patrick.net

I plan to stay at Paso Robles tomorrow night. Anything interesting there?

I plan to stay at Paso Robles tomorrow night. Anything interesting there?

Some good food, and of course, www.adelaida.com

Amazing wine.

You can take 84 W to the coast which is magnificent. Go West, turn right or left, can't go wrong. Hearst Castle is nearby. Now that boy had some fat stacks.

Hmmm, what acts are illegal?

I'm not an attorney, but as Peter P. pointed out, fraud (intentional misrep. of material facts with scientor), is probably the most common illegal act within the industry. Fraud can also occur where there's an omission of material terms, however, I think there needs to be a fiduciary relationship between the parties. Either way, I believe it would be tough to prove fraud unless the prosecution can show a pattern fraudulent behavior by the lender or agent.

The victim's best bet would be to try to void whatever contract that was created between the parties, (For example, any small print within the contract would be considered unconscionable, and therefore, voidable if a reasonable person would not have noticed the fine print and the provision included material terms).

As far as breaching some sort of ethical duty owed to the client, I'm not sure if that's a criminal offense. Rather, I think punishment would come from within the industry, (i.e., loss of license).

Anyway, that's my two cents.

But you gotta love Karma.

I suspect the Karma Interpol is looking closely at this international housing bubble.

"...And the worst part was the guy’s arrogance. He acted like he was the GOD of real estate."

There's got to be one in every group. In my case, the he is a she (and boy was she wrong about the current RE market). For a year, I had to hear about how Gary Watts was never wrong, and all the other bullshit about how the Orange County RE market would never stall or fall. I now take every opportunity to rub her face in it. For some reason, she doesn't want to discuss the RE market with me anymore.

Sir X who says what we all are thinking,

This isn't my thread, so I don't want to hijack it with a Fed/Money discussion. Suffices to say that the actual way the Fed creates money is a bit different than "just printing money". The Fed creates money through "seniorage", which involves how they make overnight loans to banks. The actual currency printed at the Treasury is pretty tightly controlled. A president wishing to illegally fund big stuff couldn't get away just ripping off the Treasury directly. Thus, drugs for guns, etc.

As it currently stands, no-doc "liar" loans certainly aren't illegal. Whether they are ethical is a bit harder of a question.

Is the lender unethical in offering such loans knowing they will be abused by people overstating/misstating their incomes?

Are the borrowers unethical for inaccurately stating their incomes?

Which party is primarily responsible?

I think in the US system it is the borrower. We don't have a "nanny state", and people are largely free to make bad decisions, throw away their money, even gamble themselves into living on the street. People are also free to decide whether to be honest or fraudulent.

When people lie on stated income loans they are committing fraud. They sign a statement that information provided in the document is accurate.

We could have an opposite system. A government that puts all the responsibility on the lender, in this case, to make sure a borrower "can afford" the loan. Of course, then the gov't would have to require your personal data is made available to the lender.

Given that my own blog is called Capitalism 2.0, you can guess which side I come down on.

Anthony,

Great video link in last thread with Rich Toscano! What a great guy, it seemed he didn't even have to "go after" the realt-whore all he had to do was let the guy bury himself with his own words. Thanks,

DinOR

Crime? Punishment?

What crime? As evidenced by my pal's massive ad campaign for mortgages in SoCal it's obvious (to me anyway) that it's the mortgage brokers themselves that are being viewed as the criminals here!

I mean it's bad. 9 out of 10 people answer the phone by saying "Is this some kind of finance company", "No we don't want to refinance" (before a word being said).

6 out of 10 claim to have refinanced within the last six months. (Is this a good sign?)

5 out of 10 claim to be "listing" or in some process of "selling" their San Diego area home (even if they are "just thinking" about it.

4 out of 10 can't speak english (but in broken english tell you they're not interested in refinancing)

3 out of 10 have trained their children how to screen a mortgage brokers calls. (I found that one kind of sad).

1 in 10 have anwering machines that say: "If you are a mortgage broker PLEASE do not leave a message, we are not interested in refinancing and take us off your list!

Folks, this is the state of the market. The sheer size of these loans is staggering! I mean scary. How could someone in Murrieta wind up owing 800K? The amount of "musical loans" and 11th hour damage control boggles the mind! As we revisit the mind of the FB it's definitely the criminal MB that created this situation. Certainly not themselves or the realt-whore that sold them that overpriced sh@tbox!

Where mortgage brokers will definitely find themselves "on the witness stand" is when the issue of "suitability" inevitably comes up!

Their tactics today are a mirror image of what con-artists have pulled on seniors for years. They call up some unsuspecting (and trusting) widow, promise prizes and gifts (with a small handling and shipping fee of say $1,000?) send them a toaster, or in most cases nothing.

Then they wait a few weeks and THEN claim to be part of a "victims property recovery unit" and promise to go after "those rotten bastards" and take the widow a SECOND time!

This is exactly how homedebtors are viewing the "lending" industry.

Of course mortgage brokers are trading roles with one another playing "good cop-bad cop" by rescuing the other brokers "victim".

Peter P Says:
Greed is what humanity stands for and it ought to be morally neutral.

I kinda agree. But where do you draw the line?
It certainly seems that deception (fraud) and violence are also a part of human nature.

Randy H says:
When people lie on stated income loans they are committing fraud. They sign a statement that information provided in the document is accurate.

Isn't there an adverse consequence for the borrower when such a loan blows up?

Seems like someone has already come up with a model bill against predatory lending: http://tinyurl.com/s6hqe

I'm not sure what the context is, though.
The bill also looks to be pretty far-reaching - as far as I can see, all current standard practices (no-doc, neg-am, flipping, "influencing" appraisers) would be prohibited.
Interesting.

What are the odds of this or something similar becoming law somewhere?

Isn’t there an adverse consequence for the borrower when such a loan blows up?

That's a good point. I think this is where it all gets complicated very quickly. Firstly, few lenders are on the hook for the debts directly; but most are for a portion.

Loans are packaged, "tranched" and then sold into the MBS and other CDO markets. Modern risk management.

That's why something like "nodoc" loans aren't necessarily unethical or illegal--from a particular perspective. Here's the nutshell argument (and please folks don't jump on me, I'm not saying I agree with it):

Kind of like the insurance industry, the home lending industry can both reduce their risks and costs by not examining each specific customer in depth. Instead, just ask the customer to self-report, then utilize intense actuarial/statistical data to profile segments/groups of customers. Like zip-code determining your base car insurance rate. This will capture both great and terrible drivers. But, when all added together, the company reduces the volatility (std. dev.) of returns on the loan.

So the lender claims they are making everyone's costs lower by only requiring customer self-reporting. It's a logically consistent and mathematically demonstratable argument. The social impacts, like moral hazards this creates, are another question for politicians to ponder. Just like w/ auto insurance, some people will figure out how to game the system. The larger the granularity of the technique, the more room for gaming by unscrupulous actors. The smaller the granularity, the greater the cost to everyone else.

George,

Thanks for bringing that to my attention! I've been wary of WaMu for some time. (How can you be in finance in the PNW and NOT have friends that work there?).

In time suitability issues will arise from their retail securities division as well. They have a mutual fund product line with ungodly payouts to brokers that virtually assure the investors will never see more than a bank return while taking market risk!

I can't wait to stay away from it!

SFWoman,

From just glancing through their data (Altos Research, the link at the bottom in the fine print), it appears they have a data anomaly in June that they didn't bother to clean out.

Click through some random cities and glance through the charts. Most have an aberration in June. The simplest answer is they are missing some data attribute. I can see some cities show an inexplicable inventory of 0 in June.

John,

LAW 5 (federal)) Interest rates may never drop below 7.5% since everytime it does people treat the dollar like toilet paper.

I hope that's tongue-in-cheek, lol. Otherwise we could just go ahead and call that "The Guaranteeing Another Great Depression Act".

ThomHall, Patron Tequila Anejo 375ML @28.99

Dude, that 56 bucks for a 750. The 1.75 at 75 is the deal

It's my new "strike price"

Inventory is falling!

http://bubbletracking.blogspot.com/2006/08/tracking-san-josesanta-clara-county.html

Please tell me it is because of the long weekend.

What should one look for in a good premium bottle of tequila? I've heard Sammy Haggar has this really expensive stuff out there. Is it really worth it? I usually just get the "Pancho Villa" stuff or house brand.

100% agave, worm at the bottom, how the stuff is distilled and aged.

Warning, I never drank tequila by itself, these guideline come from some piece of internet fluff or another. Consult wikipedia for more info.

What should one look for in a good premium bottle of tequila? I’ve heard Sammy Haggar has this really expensive stuff out there. Is it really worth it? I usually just get the “Pancho Villa” stuff or house brand.

Ahh DinOR, you Sir have come to the right place, the housing crash blog, source of all informations, including Tequilla.

Try some Patron Silver, pretty darn good and around 38/bottle at Trader Joes. Tequilla comes in 3 varities:

1) silver (unaged) Traditional, clear, fresh-from-the-still tequila is called Blanco (white) or Silver and must be bottled immediately after distillation. It has the true bouquet and flavor of the blue agave and is usually very strong. Patron has a nice "earthy" flavor to it, no wicing when drinking straight, try chilled a bit, very nice.

2) Reposado or Rested
Reposado is traditional, clear tequila that has “rested” in white oak casks for two months to one year. Reposado has a more natural mellowed taste than Oro tequila, with the oak barrels lending a pleasing bouquet and pale color. The blue agave flavor remains, but is gentler to the taste.

3) Añejo or Aged
Anejo tequila is traditional, clear tequila aged in white oak casks for more than a year. It’s amber color and distinctive woody bouquet and flavor come from it’s extended time in the porous oak barrels.

Personally I live the Anejo for sipping and the silver for margaritas.

SQT,

Well thank you. That's what I thought. (I know X isn't a fan of "blender drinks") b/c they cut into his serious drinking but after a few, who's gonna notice?

What I can't fathom is what's up all the different varieties of Rum? Coconut Flavored (which to me is like drinking sun tan lotion) and lime flavored and on and on? So if you are going to going to serve Rum drinks you can spend as much as you want to spend! In the end, what's the difference?

Btw, if you get a chance check out Ben's they have a great thread called "Free fall"! Wow.

-live
+love

Surfer X,

I stand corrected! So there IS a difference! In Oregon we have the OLCC (Oregon Liquor Control Commission) and they regulate the prices on everything. We can't even get a bottle at the supermarket. Only state controlled liquor stores with basically banker's hours. Very expensive.

Now if you want a bag of "da kine" NO PROBLEM! 24/7 availablity. It's incredible how many "grow operations" get busted up here every week.

newsfreak,

So true, so true. When I first moved out here I couldn't believe it! Chicago had a liquor store on every corner. Oregon has always been funny about hard liquor and I think for years it was a "3.2" state (meaning even beer could not exceed 3.2% alcohol). It was like drinking "near beer" for crissakes. No wonder so many people are hooked on dope! Sheesh.

I'll further agree that I can't ever recall any affiliation where I've learned as much as I have here. At work, it seems there's a lot of paranoia about sharing information b/c knowing something your co-workers don't could someday save you your job! We don't seem to have that problem here.

SQT,

A very rewarding experience FINALLY (in a very un-rewarding week)!

I've just up'd my batting avg. to .00089! Long time friend and perma bull just turned! I couldn't believe what I was hearing. After years of multiple bids on units in his bldg. (lofts if Portland) there are now over 15 units for sale and no buyers in sight! His girlfirends bldg. is worse, over 10% of the units are on the block. Well jeebus, they just finished the damn bldg. 6 months ago! How could it be that so many are selling so soon?

So he finally gets it and after years of frustrating and unproductive conversations he is catching up fast. Now he can't wait for things to crash so he can do some bottom fishing. All of this in just the last two months since we spoke. Incredible.

When these people declare bankruptsy and basically become burdens on society, the cost is absorbed by everyone else in one way or another.

That can be fixed pretty easily. I believe the hard core conservative libertarians are always arguing against that societal cost.

Jon, eburbed,

The consequences Jon reveals above are a direct result of "inviting venture capital standards" into our living rooms. Buying a house used to be about as "high risk" as getting a library card. Now, the wrong entry point can spell disaster! As with all venture capital propositions the rewards can be great (but so can the risks).

The difference is VC guys have already worked their way through the "cheap seats" and elbowed their way courtside. They've been through mutual funds, bonds, individual stocks and even IPO's. They trade options and even own options on RE. Before they got involved providing funding for start ups they took their lumps on the way up. They've earned the right to have a shot at the big time.

Joe Schmuckateli on the other hand has never heard of an affordability index, inverted yield curve nor can he define the terms of a neg. am. loan. BUT he's got one! This really boils down to a suitability issue. Taking a client that's still getting used to the idea of mutual funds directly in harms way through options without having a firm grasp of bonds and equities is just plain wrong. I mean c'mon, the guy doesn't quite get stocks but you're going to buy him an "option" on one? I realize most folks here have well graduated beyond this but let's allow for the other 99% that haven't.

Now he/she is in over their head on their loan/loans. The way that realtors distanced themselves from this part of the process is by showing the client even more "investment" homes and b/c the client had NO IDEA where he was going to get the money the realtor said I know this guy........ and he deals with these types of situations. Next thing you know they've taken a person with very good credit and MAXED OUT his DTI AND loaded hime up with about 50K in RE commissions and points.

"Players are Made, not Born" and so they go about "making players" out of everyone they can get their hands on! I actually tend to think these people have a pretty good case (however it will be made against the lenders and RE firms not indivuals) as they will be back working at Starbucks.

Santa Clara, Sunnyvale, San Jose was pegged as the most expensive area in the U.S. The house shown in the URL below I guess, was the at the median around $744K.

It is full of delusional people who think that there are no jobs outside the area and that the rest of the country is uncivilized.

It has a name: Silly Valley

@DinOR,

Congratulations on your (first?) perma-bull "conversion"! Please feel free to post the details on our Conversion thread.

I wonder if one of us can bring fraud charges against David Lereah for all his statements?

No.

People are free to interpret data any way they see fit. CNBC today had people honestly (in some cases) reading today's data as everything from "the biggest Boom in US history" to "recessions that will make the 70s look like the 90s". Even if people are paid to "think a certain way" and echo that in the media over and over, that cannot ever be made illegal unless we've really gone off the rails in this country.

Wasn't SQT saying something about Journalism being the 4th branch of the government. Since megacorps own all the media, I guess they're the new 4th branch.

Oh, btw: this gem from Newsweek's newest cover story:

Nightmare Mortgages
They promise the American Dream: A home of your own -- with ultra-low rates and payments anyone can afford. Now, the trap has sprung

Not that all option ARM holders go in blindly. While the loans are marketed aggressively, plenty of holders know exactly what they're getting into. Jon and Meghan Bachman of Portland, Ore., consider them wealth-building tools. "We want to own a bunch of houses," says Meghan. "We're hoping for early retirement."

http://www.businessweek.com/magazine/content/06_37/b4000001.htm?chan=top+news_top+news+index_top+story

the libertarian view often strikes me as an elaborate front for “not in my backyard”.

Many are not objecting to the notion of paying for a basic minimum societal safety net. They just want it to be a basic minimum, and not one iota more. Minimize moral hazard. People should be free to make bad decisions. And we don't want them to starve on the streets, even if they're there by their own hand. (I used all three thair's in one sentence!). We just don't want to make their lives comfortable or fulfilling.

Here's an actual crime that's come to light as a result of the current RE bubble being currently investigated: the collusion and racketeering practices of the RE industry.

Robert Coté Says:

There’s beeen a million take-offs of the original I think I had the Boston variety in my dorm room there until I “ran/was run out” of universities.

I've always found the geo-centricity you guys allude to funny. In a similar vein, it's funny how the BA has a general attitude of disdain and almost hatred towards SoCal, while most people I know in SoCal don't give a rat's ass about the BA. There's a parallel sentiment between Boston and NYC. Many Bostonians despice NYC and New Yorkers, while most New Yorkers barely know Boston exists. Maybe the Red Sox are an exception.

Liar loans from applicant to secondary market should be prosecuted under Patriot Act terrorism laws. Indeed some people will find themselves sentenced to 30-life of home detention with no trial or appeal.

:lol: FBuyerdom: The self-incarcerating crime.

Even home buying can get kind of risky if you're paying 50% of your take home income in mortgage, if your marriage is on the rocks, or if your job is not rock solid.

Before the home prices got so high, people in those situations (excluding the 50% of take home income in mortgage) are likely to get out with some losses, but have those losses cushioned by the 20% downpayment. But with current prices and bad practices, even buying a home with the intention of staying is a scary prospect.

And this doesn't even get into the question of how much better your home could be or how much better your household finances can be, if you waited and bought the house at 20-50% off.

jail time. capital punishment. public floggings. except they'd only enjoy it...

I’ve always found the geo-centricity you guys allude to funny. In a similar vein, it’s funny how the BA has a general attitude of disdain and almost hatred towards SoCal, while most people I know in SoCal don’t give a rat’s ass about the BA. There’s a parallel sentiment between Boston and NYC. Many Bostonians despice NYC and New Yorkers, while most New Yorkers barely know Boston exists.

The biggest problem that I see in California is that Californians tend to think that California is the center of the world - due to the fact that no matter how many hours of driving you do, you're still in California (or Las Vegas, a suburb of California).

As a result, Californians are unable to realize or even imagine that in reality, New York City is the center of the world.