patrick.net

SFWoman,

The house itself is pretty ugly but two other things really strike me.

1. 6 bdrms and 5 baths in a 2,700 sq ft structure? Peter P ought to have a word with that architect!

2. That place looks super staged, everything looks like a furniture store showroom.

astrid

The big mutual funds don't buy risky paper. They buy prime tranches of MBS, which are, as some of us pointed out last thread, probably about equivalent to Government paper. I'm quite happy to beat up on funds, but where is a better place for Average Joe to park his money? Get him out of funds and he'll probably end up in gold coins.

Randy H,

It's a dog and pony show. A lot of these Fed. Chartered lenders also own driftbag sub-prime shops too! So they jump through a few hoops in a feigned effort to "get you the best possible loan" but you had some late fees on DVD you rented back in 1999 so they'll refer you "in house" (of course) to their fellow that specializes in dealing with people that have "bruised credit" such as yourself!

Didn't WFC just buy out some slime shop and act like they were doing the world a favor?

The big mutual funds don’t buy risky paper.

I wouldn't be so sure about that. There have been a number of articles posted at Ben's blog (and here in in the news links page) about toxic waste ending up in supposedly AAA+ safe MBS tranches, where they should not be. Then there's those pesky accounting "irregularities" over at Aunt Fannie's that have prevented her from issuing an earinings statement now for 2 years running. Luckily, though, Aunt Fannie has powerful friends, otherwise she might face delisting from NYSE.

I guess it's good to be too big to fail.

Um, or would that be a 192% return?

GixxerGuy,

Only too happy to help. Here at Patrick.net, friends don't let friends buy overpriced POS!

OT: Lending "guidance" with no enforcement teeth/significant penalties for disobeying them mean almost nothing.

As many have already pointed out, there has been no appreciable reduction in the number of subprime bucket shops willing to lend FBs rope to go hang themselves, nor improvement in the quality of loan terms. If anything, terms have gotten even more extreme than ever (50 years? why not 100, like Japan?).

If you want to improve ("reform"?) lending standards in the U.S. it's real easy: force originating lenders to buy back any loans/MBS/CMOs they sell downstream to investors at face value if/when they go bad. It used to be once upon a time that originating lenders were also the same institutions that actually HELD the mortgages for the lifetime of the loan (S&Ls, credit unions, etc.).

Perhaps going back to that pre-MBS lending model in the age of eLoans/LendingTree and international carry-trades is impossible. Global credit markets have evolved to take advantage of Internet/e-commerce technology, and have become orders of magnitude more efficient/liquid than ever. That's fine. All I'm asking is that we re-align risk with reward.

If you want to lend $2.2 million to every unemployed 24-year-old mouth-breather out there and take your profits, no problem. But if your New Lending Paradigm blows up, it should not be Mr. Taxpayer nor Mr. Fixed-income Investor who takes the hit: it should be YOU, the originating paper pusher, who failed to perfom due diligence in the first place by qualifying said retard.

THAT would clean up this mess in a hurry. I guarantee it.

SFWoman,

I'm sorry. Was that "sells for" or "reduced to"?

about toxic waste ending up in supposedly AAA+ safe MBS tranches, where they should not be.

Like everything in finance, the system is not 100% fullproof. The fact that they find subprime in prime tranches, should encourage you, not discourage you. It means (a) they are looking; (b) they have an audit process; (c) that audit process is credible.

I would be much more worried if I heard the claim that their prime tranche was "100% guaranteed", so there was no need to even be wary of contamination.

I will agree with HARM and DinOR that the risk premium to subprime tranches is most likely not fully priced into those securities. Many a hedge fund will learn that the hard way in the coming months, I imagine.

They don’t say it that plainly. This only works if the insurance coverage is adequate. Care to bet the over or under on that spread?

No kidding. And the guys over at LTCM built their empire based on the notion that risk could always be precisely forecast, quantified and insured/hedged. And look how well that turned out...

GixxerGuy,

I did a post earlier today that was moderated and deleted b/c perhaps Patrick didn't appreciate the "prison humor" I applied to Casey Serin.

Anyway, we do have several vets here and my more recent experience with VA Loans and their very demanding standards is that they are far too bothersome for most mortgage brokers. Invariably the broker that "specializes" in VA loans ends up pulling a bait and switch just so he/she can get paid more, quicker and with less hassle. If everybody did loans like the VA (as they once did) we wouldn't be in the mess we're in today.

Who was it that said, "If buyers want to pay more than CPI and a point or two above last years assesed value, let 'em pay it out of pocket or shore up their reasoning with an objective appraisal as to why this home is now selling at 20-25-40% more than it did last year!" Step forth and be recognized!

(That'd put a screeching halt to this BS)

I delete DinORs posts for fun and sport because he keeps refusing to send me Leinenkugels.

@SFWoman,

Though it's no beauty queen, I wouldn't call that the Ugliest house in America or even NoCal (remember the infamous shell?). According to the listing it's actually "charming and spacious" and "lovely". For more adjectives, please refer to:

Examples of stupid comments I’m tired of reading in real estate reports and listings:
and
Embracing Realtwhores’(tm) Common Expressions

SFWoman,

While I'm sure I can't explain the wild discrepancy in this listings price I think we can agree it is about butt ugly. But I'm careful not to be too judgemental. Perhaps one could play handball or "squash" off of the concrete bunkers to the side? I'll check to see if it meets regulations.

They still brew Leinenkugels? I'll have to get down to "House of a Thousand Ales" my bad.

I was actually just kidding, some of my posts are as early as DS's and it was probably just a glitch. Besides, prison humor (even when applied to Casey) is pretty gross.

SFWoman,

Now you're talking! We'll check in w/LILLL and see if the owner of her "X-home" can hook us up w/some rapper tenants on a long term lease!

Seriously though, myself and Mrs. DinOR are looking at a 2,300 sq. ft. place right here in town that's already set up for "seperate living" two kitchens, fireplaces etc. It's been on the market for nigh on a year and has been reduced twice so w/lowball offer I'm thinking a 100 bucks a square foot. Logistically it would meet all of our personal/business needs and also have a little wiggle room for aging parent or "boomerang" child. Very similar layout BUT equally ugly! My little bird told me it belongs to Happy Happy Good Time Ent. LLC of Garbage Grove, CA so we'll see.

This may not be completely on topic, but CNBC just reported that a number of mortgage brokers and real estate agents are being laid off in San Francisco.

@Raiderjeff,

Once you've been following this blog a while, you'll learn there really is no such thing as "on topic". Topics will meander from RE to food to SciFi to Haiku to politics to economics to clothing then back to food.

Hey harm,

"Once you’ve been following this blog a while, you’ll learn there really is no such thing as “on topic”..."

LOL, you're right. I've been following this blog off and on for about two years. I just thought I'd include my little disclaimer anyway.

"I think it goes with the general drift of things."

True. I'm wondering if anyone is shedding a tear for these people? I don't like it when people are laid off, but some of the people within the RE industry have really pissed me off.

"I’d say you were more on topic than I am most days."

why thankya, thankya very much (my best Elvis impersonation).

"But I thought they weren’t making anymore land in San Francisco?"

Yeah, I guess I better call my RE agent right now before it's too late to get screwed.

GixxerGuy,

House flipping is an "idea junkies" dream! You don't have to stick to a script, you can change your mind as often as your underwear and there's basically NO regulatory body to report to!

Try collecting for a poorly done job from a guy that operates out of the cab of a pick-up truck. Pffft. He's already on to his next huge embarrassing failure!

To be fair, there are some folks out there that do quality work but let's think about it for a minute. If a flipper can change/correct any issues a house may have BEFORE the first mtg. payment is due the damn place couldn't have been that f@cked up to begin with! Real restoration takes time. Properly and LEGALLY done, I don't have a problem paying for it!

LILLL,

Anytime a listing (especially at "nose bleed" pricing) basically shows you only exterior photos I just move on. I don't give it a second thought. Shouldn't that tell you that the place probably hasn't been updated since the 70's?

Oh and SFWoman and I are submitting a lowball offer on a 2.195 mil. dump and were wondering if the new owner of your old home could hook us up with some quality tenants?

"It was a probate ….she had it painted….It is now on the market for 1.2.
Here it is…all 2br-2 bas of it. It is in a good location…."

Studio City is a nice area, but 1.2 mil for 2 bedrooms, 2 bathroom joint? Ummm....how many coats of paint did put on it? I would think it's going to sit for some time. I hope she's renting it out or living in it.

Jon,

You bring up some excellent points as always. My problem is that you can't be "just a little bit pregnant" either you are or your not.

HARM-X Industries Chairman reminds us that the function of GSE's is to:

Privatize profits.

Socialize risk.

The implied gub'ment guarantee is where it gets sticky. There's plenty of room within the system to foster competition and selection for consumers without resorting to a financial orgy.

I'm starting to wonder if a large part of the reason that defaults in the sub-prime arena aren't to some degree the result of people waking up and realizing "it's their loan that sucks, not their house"? I talk w/mtg. guys everyday and one is starting a marketing blitz to capture all of the business from people that should have never been in a sub-prime loan to begin with! I work in retail securities and we're without doubt the most regulated industry in finance if not the country. Virtually every interaction w/the investing public is scrutinized. It's working.

Randy, HARM, et al,

Thanks for enlightening me on the various facets of MBS investment. It's good to hear that there's minimal direct exposure to toxic waste. I'm still worried about mutual funds and pension funds in hedge funds with major toxic waste exposure though.

LILLL,

It's a nice house with very nice landscaping, I'll consider it for $250,000 :) Otherwise, maybe your friend can rent it to a rapper with a smaller posse.

in = owning

Anyway, playing devil’s advocate: Aren’t government-mandated lending standards and/or “guidance” just another form of this sort of regulation? Shouldn’t we let the free market determine interest rates and lending standards?

Did loan products such as Option, zero down and ARM get so popular in the last several years because of regulation or de-regulation? No one can deny that some did flip property succesfully using these products in the last few years. Were they bad for those people?

Jon,

We discussed the idea of "good" and "bad" forms of regulation more thoroughly in the How does one regulate "well"? thread. Bottom line: most of us small "l" Libertarians are not Free Market anarchists (or what Randy H calls "Market Fundamentalists"). Rules and regulations are what establish the ground rules for free capital markets to exist and function in the first place. Without them, things would quickly devolve into a Zimbabwe of Khazakstan-style kleptocracy.

However, there are some things that government regulation is good at and other things it is not so good at. Accurately and efficiently pricing goods, services and labor seems to be one of those things it is not so good at. Witness the long-term results from agricultural price-fixing and subsidies, protectionism, failed attempts at rent/wage controls, etc. Government market regulation seems to do best when it seeks to align risk with reward (which it is clearly NOT doing in the MBS markets) and in a "policing" enforcement role with regards to fraud and outright theft.

LILLL:
OMG - I have the Mary Ellen place saved in my homes on Zip, before you even mentioned it!
I liked the look of it because its small and has a big lot, so ignored the stupid asking price and kept it to see what happens...

Wow, so she's had it for a grand total of 10 weeks - sold 8/1/06 for 1 million, according to Zillow - and wants 200K over what she paid for it?

This one will be entertaining to watch. I wonder what it'll eventually go for...

Here's a very sobering statistic for you Patrick.net people which I gleaned from my stack of copies of the Contra Costa Association of Realtors trade paper "The Update":

In January of 2005, there were approxiamately 211 active detached listings for the following cities in Contra Costa County:

Alamo, Blackhawk, Clayton, Concord/Clyde, Danville, Diablo, Lafayette, Martinez/Pacheco, Moraga, Orinda, Pleasant Hill, Rossmoor, San Ramon, Walnut Creek

As or today for those same cities (according to ziprealty) there are 1988
active detached listings.

As or today for those same cities (according to ziprealty) there are 1988 active detached listings.

Wow.

I am moving all food discussions to astrid's blog, greencrabs.blogspot.com.

I may start a separate rights-to-food blog as well.

Hopefully, I will be more on topic here. :)

Can someone help locate the new TV program on one of the cable channels.....HGTV or something like that. I caught the very end of the program and didn't see which channel....DUH on me. I think I spaced it out because I was so interested in the format. It was a derivative of flipping where the sellers are dealing with a buyer's market and going through the stress of lowering their prices, whining about "losing money", horrified by the realtor's comments they had to actually make repairs, and so on. It is a timely topic and I'd like to follow the series. Any help would be appreciated.

On to other topics:
Dinor, our "DNA doc" loans are the paradox of today's lending. People who CAN and WILL repay are held to a higher level than anyone else....go figure. As lending practices come under more and more scrutiny, it's another opportunity for those in the know to use it to their advantage. I will guarantee lenders will soon offer special discounts to "plum" borrowers.....FACT. They have to prop up their portfolio for the auditors so they'll showcase those to give the impression they are good faith lenders and following guidelines.

Another thing that gripes my butt....it seems a lot of stuff does these days.....are all the "fees" lenders charge. They sit there and roll them off one after another as if the Gov requires it and borrowers pay and pay and pay when they don't have to. My favority is the Origination Fee. WTF is that for? I've yet had a banker actually justify it so I have them scratch it off and move on to the next one. You don't, and should not, pay for almost any "fee". I have yet to pay a loan fee of any kind and I am not special, smart, or good looking.

For the months ahead, my old adage is going to come in very handy:
"In confusion, there is profit". I know it sounds like Ferengi's Rules of Aquisition but it's true. You can make more money when the SHTF than any other time........

HARM

You do the topic justice. You know what, we have yet to discover one single consistent free market fundamentalist in the past couple years. But I have to say that so that I can claim to be one of the handful of genuine capitalists left. I'm so warped I still think that people dislike Ayn only because they learnt it was fashionable to do so as some right of passage -- usually about 3 weeks into Philosophy 101.

Doug H

You can make more money when the SHTF than any other time……..

I couldn't agree more. I have inevitably made pretty much all of my money during recessions and corrections.

Isn’t the Chinese ideogram for crisis the same as opportunity?

"When written in Chinese, the word "crisis" is composed of two characters. One represents danger, and the other represents opportunity."

John F. Kennedy

Doug H,

Good observation on "showcasing loans" for the auditor! I've never been through that type of an audit but I know for a fact when my internal auditors go through my client files every year I reach for the spiffiest one I can find (randomly of course!)

FEES: There was a time when you asked about various fees/charges and you'd get the same old hum-drum excuses like they're standard customary and reasonable and you'd say something like "can I get a copy, I just wanted one for my attorney?" and they'd say sure. Then you'd go back into the fees and one by one they would all of a sudden either disappear or become negotiable. Of course with the "white hot real estate market" the focus was more on doing things quickly than correctly.

HARM Says:

> @SFWoman, Though it’s no beauty queen,
> I wouldn’t call that the Ugliest house in
> America or even NoCal

Some real dumps at:

http://marinpos.blogspot.com/

Keep in mind you’re quoting someone who also thought he was a jelly donut.

Yes, and I think I am a cannibalistic lobster. :)