WatchPatrick,
This may be a dumb question but I would like to ask or see if you could ask your readers since some may be lawyers.
I just read one of your links where an investor sued, and won, for the fraudulently packaged CDS derivatives ( http://www.nytimes.com/2012/02/05/business/an-investment-wipeout-that-didnt-have-to-happen.html?source=patrick.net )
Here is my question: I bought a house in Florida in July 2005 for $300,000. I knew the housing prices were ridiculous but I did not realize or know they were actually false. Now, the Tax appraisers office values my home at $136,000 dollars! I was not buying the house as an investment and I got it appraised before I bought it – no one knew is was all a mirage that was constructed by the government, the banks and the NAR. Is there anyway home owners can pursue a class-action suit against the investment banks or the government or the entities that were responsible for creating this mirage and destroying many people’s years of savings (I put $100,000 down of my saved up money – it is all gone now)? Please let me know or ask your audience – a fraud was perpetrated on the American public and there seems there should be some recourse for those who purchased a home between 2004 – 2006. It seems to me that home-buyers were victims of these CDS derivatives also – even more so than an investor because we were not trying to take on anything as risky as that.
Thank you for your answer or help,
Patrick
Oviedo, Florida
Do any of the currently discussed settlements with the bank over foreclosure practices preclude a class action against the banks for fraud? Certainly they knowingly packaged bad loans into bonds.
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I think I get the irony thing now:
Calling an argument stupid can itself be called stupid.
That does seem to be ironic.
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robertoaribas says
It is not a question of morals. It is a question of endless prosecutions because the government knows the banks were at fault.
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Patrick says
Sorry, I meant to say his logic was despicable. You can be raped in many different ways, not all physical. But I will refrain from personal name calling.
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As an aside, herein lies Patrick's (of .net fame) salvation. Serious people with serious problems come here for help in navigating the often confusing, byzantine rules and options facing them in this crisis.
They post, seeking help and guidance, and are even okay with the notion that they fucked up. Yet sometimes all that is conveyed is "you're a fuck-up--HELOC pig!".
I understand the positions of the contributors, and I understand why things can get heated. What some here have missed is that the contributors are at their best when they can somewhat dispassionately express themselves. For example, a poster here may ask what their options are. An answer could be, "You gambled and lost, and you want me to pay for it??!?!? That said, you can always walk away as your State is a non-recourse....."
I think it's a potentially fatal mistake to lose sight of the fact that the audience here is larger than those bold enough to post. And those people want and need advice. They want and need help. They'll return if they get it, and if they manage to save a little scratch from your advice I bet they'd pitch in as a way of saying thanks.
I'm not arrogant enough to think my comment will change anything. I do believe it would be helpful for Patrick though if those who can recenter do so. Seems like the OP has paid for his crime of homeownership, and served his country admirably. Can we afford him the dignity of helpful advice?
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Good Point CL!
Well perhaps the OP can get a principal reduction from the JUST TODAY announced settlements with the banks for robosigning or wateva.
I know the principal reduction are part of the 'loan mods for liars' program aka HAMP and he said he can afford his payments so they wouldnt modify it. Maybe not now?
The FEDS are dead serious about doing mods - the bus stop near my office has a big advert for a HAMP mod to 'make your home affordable' and its a government ad not a fly by night.
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CL says
I agree. Just look at the number of views vs comments for any thread. Most people read but don't comment, and a lot of that is probably fear of being insulted.
I myself am annoyed at the way out-of-control borrowing drove up housing costs for everyone, but on an individual basis, it just doesn't help anyone to be rude.
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CL says
See this is the problem. Santelli said you gambled and lost. But most people had no clue they were gambling. Most people did not know or believe that it was a bubble.
People conveniently forget that David Lereah and NAR were saying daily, with the power of main stream media behind them, that you would be locked out of housing FOREVER if you did not get a loan now. That was the scam in conjunction with the banking sector that set up the scam.
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&feature=results_video&playnext=1&list=PL133F82757CE0FAFF
The sooner that you understand and accept that the entire financial system is a scam the happier you will be .
If you want to really understand what happened , have a read of ' Thje Big Short ' by Micheal Lewis . The end is interesting in that the main players think once the financial system impolded that it would have to be reformed . Yet as we all know it was not .
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Move on pal. I felt the same when I walked out of Las Vegas casino table.
You laid down $100,000 on the table expecting hugh win. The dice spinned, you lost. You gambled and lost.
But the Moral Hazard continues, the responsible American get shafted again, and get nothing ....
... Obama's 26Billion mortgage plan? The bulk of the settlement, about $20 billion, would go to one million American homeowners who would have their mortgage debts reduced or their loans refinanced at a lower interest rate. It also includes $1.5 billion for roughly 750,000 people who lost their homes to foreclosure between 2008 and 2011, with each receiving between $1,500 and $2,000.
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bgamall4 says
But we've had bubbles before. The dot com bubble wasn't that long ago (which is why I think facebook's ipo is a bit of a scam).
On the same note how many smoke and invest in a 401k..which is for the future? People gamble all the time it isn't always in the concept of investing.
The consumer has more access to information now than ever so it makes it a tad harder to argue that someone "didn't" know.
If someone walks into a retailer with a smart phone they can scan the upc's and find the product cheaper somewhere else, they can find real customer reviews and find out much more information about it then the company wants to say. The process of finding things out has always had its own terms. For example the sex offender registry is listed in some public buildings in my town of those that live in town that are on it. They aren't going to send mail to everyone in town about it. It would also be in local newspapers as a public notice.
A local strip mall was being renovated last year. They had a town meeting and I noticed on the blueprint that a video store was not listed on the new one. I inquired and was told they didn't renew their lease. The company filed for bankruptcy and some at the place were surprised it was closing..um...the meeting was across the street from the store. I know it kinda sounds like hitchhikers guide to the galaxy but you have to be informed more and more these days.
I worked in retail related to home improvement and anyone could tell you it was a bubble. Heck I saw a man who probably had scoliosis lug a whole bag of shingles to a cashier! Constant building led to what..extra buildings.
http://yuriartibise.com/blog/downtown-phoenix-recession-ghost-town/
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Patrick says
Instead of buying that overpriced POS you bought back in 2005, you should have proposed a class action law suit by all the renters who were priced out of the market by the bubble since 1975. But, no, you didn't seem to think that there was any fraud perpetuated against the American renters back then. In fact, I bet, you were enjoying your prized possession appreciating for a few months, before the crash. And now, you expect to find sympathy on patrick's blog. Well, I only have 1 thing to say to you. Sit back and enjoy the crash - it's the renter's time now...
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mdovell says
Many people didn't know it was a bubble and you should read this as proof: http://en.wikipedia.org/wiki/David_Lereah
And even those who thought it was a bubble never thought it would crash. They thought it was a new normal, that real estate was really more valuable. I remember people saying it had to go up because there was no more land in the bay area, blah blah blah.
There was mass media arguments that the bubble was sustainable, even for those who knew it was different. Even smart people on business news desks were surprised at the crash.
But it was a premeditated bubble, and planned a long time ago at Basel 2 in 1998. Again, that meeting brought out off balance sheet hiding of bad loans AND a false math assumption as to the risk of all mortgages defaulting at the same time. That mispriced the CDO risk and easy money flowed from that. It was planned years earlier than it happened.
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dunnross says
You said it Bro! Just like that speeding BMW on the highway crying to the cop giving him a reckless driving ticket. Too late. You chase greed and you deserve to pay. The smart money left the station many years ago.
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dunnross: It is AMAZING to me how people make judgements on others they do not even know (do you think one post on a page makes you "know" about my life?). For the record, I never owned a home before 2005 because I was in the Military for 21 years and moved around often, so I was a renter the WHOLE time.
For those who say "You should have known": Let's be serious here - no one knew. Want proof? A hedge fund manager made BILLIONS of dollars because he invested AGAINST the establishment with the belief it would all crumble. Why did he make so much money when it did fall? Because every other talking head was saying that this was the "new normal" and there was not problems going on - he was one of the VERY FEW who said it coming and made BILLIONS on it (which proves you all did not REALLY see it coming or you would have profited HUGELY off of this too).
bgamall4 is correct - I did not know I was gambling nor did I realize I was participating in the stock market when I bought my house and MANY people where in the same boat. Shame on me, I should have realized my country was full of cheats and liars but, I had been overseas in Germany and Turkey - where people are more honest - and did not realize my country had turned into a cesspool of greedy, dishonest, money-crazed people. Maybe I was a little niave but I moved from Turkey backed to the states and had no clue of the gross non-sense that was taking place.
Rember, though, the main point: This housing debacle is MUCH, MUCH bigger than me and my little housing situation. Whether I should have known this or that is not relevant since A CRIME AND ILLEGAL ACTIVITY was at the base and the root cause of the artifically inflated prices. Was there greed in the average American during this time? - yes, there was but, again, that does not negate the criminal activity that was occuring which the average American had absolutely NO CONTROL over whatsoever.
Like I mentioned to Robert already: to blame the average consumer who was just trying to put a roof over his families head (no, not investing nor being greedy) and to tell him/her that it was THEIR OWN FAULT is the same as telling a person who gets mugged at night that it is his fault because he should know not to be outside his house at night (yet, doesn't he have a right to walk outside at any time of the day or night in a free country?). A person has the right to buy a house and should not have to worry about getting mugged by the very industries that are supposed to be serving the greater good of society. The problem in America is that anything is now justified in the name of "business" and ever increasing "profits". Let me warn everyone who reads this: WE WILL ALL HAVE TO ANSWER FOR OUR ACTIONS ONE DAY AND GIVE ACCOUNT FOR EVERYTHING WE DID, WHETHER GOOD OR BAD TO OUR CREATOR. What relevance does that have to do with the topic at hand? This: The mentality that a person can do whatever they want and it is the other person's job to protect themselves may work now but, one day, you will have to answer for that...that is a promise.
Remember: treat others the way you would want them to treat you - because that is the measuring stick each of us will be measured against.
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Patrick in Oviedo Florida says
Well said, Patrick in Florida. I hope you would read my newest article on Business Insider and perhaps comment there as well:
http://www.businessinsider.com/dick-bove-just-argued-all-mortgage-holders-should-get-cramdowns-2012-2
There is a media blitz to show that bankers were not at fault for bad loans, but rather borrowers. Of course they switch cause and effect but people are so brainwashed by the main stream media that they cannot see the misuse of simple logic.
We are dumbed down because the powers that be want us set against each other rather than against the real culprits, the banksters.
People are so fooled, and so in a fog. It is sad, very sad.
I would like to see the owner of this great forum stand up against the immorality of this switch in blame from the cause to the effect, and I hope you hold your ground.
This all is no different than the PIIGS getting blame for what they do. The bankers made the loans. No one held their arms behind their backs and forced them to make the loans. Most of the housing bubble was deregulated and the loans were made freely and without force, except for the CRA loans which were only about 24 percent of the subprime and zero of the prime toxics.
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Patrick says
Yes, your paper loss hurts, but lets look at the situation positively. Obviously, you thought the place was worth it for your family to put $100k down and $X per month. Unless you plan to sell, what's the big deal? Nothing has changed except that your assessment went down and you taxes are now lower.
If you planned to live in that house only a few years and then cash out on expected increased equity, then the house was more of an investment than you claim.
Also, if "Benny and the Feds" decide to do massive printing and the resulting inflation nullifies public and private debts, your house value will likely rise up to more than you paid. Could I then sue you and the other benefiters of the inflation fraud because my cash savings were destroyed?
Was that house new when you bought it? If not, is the seller a crook because he sold you a $136k house for $300k?
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bgamall4 says
I hope you and others don't think that your money spending actions are best guided by knowing about crashes and bubbles. Stick with fundamentals and let those guide you. Ask, "How much money do I make? How much am I planning to spend? What is the mathematical relationship between the two?(requires only division) Does that make sense to me? What is the average income in my area? How does the average income compare to my income? What is the average cost of a house? Does that make sense?"
I've been asking these questions the entire twelve years I've lived in the Bay Area. My answer has increasingly been, meaning the answer got more emphatic during what we now know was a bubble, "THIS DOES NOT MAKE SENSE!"
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FunTime says
So pat yourself on the back. You must be better than the "deadbeats".
Or maybe most people don't analyze credit the way you do. That is closer to the truth. Most people don't have a clue, and just want shelter and trusted their banks. Look where it got them.
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bgamall4 & Headset - thank you both for your comments. I will visit the link and definitely read the article.
My goal is to live in this house until I die, Lord willing. I can honestly say I was buying a home and not an investment. I knew it would not appreciate much more (if any) when I bought it because the prices were ridiculously high. I used to comment to my wife, "how can people afford this in the Orlando area when the average worker is only making $15 - $20 an hour?" but I honestly did not know if was all so fake (and like I said, neither did most people. Even professional economists were blind to it if what they were spouting on CNN and Fox was really what they believed).
I do not think even 30 years from now the prices will be back to where they were and that is ok with me - it was an unsustainable bubble, an illusion with no substance; so why would I want that to happen to the next generation too?
As far as hyper-inflation goes, if the Fed print too much money, we will be buying a loaf of bread with a wheelbarrow full of money jus like in Germany back in the day.
Was the one who sold the house to me a crook? No. He was just an average American that was working within the system he found himself in (just like I was). Had he caught the greed bug like most? Maybe but the whole situation was so stupid and I do not know his life situation so I will refrain from commenting on that. But, no, he was not a thief nor do I bear any ill-will towards him.
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Patrick in Oviedo Florida says
You could be right, however, I believe many in government, the majority being Republicans, want another housing bubble as soon as possible. Something to keep in mind.
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bgamall4 says
Or some other bubble. The point of what I wrote was not to boast. I'm trying to promote people's trust in their own instincts. Patrick in O Florida wondered how people could afford houses and he was almost there to understanding. I don't blame him for taking the risk. For whatever reason, I'm naturally built to question every trend I see. I am very uncomfortable when I think I am like most other people. Of course, I am in many ways, but I have the idea that I am unlike others which keeps me from doing things like buying houses when all of my friends now live in houses purchased with a mortgage.
My main issue with the way housing value was built is that at some level and in many places people were lying. Lying. Unfortunately, it was easy to buy a home and not be lied to, because the real estate agent and the owner typically probably didn't know that insitutional investors had created this massive section of securities that was quickly becoming debased.
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That first frame of video that grinderman posted creeps me out!
Comparing mugging with mental mugging of deception and lying gets tough. There are laws that attempt to do this, but our country, the U.S.A., has a strong bias toward money and has had that bias for longer than any of us have been alive.
It's a really bad deal that the way you get elected POTUS is to raise millions and millions and hundreds of millions of dollars. Hopefully people in the U.S. will soon embrace their freedom and elect someone to office who is not a millionaire and not taking huge amounts of money from investment banks and large corporations.
Vote for someone outside the two major parties.
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Patrick in Oviedo Florida says
No one?
Peter Schiff, Merdith Whitney, Bill Gross (pimco), Nourial Roubini, Nassim Taleb, Mohammad Al Berian (pimco), Ron Paul, Robert Schiller
bgamall4 says
It isn't normal for a surge in value without some surge in demand or massive amounts of scarcity. It doesn't take a group of mensa members to tell it was going to pop. I could tell that just working in retail and talking to contractors..I started hearing it in '06.
Even on '05 the economist (the paper not a person) called it in '05
http://www.economist.com/node/3886356?story_id=3886356
"The increasing riskiness of mortgages is not the only sign that America is experiencing a housing bubble. The ratio of house prices to rents is well above its historical average, as is the ratio of prices to median incomes. And people seem increasingly to be basing their house-buying decisions on the notion that the large capital returns of the past few years—house prices in America are up by 65% since 1997—will continue indefinitely. As with a stockmarket bubble, if this confidence is shaken, prices could begin to fall rapidly."
here's robert schiller
http://www.yalealumnimagazine.com/issues/2009_09/shiller032.html
To say that "no one" called the housing bubble is a bit naiive (no offense). It is more correct to say "no one took who called the bubble seriously until it was too late".
Unless you want to say rent a property out then you really shouldn't be concerned with rates going down. If you bought a house then fine, live in it. Flipping houses is much harder today and frankly I don't think that it really creates long term growth. I've seen a building in one city near me turn from a bait and tackle shop to a hair salon to a sandwich shop..and back again..
Plenty of things go down in value after you buy them. I'm typing this on a four year old laptop on it's 2nd battery. I don't expect to sell this for a profit. I have a car 10 years old and I doubt I'd ever get the same value then what I paid. If you want to invest in something I'd argue in your health. Don't smoke, don't drink that much, join a gym and education. Not so much a degree but never stop learning or thinking that you cannot learn.
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"To say that "no one" called the housing bubble is a bit naiive (no offense). It is more correct to say "no one took who called the bubble seriously until it was too late"."
Good point - I could have worded that better. No offense taken, thank you for the kind spirit you shared that in and that is probably the better way to word it.
Yes, Peter Schiff did but look at this clip to show how much the "experts" did not agree with him (and this was in 2006). People seem to have forgotten this (the majority of "experts" ridiculed his position; hindsight being 20/20, we now know who was right but, back then?). Please, everyone, look at this and refresh your memories - this is in 2006:
www.youtube.com/watch?v=2I0QN-FYkpw
or this if that link does not work:
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Again, how many other predictions do they make that don't "come true"?
Paul et al, warned of hyperinflation. The rest of the world said inflation would not occur due to slack demand. So, who is to be believed?
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Exactly, that is the point! Most of us are not Harvard and Yale trained economists and the best we can do is try and understand it the best we can. In this case, however, even the highly educated people who should have known better did not.
The truth is, the illegal activity we know about is like the tip of an iceberg sticking above the water - we only see about 10% of what is really there. The corruption and illegal activities ran deep, I believe, and we will never know the true extent of the crime.
The bigger problem now is, although a little has changed, the system is still rigged and the odds are still stacked against the average American just trying to make a decent living and take care of his family. This is the part that needs to change - we need a system that does not reward corruption and dump on and steal from those who are simply trying to make an honest living for their families.
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i saw that video in 2006. the message was out there.
i sold in 06 and been renting happily ever since. mostly renting makes me happy when house prices are down yoy. one year house prices will go UP in los angeles and i wont be happy at that time.
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Certainly it can be hard to tell who to believe. Heck I almost was going to buy enron stock in early 2001 because it was hyped up.
Some outlets I trust..others not so much. Barrons had a article back in the fall of 2000 that pretty much detailed that the dot com crash was coming. Y2K happened (or not rather) and stocks surged..by march/april it crashed.
I'd argue that bubbles have some common traits
Speculation leads to saturation - over supply
the general consumer does not know what they are buying
there is no signal of outright quality
"it's different" or "it's different now" becomes a mantra.
It is considered easy
You should get in before you are overpriced (which is kinda stupid with stocks when there are stock splits anyway)
The difference with this bubble vs some prior ones is what was created isn't liquid and few really want to deal with. With dot coms the property was auctioned off and the stock tanked..I've seen kozmo.com stuff sold in discount stores..but massive amounts of houses are harder to get rid of.
I'm thinking there is some other bubble but I'm not sure. Some say alternative energy but it's already beaten down (ballard power, first solar...down 10% today alone, canadian solar) I say private education but it took has taken a hit already (devry)
The only other thing I can think of would be medical stocks if Obamacare does not hold up. Maybe something else could be attempted like if states somehow mandated that some employers would have medical staff on hand if there is some level of employees on staff.
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Someone who served to military corporations for so many years had lot of opportunities to understand what propaganda and brain wash is.
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That "Military Corporation" (as you refer to it) is what protects your freedoms so you can cheat, steal, lie and defraud each other. You should not "bite the hand that feeds you". Based on you icon of a nice, red car, you seem to like the toys that Americans blindly chase after.
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PockyClipsNow says
but that message was playing on a broken record. These guys had been saying the same thing since around 2003. Maybe earlier but that's when I first heard people telling me not to buy a house.
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Id say if they built houses out of different material. Don't use wood "planned obsolesence". Not good to screw with. Then not charging you usury (interest). Don't make a mistake you would still owe. So you would be in debt. The other part would be to NOT use paper to suck everlasting labor out of you. Which is a really bad deal. Just labor straight out for what was built for you. The swindel part is the paper. Its a really bad measurement to base your labor on. Its in someone elses favor (FED) because they set the measurements. Ie: They can keep you on the hook forever.
Three months to build (most houses) 30 years to pay for your working for free dude. Thats just one example of many.
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Patrick in Oviedo Florida says
See… you still don’t get it.
Bad “evil” people (I’m not one of them) live around us in any political or economic system. Everyday some of them die and new ones are born. Nobody is able to change that.
Smart people makes mistakes too and not so smart sometimes get lucky.
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PockyClipsNow says
LOL! Yeah, they were lining up to buy my crap hole in the central San Fernando Valley.
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My apologies, REpro, I misunderstood your post.
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RE the letter to Patrick.
I think everyone knew there was some strange shit going down, especially for those here in south Florida. And I tell you something else. 300K got a house one degree better than a Shit hole, in So Fla back in 2005, not factoring in the custom cabinets, the granite counter top, and the marble baths. Don't tell me, you didn't know there was something rotten in Denmark.
Everyone knew there was sham going on, but every one that bought expected Uncle Sam would bail them out, or do what ever it took to keep prices inflated. I'm not going to argue wit, that's a moot point, but I still don't understand why those buying never thought about the sustainability of a healthy housing market, at the rate houses were appreciating. At least consider just one generation from now would need a couple million for that same $300K house. What good is a super inflated house if someone can't afford it? We aren't France or Italy, we're the United States of America, home ownership for those willing to get their shit together has always been a guarantee. Not in the literal sense, but if you squared your credit away, saved up a few bucks, found the affordable house, you could buy a house.
We were in uncharted territory, when you typical family starter house went from 120K to 220K in just two years. There were still plenty of folks struggling to pay the mortgage on 120K. Well of course they were paying 8%.
If you sincerely got caught up in the hype "buy now or be priced out forever." Then I think you should sue the NAR. I don't think this is the Banks fault. At that point you wanted to buy a house, you would have borrowed from the Mob Shylock to appease your deepest fears.
All I knew there was no damn way I was stepping up to a 2500 or 3000 mortgage if I weren't living Turnberry Ilse, Weston, Boca, Emerald Hills or some Neighborhood like that, but definitely not in your average South Florida suburb that went for 79K-120K for the last two decades, with out budging a cent.
Having said all that, all of those people that actually got foreclosed on only got $2000 for their trouble. How much do you really think you'll get? You'll just make a couple hundred lawyers filthy rich if you succeed. You'll still be straddled with debt, and you might get a steak house gift certificate for your trouble.
I'd like to Sue all of those that bought, and put the world though all of this, for their greedy Ass Greed.
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HeadSet says
Yes, this is just a temporary paper loss. However, let's just say it's a life-time loss, because, unless you are an infant, you won't live long enough to see prices go back to the 2005 levels.
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bgamall4 says
Bubbles don't re-inflate, period. If the gov't could re-inflate the .com bubble, they would have done it, instead of blowing up the housing bubble in it's place.
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dunnross says
I agree. Tough to get that many people going in a direction against their better interest back-to-back. In the infamous words of George W. Bush, "Fool me once, shame on me. Fool me twice, won't get fooled again." I think he also said, "Meet the new boss, same as the old boss."
So look for the next bubble. Gold's an obvious one. ETFs? What are those?