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LA Daily News: Foreclosures, housing slump hurting California economy

“‘The problem we are seeing now is that first-time homebuyers can’t get into the market,’ Mozilo said. ‘This is the most expensive housing market in the country and the federal government has not done anything to help ease lending.’”

And what else, pray tell, SHOULD the government have done to "ease lending" that is has not already done (which itself is the single biggest reason why houses here are so damned expensive)? The government (incl. Fed) thus far has:

1. Dropped short rates to 1% and held them there nearly 3 years.

2. Cut 50 bps when it should have been RAISING them to combat inflation/defend the USD.

3. Provided every conceivable preferential tax incentive known to mankind to inflate housing prices, including raising the capital gains "homestead' exemption to $250/500K, virtually waiving the old primary residency rule (replacing it with "any 2 will do"), generously expanding the 1031 exchange to RE, etc., etc.

4. Growing the GSEs to absorb 50% of the national mortgage market and (until recently) hiking the conforming price limit every year, regardless of how working class incomes were doing.

5. Deliberate non-enforcement of mortgage fraud laws, ignoring blatant cash-back financing scams, phantom/shill bidders, lending to illegal aliens, identity theft, allowing the NAR to run a virtual information monopoly (MLS) etc., etc.

6. No application of fiduciary rules/SOX to mortgage brokers, lax-to-nonexistent regulation of the RE industry vs. securities.

“‘Programs (like Freddie Mac and Fannie Mae) have the same limits for North Dakota as (they do) for Los Angeles. And no one here can buy a house with what they are offering,’ he said.”

No non-rich person in L.A. can buy a house because (a) the prices are too damn high, and (b) the NINJA-ARM easy money spigot just got turned off. $417K should be PLENTY of money to buy a run-of-the-mill middle-class house *anywhere* in the U.S., given current incomes. Putting taxpayers on the hook for even MORE bad loans will not make them more "affordable", but create an even bigger moral hazard, reward the reckless & stupid, punish the responsible & prudent, prolong the inevitable bust, and make the aftermath even worse than it already is.

“Mozilo said the problems stem from the loosened lending and credit rules in the late 1990s through 2004.”

“‘It was an easy market,’ Mozilo said. ‘People subscribed to the belief they couldn’t lose - and for a while they didn’t. Prices continued to go up. What created the problem we have now is that prices began to fall and panic set in.’”

I guess Tan-Man had to throw in a couple of truthful statements just to confuse people, though his dates are off --it should be "late 1990s through 2006". Meanwhile, the man best known for that unique orange glow may be getting measured for an orange jump suit.

Discuss, enjoy...
HARM

#housing