patrick.net

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.

But if you use a manipulated currency and an international plan of loose credit following the marxist dictat of “sell you the rope” then you are… um… China, our friend.

I believe the expression is that China is our frenemy.

How can Californians possibly think they're the center of the world? You guys watch TV shows 3 hours after everybody else in the country. Your stockbrokers work a 5AM-2PM shift.

I hope that this article will serve as an encouragement:
http://www.msnbc.msn.com/id/14604126

No, it may be an encouragement for you. We do not need any more confirmation. We do welcome dissident opinion nowadays because we are getting really bored.

BTW, near the white hot job center, there are a few new communities in Sunnyvale that are now offering incentives and/or price retrogradation. I am sure prices are still "on the rise". Perhaps builders are just being nice.

Fake P Says:

Have any noticed that the job market in the bay area is sooooo hot for tech guys? The traffic jam in San Jose is getting from bad to unbearably bad.

At least try to use proper grammar. You read like a FOB.

Fake P is not too bad, at least he never uses all block capital letters.

Fake P is our friend. We miss him!

Now where is Jack?

http://www.counterpunch.org/whitney08302006.html

The Great Housing Crash of '07
By MIKE WHITNEY

This month's figures prove that the so-called "housing bubble" is not only real, but that its cratering faster than anyone had realized. As the UK Guardian reported just yesterday, "the orderly housing slowdown predicted by the Federal Reserve will (soon) become a full-blown crash".

All the indicators are now pointing in the wrong direction. Consumer confidence is down, inventory is at a 10 year high, and the number of homes sold in July was 22% lower than last year. As Paul Ashworth, chief economist at Capital Economics said, "Things seem to be getting worse very quickly. Freefall is a strong word, but I think it's the right one to use here." (UK Guardian)

The housing bubble is a $10 trillion equity balloon that will explode sometime in 2007 when more than $1 trillion in no-interest, no down payment, adjustable-rate mortgages (ARMs) reset; setting the stage for massive home devaluation, foreclosures and unemployment. ("By some estimates housing activity has accounted for 40% of all the jobs created since 2001". Times Online) July's plunging sales are just the first sign of a major slowdown. The worst is yet to come.

Robert Cote,

Huh? Congrats and everything to you for having a great life, but what does that have to do with west coast stockbroker hours? I was just trying to illustrate that the Left Coast does not have major stock or commodities exchanges.

I miss Jack too. Then we can restart the discussion on Marin intangibles and how high they can go. Then we can go through MarinPOS's selection of high priced shacks and go find intangibles...it'd be so much fun!

And then I'll go OT and start bashing marble kitchen counters, Jack will come in and defend marble countertops and then I'd be forced to apologize and say that some marble kitchen counters are actually quite cool, especially if they're black and overlook the Bay.