine the face of the agent receiving the whopping 6 cents in commission. Now on this home we can say that it was worth every penny. People forget that these homes may have unpaid taxes, major repairs needed, and also may be more of a burden than anything else. You can be the judge of that. Detroit has many homes that are practically being given away just to get someone to move in.

In Southern California some people are still in delusion land and think that the housing correction is only a minor bump in the road. A speed bump in the infinite pursuit of unlimited appreciation. This is the psychology that is still prevalent in the market. The market seems to be at a standoff between those that believe the bottom is not yet here and those that think now is the time to buy before prices skyrocket once again. I tend to believe California won’t see a bottom for another 3 years and prices will fall overall by at least another 20 to 30 percent.

This isn’t some random theory. The Case-Shiller Index currently has the L.A./O.C. index at 198.59. The last sold future contract for November of 2011 sold for:

Someone is actually making the bet the Case-Shiller index will fall to 155. That translates into an additional fall of 21.9% for the entire region. These are bets that are made with real money. Clearly the line in the sand is being drawn. I think those making the bets for stability are vastly underestimating the explosive toxicity of the pay option ARM fiasco that will commence this forth quarter and will hit full stride in 2009.

So let us now salute the 6 counties that arguably are the most overpriced counties in our country. Today we salute you Southern California with our Real Homes of Genius Award.

County #1 - Los Angeles

Population: 9,948,081

Area Spotlight: Toluca Lake

Median Price zip code: $862,000

What more can you ask for than having NBC-4 weatherman Fritz Coleman as your honorary mayor? This small community of 16,978 people is between the city of Burbank and North Hollywood. The Santa Monica Mountains surround the area of Toluca Lake and provide one of the nicer areas of Los Angeles.

Toluca Lake even though it is considered prime, has not been immune to the housing bubble busting. The area’s median home price is now down 16.6% when it flirted with the $1 million mark. This 6 bedroom and 7 baths home provides a lake front view (hat tip L). You are going to love the view since it is going to cost you $6,650,000. Now before you go to your IndyMac FDIC taken over account to put down a earnest money deposit on this place, you may want to look at the pricing action:

Listing Price History

Date Price

May 23, 2007 $8,795,000

Jul 10, 2007 $7,795,000

Oct 17, 2007 $7,100,000

Feb 16, 2008 $6,650,000

This place has been on the market for 450 days and has seen a reduction in price by a stunning $2.1 million in one year. Now that is a true discount. But is it? Let us look at the previous sales history on this place:

Date Price

Jul 31, 1991 $1,200,000

Apr 09, 1999 $1,090,000

This place actually sold for a loss in 1999! Even given the current selling price, we are talking about a $5.5 million gain in 9 years. Now that is what we call high hopes.

County #2 - Orange

Population: 3,002,048

Area Spotlight: Newport Beach

Median Price zip code: $1.85 million

Just because Kobe Bryant lives in Newport Beach doesn’t mean all homes will sell for multi-millions. At least that reality is coming home now. It was thought during the days of housing bubble lore, that simply buying in Newport Beach meant you were going to be a millionaire with enough money for you to create your own rendition of Redline the movie.
This above home is amazing because who would of thought steel gates would be abound in a community with a $1.85 million median price. This 3 bedroom and 2 bath home is a nice starter home for any would be millionaire. This place is on the market and is a foreclosed home. A foreclosed home in Newport Beach? That is correct. The current list price for this home is $1.2 million. Not bad right? Well let us look at the previous sales history:

Sale History

12/21/2007: $949,900 *

06/27/2006: $1,477,000

The $949,900 price tag is simply the lender taking the place back. The more important price point is the $1.47 million. This home is already selling at a major loss since who only knows if there were second mortgages on this place that are now wiped out. Given the current market and lack of movement on this place, the current $1.2 million doesn’t seem to be wetting the appetite of many. At what price will this home sell? And when it sells, you can rest assured that median price is going to head lower.

County #3 - Riverside

Population: 2,026,803

Area Spotlight: Riverside

Median Price zip code: $300,000

I love trash can real estate photography. You almost expect Oscar the Grouch to pop and say, “buy me, buy me, buy me!” Riverside is being hit hard by the housing crisis. This zip code is now down 36.6% on a year over year basis and once we go into the details of this Real Home of Genius, you will know why. This 5 bedroom 4 bath home has been on the market only for 3 days at least according to the MLS data. The current list price is $794,900. Is this a deal? Well let us now examine the previous sales history to find out:

Sale History

07/25/2008: $750,000 *

03/21/2007: $1,200,000

04/30/2002: $635,000

Again that $750,000 is simply the lender taking the place back. With the current sales price, it looks like the lender is simply trying to recoup part of the first mortgage. This place sold at its peak only last year for $1.2 million. If you do the math on the current discount, it works out to be approximately 33%. Lenders are paying attention to the current market price and are cutting prices to reflect this. A $400,000+ discount is not a bad deal. That is, if someone even has the money to buy this place in an area where the median priced home is $300,000! Do you see why this bottom is nowhere insight?

Until we start seeing housing glamour shots, we are nowhere near a bottom. I’ve seen places in the Midwest where lenders take the time and meticulously arrange homes to sell for $200,000! Here for a $794,900 home they can’t even move the garbage and recycle cans out of the way.

County #4 - San Bernardino

Population: 1,999,332

Area Spotlight: Fontana

Median Price zip code: $321,000

Don’t you love model homes? I would get tons of brochures about these places during the boom. San Bernardino and Riverside counties make up the Inland Empire. These two areas have been absolutely slammed by the housing correction. Yet as you can see with L.A. and Orange counties we are simply a year away from catching up as well.

This above home is one reason why Southern California was the epicenter of the housing bubble. This 4 bedroom 4 baths home have been on the market for 115 days. Currently the list price is $569,000 which is high for an area with a median priced home goes for $321,000. This zip code has fallen 25.5% in the last year. The current list price may not be such a good deal:

The listing description tells us this is a short sale but the MLS data is stating that it is a foreclosure. I would venture after looking at the sales price that this is a foreclosure:

Sale History

03/14/2006: $875,000

A 34% discount in two years. This is why the Inland Empire is having so much pain. Also given the still high price of fuel, who is willing to commute 30 or 40 miles into OC or L.A. county for work? The numbers simply do not work. The incomes in these areas do not remotely reflect the price of some homes.

County #5 - Ventura

Population: 799,720

Area Spotlight: Newbury Park

Median Price zip code: $699,000

This home should be called “when refinancing goes wrong.” This home is located in Ventura County in the city of Newbury Park. Newbury Park has seen a 15.7% yearly decline in their housing prices and this is one of the more prime areas of the county. This home above is a 4 bedroom 3 bath home with apparently dry grass. This is an REO and is currently on the market for $875,900. This home simply by looking at the sales history, we can tell that this was a refinance machine:

08/01/2008: $700,000 *

07/27/2006: $296,695*

11/07/2005: $163,000

Again, the August number is simply the bank taking the place back. But between November of 2005 some $500,000+ in who knows what of mortgages was attached to this place. Normally the banks take back the REOs should their be no matching bid at auction for the face value of the first mortgage. The 2006 price was probably a refinance and given the 2008 number, this place was a mortgage equity withdrawal machine. Don’t you wish you lived in California so you can max out your home, suck out all the equity, and let the bank take back the place? A salute to you Real Home of Genius in Newbury Park!

County #6 - San Diego

Population: 2,941,454

Area Spotlight: Poway

Median Price zip code: $550,000

Our final stop takes us to Poway in San Diego County. San Diego was the first county to falter during the Southern California bust. It appreciated the quickest but also fell first. This 4 bedroom 2 baths home in Poway is another example of the hyper bubble here in the Southland. First let us look at the sales history action:

07/16/2008: $293,203 *

11/06/2006: $498,000

12/08/2000: $225,000

The bank is going to take a major hit on this one. The current list price is $320,000 and is sold “as-is” which you are going to see a lot of in the months to come. The peak price of $498,000 is absurd and even the current price of $320,000 is the lender simply trying to get out as soon as possible.

So there you have it. These 6 counties have a combined population of 20,830,000+ and still have prices that reflect very little of the incomes of those in the areas. California is years away from the bubble. Need more reasons than the above examples? Read 10 reasons why we are on the verge of flying off the diving board into the housing abyss.

Today we salute you Southern California with our Real Homes of Genius Award.

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30 01 2009

Afternoon Quickie 01/29/2009

Posted by: admin in mortgage industry

Mortgage Insider - Mortgage rates jump to 5%

The Big Picture - Good Bank, Bad Bank by Dr. Seuss

The Reformed Broker - People I Can Do Without: Winter ‘09

Huffington Post - Senate Banking Chairman: Confiscate Wall Street Bonuses

Source [blownmortgage]