patrick.net

eternitus "The Great"

Absofreakinglutely! Good for you!

Before "lofts" were all the rage in Portland the city gave prospective buyers a 10 year "tax moratorium" (ridiculously low taxes) IN EXCHANGE for a hefty chunk of their profit if they sold in the first 10 years on a sliding scale matrix. It was perfectly legal! You want to be subsidized? FINE.

Of course (up until about a year ago) there were waiting lists and lotteries to "get in" on the action. Now they sit on C/L month after month (but they're still offering the moratorium). Go figure.

Danilo Bogdanovic:

Allah - If you had read my blog in its entirety you would have noticed that I am all for and bring up ideas on how to change the real estate industry for the better. I am also sick of horrible and deceitful agents, corrupt lenders, big brokerages and the NAR for screwing consumers and giving the entire real estate industry a bad name. I am also against the broker-centric business model and believe that consumers should have the power.

I believe you.

What I was trying to say is that the honest, hard working loan officers who actually do care about their customers and can actually sleep at night (they are still out there) need to make sure that the lending institution they are working for is not doing corrupt things. Even if the particular loan officer is legit, but the company is not, the loan officer could be out of a job and/or a paycheck.

The loan officer is the interface between the lender and the buyer. He knows everything that is going on, in fact he is the one who initiates the loans. A loan officers job is:

1) find potential clients, individuals or businesses, in need of loans;
2) specialize in commercial, consumer, or mortgage loans;
3) often act as salespeople, persuading clients to obtain loans from their institutions;
4) help clients apply for loans;
5) analyze and verify the application to determine the client's creditworthiness;

If people are taking out loans they cannot afford, the blame lands squarely on the loan officer.

And I’m also saying that the company is at fault for not only screwing consumers over, but also for not paying their employees. Both are against the law and they need to pay for both offenses.

The problem is that the lenders are bankrupt; they have no funds to pay anyone. The only place the money can come from is either the taxpayer or the printing press and I am against both of them.

And if you blame every loan officer blindly across the board, then do you also blame the hard working guy in the mail room of Enron’s corporate building for the corrupt actions of the few at the top of Enron? Didn’t think so…

When the nasdaq bubble popped, I didn't blame all those (including myself) that had money in mutual funds that disappeared, never to be gotten back. I also didn't expect the taxpayers to make up the difference (and they didn't). I could have done more research and pulled my money out in time but I didn't so I accept the loss. If I worked for a corrupt business and I didn't leave the company, any losses I would have to accept myself as well.

Think about it, if I was working for a corrupt company was doing damage to society; after I lose this job, do you feel it is right that I should have society pay for what the company couldn't.

If you work for a crook, don't expect fairness. Anyone (even the poor slob in the mailroom) with common sense knew that lenders were giving loans to people that weren't in their best interest; it has been all over the news for the last few years. This is criminal activity! I have read over 100 articles about this and I'm not even in the business! I wanted for this to stop for years, I knew how it was going to end; but there was nothing I could do. If I was working for the company, I would have left!

It's not like something that was just uncovered. No one can play the "babe of the woods" routine and expect the taxpayers to compensate them; they knew what was going on and they could have left, but they chose to stay and go down with the sinking ship instead. Take your lumps and don't expect society to cushion the blow!

If you feel that the mailroom guy didn't know then maybe the next time we get a speeding ticket we can say.

Defendant: "Your honor, I didn't see the sign for the speed limit. I thought it was 55, but it was 30. I must have blinked my eyes for a second as I drove past the sign."

Judge: "That's ok, I'll let you go, just make sure that you look out for the sign the next time, ok?"

Defendant: "Thanks, your honor."

We’re all on the same page - you just took my post out of context. And if you don’t believe my stance on things, just ask Kevin at HousingPANIC about my guest post there a while back.

Again, I do believe you but I don't believe I took your post out of context. Now that everyone is talking about a bailout, putting up a thread like this is sure to bring forth many angry taxpayers!

I think what would be fair for a bailout is this:

Send out a form to everyone in America that has identifying information (such as ss#, etc.) with checkboxes as to whether you are for or against a bailout. If you choose no, you are exempt from it, but if you are also an FB, you can't get any funds. The entire funding of the bailout will be divided between all those who chose yes.

Those who don't want it, don't have to pay. All the bleeding heart liberals and FB's that want it can pay. The FB's get their bailout. Everyone is happy!

This is America and I think each and every individual should be able to decide how their money is used! It shouldn't be decided by a majority of votes! It's like when you work for a company and it is someones birthday who you just happen to really hate; someone comes around with a cup asking for $10 to chip in for a present for your enemy, should you have to pay the $10? I don't think so!

http://www.latimes.com/business/la-fi-bailout30mar30,0,4891093.story?track=ntothtml

Historically, the ownership rate has been around 65%; the bubble pushed it to 69%. Obviously it needs to come back down to 65% before we could again have harmony among the markets. The only way for this to happen is to let nature (darwinism?) take its course.

allah,

I would have simply responded to Danilo by saying there isn't enough good left in the REIC worth saving! Rookies are so quickly indoctrinated into the graft and greed it would be better (and easier) to just start over. I do appreciate however your willingness to take on that beast one nasty fang at a time. :)

I do appreciate however your willingness to take on that beast one nasty fang at a time.

You know me, I don't give up so easily; ask Randy H. :lol:

The link Sylvie provided (and Mark referenced) really cuts to the core of the issue. Since the subs originated these loans for them to step in and "float the issue" through subsidies is a clear conflict of interest.

For Wells or CFC to step in and back fill some of these loans is like a mugger having a change of heart and giving the victim "some" of the contents of her purse back to her. The mind boggles at how many securities infractions would likely occur.

This is what Ron Paul has to say about the Fed and the housing bubble; supposedly he will be up for presidency in 2008.

How about the government as a "victim"? Think of all the lost tax revenue! How we will our gov't continue to support insane spending trajectories?

A couple of examples:

California population: 36 million
California inmate population: 170,000+
Cost per inmate per year: $43,000
Cost per year per California resident: approximately $200/year per person (or $600 for a family of 3).

I thought this was staggering until you consider this:
DOD budget: $499B
Homeland security: $70B
US population: 300 million
Cost per US resident: $1,900 ($5,700 for a family of 3)

That was scary until I looked at entitlement spending and interest on the debt. I won't even get into that topic.

When the housing bubble busts, won't California and federal tax revenues decline precipitously? I know that the feds exempt $500k/house in capital gains, but there was still a ton of tax revenue related to real estate sales paid between 2001 - 2006 (singles with > $250K of gain, couples with >$500K, smart money real estate investors cashing out without doing 1031 exchanges, flippers with holding periods

We could expand on allah’s suggestion. Everyone writes on a paper what they think the tax rate should be. Uncle Sam then taxes you at that rate. Everyone writes on a paper if they agree with the Death Penalty. When they are convicted, the court looks up what they wrote on the paper and that is what they get. Everyone writes on a paper what their salary should be. Everyone writes on a paper what job they should have. Everyone writes on a paper where they want to live. This could go on and on. Wow, what a wonderful idea!?

This is idiotic and has absolutely no relevance as to what I posted.

Oops...
Should have said "flippers with holding periods of less than 2 years."

Glen,

Thanks for clearing that up, kind of left us hanging there.

All I can say is there are no easy answers. It won't just be CA with sagging revenues and the state's response to this short fall aren't clear just yet. My guess is that they (like most everyone else) are clinging to the hope that "things will return to normal".

More likely will be continued strain as floppers now begin to off-set income w/failed RE ventures. You're right though, it's awfully big to ignore and the possibility these guys will carrying forward losses for years is all too real.

Ron Paul has no charisma.

Dinor,

There will be a lot of hand-wringing, for sure. My guess is that we will see a return of xenophobic immigrant-bashing, protectionism and a continuation of aggressive military campaigns. I remember the early '90s: Japan-bashing, Pete Wilson, Pat Buchanan, Gulf war I, prop 187, three strikes law, etc.. Ugly times call for ugly politics.

The process of self-examination is psychologically difficult. FBs will not want to blame themselves. Politicians can score easy points with p-o'd voters by claiming that the source of our problems is some external threat.

Instead of admitting that they recklessly spent your tax dollars when times were flush, politicians will say that the source of our budgetary problems is immigrant healthcare or some other such nonsense.

Ron Paul has no charisma.

While I don't agree with everything Ron Paul believes in as I don't with any other nominee, anyone who is for abolishing the printing press is sure to get my vote.

Check out the new cartoon poll at CNN.

Here's a new Schiff article hot off the press.

Another small one bites the dust.

"Ugly times call for ugly politics"

Man ain't that the truth. Some time back I made an effort to de-rail the argument that subprime alone should take the blame. I was soundly thrashed (not here, at Ben's). Thus far the public and many investors seem to be satisfied /this explanation. It's neat, tidy and with a corpse and a smoking gun there's little motivation to investigate further.

How will we explain things when defaults bleed over into Alt-A etc. as we are already starting to see? For now everyone is content with this version of reality but until we address the "total package" we'll continue to fill seats at "Make Millions with Foreclosures" seminars.

DinOR, I firmly believe that the problem will bleed into PRIME mortgages. I suspect there will be some reconsiderations regarding the FICO scoring system.

Did you guys see the Ads?

Arizona CCW Courses

Wow!

DinOR, I firmly believe that the problem will bleed into PRIME mortgages. I suspect there will be some reconsiderations regarding the FICO scoring system.

It has been.

I do not understand why initial margin for stocks is set at 50% when one can buy a house with little or no downpayment.

DinOR, Peter and allah,

I agree. The Marin RE bubble blog guy uplinked a telling table:

The subprime resets and resulting defaults are only the earliest resets. The Alt-A and Prime resets take a little longer, as these are usually fixed rates for a bit longer, but reset they will. Anectodally, I (and I'm sure many of you) know people who have good credit, great jobs, who still went for an exotic loan product of some kind to stretch and afford the kind of house they wanted, ESPECIALLY in the Bay Area. Your typical professional feels he/she deserves to not have to live in a 1100 sf stucco box in the South Bay for 700k, so they stretch with an ARM to be able to "afford" a $900K or $1M+ nicer place in a nicer locale. Some/many of these folks will be hurt by the resets.

Peter P,

Do you mean they might "re-jigger" the FICO's so that a 680 somehow "mystically" becomes a 720? Since fico seems more art than science that may be entirely possible.

Do you mean they might “re-jigger” the FICO’s so that a 680 somehow “mystically” becomes a 720?

They can certainly hedonize it a bit.

I do not understand why initial margin for stocks is set at 50% when one can buy a house with little or no downpayment.

Peter P,

Which one do you have problems with? Do you disagree that you need to have "skin" in the game in order to play stocks, or that none is needed to buy a house? Wouldn't that be something if we could buy stocks using loans with "no money down" and interest-only payments! Now that sure would add stability to the stock market!

I am just saying that margin for stocks should be lower than that of homes because stocks are subjected to margin calls but homes are not.

"but reset they will"

Uh huh.

Can't say as I blame young professionals though. An 1,100 s/f home doesn't really afford all that much more utility than an 1,100 s/f apartment. How long will it be before you outgrow THAT? So "stretching" is a natural response.

So wether you default on a 700k loan or a 1.1 mil loan you're going to regret the move. This is going to cut across a lot of income groups.

skibum,

Too funny! Then when we're late making our I/O loan payment on our declining stock portfolio we can all join hands and demand our voices be heard! Kum-buy-ah My Lord :)

@SFBubbleBuyer,

Thanks for the cartoon poll link! Word of lender bailout schemes is obviously "getting around" to have something like that on CNN.

I hear ya Sylvie. I'm sick and tired of the bragging and now the whinning. I lived behind the Orange Curtain for a few years. I fear that the Bay Area is becoming infected by that same mindset. The RE bubble has certainly tainted that 'specialness' we used to have.

Any day now I'm expecting to hear the official OC greeting "Hi...what's your area code? What do you drive?"

We already have a bail out system. It's called foreclosure and bankruptcy.

Interesting article.

"We already have a bail out system. It's called foreclosure and bankruptcy."

Amen. We kid a lot about "debtor's prison" and "indentured servitude" but the truth is we did away w/that a long time ago. You want a break? There's your break.

Thanks for centering the debate Lowly!

Interesting cartoon:

http://tinyurl.com/2hda8z

Peter P,

Lower margins for stocks resulted in Black Tuesday. 10% was all the skin you needed in the game then. 50% TECHNICALLY keeps people from winding up with massive piles of debt as the brokerage sells of stocks to cover the nut as the market tanks.

20% in homes did a good job of keeping things mostly stable given the tendency of houses to stagnate rather than deflate. With 20% in, even if you foreclose, the bank can usually get back the initial investment and sometimes even costs.

10% is cutting it close to the bone, but would probably keep thinks 'sorta' stable. There's at least a little bit of 'holy crap, that's a lot of MY money' when you have to lay down 100k for your 1M McMansion.

5% through -3% is begging for trouble.

Then when we’re late making our I/O loan payment on our declining stock portfolio we can all join hands and demand our voices be heard! Kum-buy-ah My Lord

DinOR,

You know, the funny thing is that it's not THAT far off from reality. LBOs and a lot of hedge fund dealing invloves the large business equivalent of exotic loans. Wasn't the 80's heyday of LBOs and their "buy, fire and flip" strategy more or less what today's flippers do? A lot of that didn't end well, either!

Amen. We kid a lot about “debtor’s prison” and “indentured servitude” but the truth is we did away w/that a long time ago. You want a break? There’s your break.

DinOR, Robert Cote (good to hear from you!),

Maybe Amerika needs to find our own version of Australia (apologies to ajh and DS) and send the FBs there. Since everyone's moving out of Detroit, how about there?

Lower margins for stocks resulted in Black Tuesday.

Ocassional stock market corrections are healthy. They remind investors to practice prudent risk management.

Besides, why is the margin for SPY the same as some tiny four-letter stocks?