patrick.net

Does anyone know what the foreclosure count is for San Jose/Santa Clara?

I would be really interested.

Why is this so easy to find homes for sale for free and all foreclosure listing sites demand payment?

Sorry Claire --check the newslinks on Patrick's main page, might be something there.

Now, can anyone tell me why this makes sense?
Federal Reserve says super SIV requiress less capital

WASHINGTON, Nov 2 (Reuters) - Banks that back a proposed new multi-billion dollar investment fund that may purchase risky mortgage-related assets will need only one tenth of the capital they would need if they were to take the assets onto their own balance sheets, the Federal Reserve has said.

Hmmm... let me get this straight. The toxic waste the banks are holding in the form of MBSs CDOs & various other NINJA-mortgage derivatives is so radioactive, they have to get it off their own books ASAP and dump it in this wonderful new 'mark-to-myth' creation of financial alchemy, known as a 'Super-SIV' or M-LEC.

So, given that the M-LECs are full of toxic waste by definition (the very reason they were created in the first place is to house non-performing toxic loans/derivatives off bank balance sheets), the Fed figures they're so safe they only need 1/10th of the reserve capital needed if they stayed on the banksters' own books.

Huh??

HARM,
Don't you realize that the "Superfund" is a big huge, stinking con game?

It's nothing more than a bunch of banks up $hit's creek trying to get rid of these bad, bad instruments on their "off balance sheets". So, they come up with a great idea of putting in some chump change, slapping the "Citi" or whatever label on them, and hoping that suckers, er, investors, buy them becuase these banks have a good reputation. All this with the blessing of Hank Paulson.

Well, seeing how Citi is in deep doo-doo, doesn't seem like their "plan" is going to quite work, is it?

@skibum,

Sounds pretty cool --where can I get me some? Can I buy them through my 401k?

Time to start taking out unsecured loans & CCs from Citibank I guess. Doesn't look like they'll be around long enough to collect.

skibum :

I have often wondered if this whole Superfund is just a mental game. I don't think there will be a Superfund. It's just a charade. Just a feeble (and unsuccessful) attempt to show investors that, nothing to worry, these assets will be taken by a Superfund.

Based on the Citi's stock, no one is buying that. (Pun intended)

Completely OT.

I know some people here like photography a lot.

http://sawse.com/2007/11/02/25-photographs-taken-at-the-exact-right-time/

I suspect some are from Video camera and some might be doctored. But nice to look at.

Claire:

Does this help?

http://bubbletracking.blogspot.com/2006/12/tracking-foreclosures-and-pre.html

HARM :

On topic. It still seems like yesterday to me. After having suffered through years of boasting no how people struck a goldmine in their backyard, the quietness of last 12 months is not long enough.

After having lost serious money in dot com, I used to participate in similar discussions - "My loss is bigger than yours". It was a way of trying to laugh away your problems, some consolation.

I bet those days are returning to the savvy people who won the bidding wars.

Thanks Random User

from that site: first number foreclosures, second number pre-foreclosures

Santa Clara County
10/31/06: 79/1,293 (6.1%)
11/30/06: 101/1,347 (7.5%)
12/30/06: 119/1,195 (10.0%)
01/30/07: 140/1,205 (11.6%)
02/27/07: 161/1,217 (13.2%)
03/30/07: 201/1,253 (16.0%)
04/30/07: 313/1,402 (22.3%)
05/30/07: 392/1,554 (25.2%)
06/30/07: 503/1,698 (29.6%)
07/30/07: 473/1,771 (26.7%)
09/07/07: 534/1,972 (27.1%)
09/30/07: 638/2,106 (30.3%)
10/31/07: 658/2,243

People are starting to fold!

The fund will require a government subsidy and will eventually become part of the national balance sheet. It will then just become part of the national debt.

These types of insane measures would normally cause partisan outcry, but the silence and subtle head nodding by the feds is more frightening. It is worrisome because we can start inferring from this appeasement that the situation has become so grave, policymakers are starting to resemble crack addicts.

I have often wondered if this whole Superfund is just a mental game. I don’t think there will be a Superfund. It’s just a charade.

Superfund is already in Silly.con Valley:

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2004/01/30/BUGCJ4JS7N1.DTL

@HARM,

I believe it means the entire financial system is facing solvency issues with major players potentially failing. The FRB is scared to death now.
Northern Rock was just a precusor of many bad things to come to their country and ours.

For humanity sake I hope I am entirely wrong!

The crash is only just beginning.........

Paul I hope you are wrong and I am wrong, but I have a feeling we're not wrong....

Paul and Ex,

You are not wrong.
There is a massive leverage unwind that will roild the financial markets.
That problem will cause massive local polical fall-out. I would say protectionism and massive governement regulation are two obvious outcomes.

Uhg!

Iran is next, I guess.

They will kick our asses.

Well this time it's a credit union that has folded:
www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/11/04/BA7FT67CK.DTL

"The weight of defaults on real estate loans has forced the Bay Area-based Cal State 9 Credit Union into federal conservatorship.

The state Department of Financial Institutions announced late Friday that it was putting the National Credit Union Administration - the federal agency that regulates and insures credit agencies - in charge of Cal State 9 operations. "

Bap33 if I understant correctly, how it works right now is you walk away from your stucco shitbox and if the debt is forgiven, you have to declare it as income and pay tax on it.

Talk about a way to hit someone who's down, kicking the wounded is after all The American Way.

I think by the time the FB has walked away from their stucco shitbox, they've likely sold the widescreen TV, the Harley, the jet-skis, etc. They've usually lost their job, health, spouse, maybe all three. The owed tax on the "income" will end up being defaulted on also. This just results in a few years' worth of paperwork and wrangling for the IRS, for no return.

I personally hope the bill passes. Yeah a few will scam the system but they will be a tiny minority in this Greatest Depression we're just entering.

ex-sunnyvale-renter

I am not sure it is going to work the way you think it will. Many loans were taken out with piggy back on top of the main mortage. These people who end up in foreclosure will still be liable for these piggy back loans even after the home is sold. The bank will graciously let you convert the Heloc loan into a line of credit at a higher interest rate. There is no escape for many people. The new bankrupcy laws will make this worst than in years past.

The main morgage will be taken care of with the sale at the sheriff's auction. If the home was bought with an 80/20 loan, the bank will get the money. Even with a 20% hair cut on the home price, the bank will break even on the main loan. This leaves the poor FBers in ruin as debt serfs.

Bap33,

I also have no love for the howmuchamonths who with thier collective use of easy credit ran up the prices of homes and cars. Yet, the Mortgage Cancellation Tax relief may have one good consequence. The law will encourage more short sales that will bring down the prices of home to levels affordable by those of us who refuse to sell ourselves into debt slavery. I would love to see an outcome where people wise up and a trend is established where folks only buy homes they can afford with a down payment and no more than a 15 year mortgage.

@ex-sunnyvale-renter

The bill is S. 1394. It has been referred to the Senate Finance Committee. As a saver and investor, let me offer my perspective.

As a reward for my diligent work, thrift and disciplined delayed gratification, I am paid back with the virtually certain passage of this bill, the creation of the SIV and its almost assured eventual bailout with taxes, and the dramatic debasement of the currency. A simple request that funds secured through cash back components of mortgage deals be treated the same as any other source of income is painted as a heartless "kick them while they're down" sentiment, and advocates of the Congressional bill like you glibly assume that somehow the missing taxes will be paid from elsewhere (and Lord knows Americans won't demand a cessation to the out of control spending so the taxes will be needed). This sentiment comes purely from the basis of I have money, and the short sale borrowers (putatively) don't.

So after saving and investing sensibly, then getting my positions in real terms eroded from the currency devaluation, I somehow don't qualify as "someone who's down". Apparently in your world I need a good shit-kicking from lots of taxes and inflation to pay for other people's mistakes. Right. Like any sensible investor is going to just stand there while he gets the crap beaten out of him by a crowd that daily resembles less and less a reasonable risk as an investment. And more like a bunch of thugs.

This bill legitimizes theft and fraud. In all other financial activity, income is never magically vaporized as if it never existed, especially if the income derived from speculation. However, because enough people participated in the speculation, the fraudulent outcome of tax-free income is given a pass. All those who got caught with underwater dotcom options triggering tax liabilities should get a pass too, by these well-nigh non-existent standards of fiscal responsibility. I'm not going to stick around for the inevitable soaking savers and investors like me should expect after this continuous trend of shameful behavior. Fool me once and all that...

The bill's assumptions on tax receipt neutrality are naively optimistic. The whole rationale behind the bill is addressing an aspect of distressed housing, yet it presumes that the tax receipts will be replaced by tinkering with a part of the tax code dependent upon a volume of housing sales that is historically aberrant. So not only will the bill reinforce moral hazard, it will increase the overall tax deficits.

We now have the likes of Mozilo heavily pressuring the GSE's for an increase to jumbo caps and other shenanigans. On top of all that you want to pour another bucket of speculative fuel by telling people with this bill that their housing is simply another investment. Not just any investment either, but one where tax liabilities from income already received and spent can be conveniently written off.

Supporting this bill means believing a system rife with fradulent mortgage and brokering activity will only produce "a few" who "will scam the system but they will be a tiny minority". What, all of the sudden a little bankruptcy will inject some sobriety into this crowd where mortgages marketed for bankruptcy cases somehow failed to leave an impression? Exactly how is letting people off the hook for highly speculative activity supposed to help them learn that housing for individuals is a consumption good and not an investment?

On the basis of my belief that Americans by and large will not own up to these financial mistakes, I moved 20% of my assets into non USD-denonimated or US economy-dependent positions a couple years ago. At the time, I thought I was perhaps unduly cynical and pessimistic. They have been ratcheting up alarmingly with the dollar weakness since Q2 of this year, and there is probably only 2-3 quarters left before real valuations (with inflation factored in) are marked to market. I now realize that I've been too Pollyannish. Tommorow on Monday, seeing that this wilful refusal to face the music has percolated to the highest policy levels, I'm taking the first steps to move these assets and enough to make up 80% of my portfolio completely offshore. First step is to head straight for dollar and US economy bear positions as a substitute for cash, then for tax planning reasons sit there until the first of the year, and expatriate the funds to offshore accounts in January 2008.

Then, even though our income can sustain a far higher monthly burn rate, my wife and I are already discussing ways to downsize to $1000 per month in food and residential shelter as a way to prepare to move offshore sooner than we had originally planned. The idea is to practice living for a year on bare essentials of material possessions (and place everything else in a shipping container), figuring out what we cannot do without for our business and personal lives. With that under our belts, we can move to almost anywhere in the world, then for the first couple of years focus upon acquiring cultural and language skills, and expand my business' geographical reach.

What does S.I.V stand for ? Suckers In Volume ?

S.I.V?
Substantial Intrusion Velocity

X,
Yeah, you're probably right on the mark.

I also like "Master Liquidity Enhancement Conduit". It's kinda' like Double Chrome Reverse Muffler Bearings. Not standard, but Double Chrome Reverse. OOOOOOOOOOOOO.AHHHHHHHHHHHHH. Can you feel the salvation. Hallelujah!!!

"Superfund is already in Silly.con Valley"

What a kick... all this was already known 10 plus years ago... the contaimination started long long ago... its the silly people who came
here since that kept saying "Every one wants to live here"
that are shocked...

Dow futures down 110 points. Citibank looking like it will write off 11 billion more on bad mortgages.
Not a pretty day.

I'll wonder aloud if this... thing can possibly have any validity? I hope no one minds?

In the traditional sense, the much dreaded short sale was an isolated instance. Death, divorce or long term job loss. Unpleasant to be sure but certainly manageable in limited cases. Now, with legions of FB's unable to make anything resembling an amoritizing payment and certainly unable to sell for what is owed, how will the system be able to handle the sheer size of this?

Dinor,
To me, its more then just the magnitude of the short sales. While large, I think the system can handle the between 1 and 2 trillion dollars the worst case could present - especially since it should not be aything like that. But what really makes this hard is that that up to 2 trillion dollars formed the basis of collateral for loans with largely no reserve requirements. Usng a multiplier of 20x on the 1 to 2 trillion means we may have a problem whose magnitude is 20 to 40 trillion. Even as hugely problematic as this is, there are a number of other countries with exactly the same problem: Australia, Engand, Spain. The kind of contraction we may see is mind boggling. If the markets lose a few hundred points here and there on the 6 to 11 billion dollar write downs from the banks so far, what will the market do once the other shoe really drops?
So far, the stop gaps of the super siv and the inflationary lower fed funds rate give the markets more time to unwind in an more orderly manner as well balance losses by the fixed income crown (inflation) and the current wage slave (asset price reduction) but it seems to me that the massive over-leveraging on a global scale will see us into a deep and long lasting global recession.

I hate to sound like chicken little, but I just can't see how we can slide past this problem. When Long Term Capital Management died with the Russian default there were enough big players to halt the loss and restore the market. I just don't see anyone, not even the US, having the financial depth to handle this crisis. Inflation will reduce the cognitive dissonance of the losses, but the financially savvy will realize the real losses in asset prices and purchasing power.

Duke,

I can't even pretend to be able to wrap my mind around this? Going forward, what investor would want any part of MBS? How would you sell it? How is the REIC going to be able to find any source of funding in the very near future?

It just feels so day to day right now and the measures we're being shown are "damage control" at best. HR. 3648? Whatever.

Right now in OR we're voting on Measure 49. Now mind you, we just passed Measure 37 a few short years ago! This new abortion is being billed as a way to keep farm land from becoming subdivisions. Well, at this point (after getting on the bandwagon for 37) I have to say NO! Sorry, but I "helped get the word out" for compensating owners for loss of use of their land and now that these guys have cashed in they want to bar further development? Talk about NIMBY!

Too bad guys, you've abused my trust for the last time. If you have land and want to make sure no one else can build next to your farm, get a lawyer. I'm so tired of people taking their personal agendas and making it everyone else's propblem. Want to fight development? You should have plenty of money left over from your M37 windfall. Fight it with that.

"propblem"? Let's try... problem.

Or consider it a new term for problematic propositions?

I foresee no investor being interested in MBS until:
1. The Fed regulates how they are carried on balance sheets
2. The Fed regulates lending standards
3. The world becomes convinced of the value of the collateral - the homes actual worth in foreclosure.
4. The rating agencies fully disclose their rating methodologies.
5. People learn how to price risk on the insurance poliies for failed MBS.

All of which means MBS disappear for a while. This means mortages should decouple from the bond market as they again become the perview of local savings and loans who mark rates to risk, business costs, and small profits. With a Fed funds rate at 4.5% I think your local bank will soon (say, 1 year from now)ask for 1-2 points (thank you for demanding borrowers get a bit more up front costs) and a rate of 7%. In the future, as was true of the past, when the fed raises rates rise, so well the 30 year mortgage.

As I try to wrap my mind around the magnitude of this problem I winder what can help? Dunno. Massive goernmeent spending on infrastrucutre? Annoucing the cure to cancer from a US company and asking the world to pay through the nose for meds/treatment? Some other technological revoltion?

@Richmond

SIV = Structured Investment Vehicle

A fancy way of saying "convenient dumping ground for investment vehicles so toxic we won't carry them on our own books".

Duke,

That's kind of what I come up with. I don't know that it's necessarily the Fed's function to regulate lending/underwriting standards but perhaps "someone" should? Until such time I can't imagine there would be much of a market, period.

Their credibility is so tarnished that even if there was some sort of new "government implied guarantee" it probably wouldn't mean much. Now they want to create some new brand of derivative to sweep a failed derivative under the carpet? It's not like anyone in a position to have made a difference can claim they weren't Patrick.net regulars. Buffet has been warning on this type of financial misbehavior for years!

Or doesn't he have any credibility either?

Oh and Dear God the "fakepaystubs.com" was DAMN funny! Right up there with "Fantasyland Mortgage"! :)

Yet, the Mortgage Cancellation Tax relief may have one good consequence. The law will encourage more short sales that will bring down the prices of home to levels affordable by those of us who refuse to sell ourselves into debt slavery.

I think this is an important point to make. Does S. 1394 basically give cash-outers a free pass on already spent equity windfall? A: yes. And I completely understand and share Bap33 & apostasy's anger (delicious, sweet anger... mmmm...)

However, I also see things from a "correction velocity" POV. The more financial penalties that exist to deter FBs & specuvestors from unloading their underwater properties, the longer this thing will drag on. I don't want to be indirectly on-the-hook for cash-out fraud and consumption I had nothing to with.

But, I also want the correction phase to pass as quickly as possible. The ultimate nightmare scenario for me (and I think many here) would be for the Fed to enact ZIRP, allow banks to keep this crap on their books forever vs. writing them off, and going into a Japan-style slow-drip housing slump, where is takes 15+ years before it makes any sense to buy again.

I don't really want to be close to retirement before I get my opportunity to buy at a reasonable price, so from that perspective, the bill doesn't look so bad. Just my 2 centavos.

Agreed. I wish it was over yesterday. Considering it will take another 15 years just for prices to get back to peak of 2005 why not hasten the correction side of things? I had heard the Senate version didn't contain the same language as the House's but that too will come. The REIC and the banks will be powerless to stop it and "any two will do" becomes a sweet and distant memory for those that weren't following it anyway.

The REIC and the banks will be powerless to stop it
I think you mean just banks. At this point the REIC needs sales volume "by any means necessary".

HARM,
Looks like I am not the only one to have read Greeenspan's book. Amazing to see how protracted Japan's problem became when face-saving took precedence over market corrections. It does seem pretty clear that the goal here in the US is to lessen the worst of the fire-sales and over-creections but to allow banks to fold and prices to go down.

Baps and Apostasy,
I would love if this board had a bankruptcy attorney. I think the new bankruptcy laws are nice in that if you have the income to work on paying off debt, you must. So the Hummer isn't free, its just cheaper and you become a slave to it. To truly game the system you also need to be out of work. Some may well do that. I think some of the 'illegal alien' anger is certainly true in that this group was able to perpetrate massive mortgage fraud and then just move; thus walking away with all proceeds. Shame on the banks and shame on them. What I have no idea about is just how large a loss that represents. I am guessing it is fairly small. So while it wrankles, it only wrankles me at the rate of senior management golden parachutes.
Another comment worth noting in Alan's book is trust. For society to function we must trust that other's share our values. Somehwere it seems to have become okay to brag about gaming the system. From seriel bankruptcy to mortgage abuses and social security manipulation, it seems that America has lost its moral compass. I can only say that everyone should voice their moral outrage at everyone that is gaming the system. Let people know its not okay to do the wrng thing just becasue they can. Peer/social presure worked for years and it can again.