patrick.net

No issues whatsoever with unrestrained shopping binges! (Both sick as a dog) Works great. Other than gas, take-out and a few dvd rentals we weren't feeling well enough to join in on the fun.

It's hard to spend when you're in a coma. Feeling... much better now thank you.

"Next year I will start to appeal some property tax bills"

Might be a teence early for that but you're welcome to give it a shot. Pack a lunch (it may take a while). I'm sorry if this seems... testy but on one hand you're saying you don't care if your property values go down but OTOH you're at the ready to appeal? It just sounds a little defensive a position for someone that doesn't care to take?

DennisN,

I did all that stuff for years. In many cases b/c we had 4 or 5 cars and it CAN... add up quickly. Then when the complete lack of gratitude finally struck me (and the fact that they just found other ways to spend what "I" was saving I retired as "Fleet Maint. Coordinator".

Now my job description consists mainly of scheduling maint. appts. for "the fleet" and I'm complaining about THAT. They call and ask you to call one of "your buddies" to get them a deal on having their transmission serviced and then don't like the day/time you were able to set up. So I've turned in my "notice" there too.

Yep, maintenance on one's ride may get more popular.

One good tool to use is the internet. I had a blower that only worked in "off" and "high", so I googled the problem and came up with several sites explaining the problem and how to fix it. All I had to do was replace the blower resister, a $26 part that took 2 minutes and a screwdriver to replace. Had I taken the car in for repair, I'm sure the shop would diagnosed a need for a whole new blower motor assembly along with lots of labor charges.

Headset,

Excellent point. Some of the Car Club threads will give you just what need.

"My 2003 ____ won't ____ when it's____"

Those are the "fixes" I love. When you have thousands of people that ALL own your year, make and model contributing to a single source you're bound to find answers even factory trained tech's hadn't encountered. Oh and all the aggravation they went through getting to the bottom of things!

It's just not worth it to me though to have hot tranny fluid running into my armpit to save __ $'s. I'd rather have someone else contend w/ that.

From Bloomberg , via Ben's blog:

The ``SuperSIV'' fund, backed by U.S. Treasury Secretary Henry Paulson, would buy assets from so-called structured investment vehicles, whose $300 billion of holdings include corporate and mortgage debt in danger of default. Analysts including Richard Bove of Punk Ziegel & Co. have criticized the proposal because it may saddle new participants with losses created by their bigger rivals.

``Why should we put something on our balance sheet that is going to result in further writedowns?'' is how most contributors will respond, Bove said in an interview. ``The job of the Treasury isn't to go out and defraud investors.''

I LOVE IT! Not to pick on Mr. Bove, but I agree that it is not the job of the Federal Reserve (or the Treasury) to defraud investors. That particular job belongs to someone else, like Citibank or Countrywide Mortgage.

Another zinger:

``It's so nice to get a personal invitation to go to Washington and have a one-hour visit with Ben Bernanke,'' said Fuss, who decided participating wasn't worth the risk to his firm. ``Oh, boy, did I feel important for about 27 seconds, and then you smell a rat.''

Sweet. Absolutely deliscious.

From

http://www.pimco.com/LeftNav/Featured+Market+Commentary/FF/2007/GCBF+Dec+2007.htm

Indeed, I’ve taken to calling the 2004-2006 vintages of limited or no document, no down payment, negative amortization (pay-option) subprime ARM loans as not loans at all, but rather free, at-the-money call and put options on property prices. Not exactly free, to be sure, as the putative borrower was obligated to pay something in cash interest, even if not the full amount, with the unpaid amount being added to the principal.

But as a practical matter, the options were essentially free. If home prices went up, the putative “borrower” would stay current, as the call went into the money, refinancing before the ARM reset, essentially re-striking the option exercise price higher. Simply stated, the borrower wouldn’t default, as logical people do not walk away from in-the-money call options.

And they didn’t, until about a year ago. As a consequence, default rates on pools of such subprime loans came in amazingly low, soothing rating agencies’ nerves and re-enforcing the shadow banking system’s appetite for securitized pools of them.

But if house prices didn’t rise, the call option would fall out of the money, and the put option – the right to default on the full principal value of the loan – would go into the money. Indeed, house prices didn’t have to fall, but simply not rise for this outcome to unfold, given negative amortization. In which case, the putative borrower would no longer have any incentive to stay current: Why throw good money after bad for an at-the-money call option that you got for free, which has gone out of the money?

And so it came to pass about a year ago, when early-payment defaults became a new phrase in our collective lexicon. The home price bubble popped, the at-the-money call options went out of the money, the at-the-money put options went into the money, and the holders of them remembered the wisdom of Paul Simon’s 1975 treatise on 50 ways to leave a bad situation:

You just slip out the back, Jack
Make a new plan, Stan
You don’t need to be coy, Roy
Just get yourself free
Hop on the bus, Gus
You don’t need to discuss much
Just drop off the key, Lee
And get yourself free

And with Jack, Stan, Roy, Gus and Lee setting themselves free, the shadow banking system was revealed to be caught between the longing for love and the struggle for the legal tender, living life as Jackson Browne’s Pretender, ships bearing their dreams sailing out of sight, with the junkman pounding their fenders. To wit, a run on the asset backed commercial paper market!

My 2004 forecast of a cyclical peak for Fed funds of 2 ½% was spectacularly wrong. I own that. I also own the very rational reason why: the Fed chose not to use its regulatory powers to police the mortgage loan originator sharks feeding the levered yield appetites of the shadow banking system. I thought they both should and would, and I was wrong.

Refinancing programs omit many borrowers
Mass., other states limit their focus
By Binyamin Appelbaum, Globe Staff | November 21, 2007

Eight states including Massachusetts have pledged almost $900 million this year to help borrowers replace unaffordable mortgages, but the states collectively have refinanced fewer than 100 people, a Globe survey found.

In Massachusetts, where the Patrick administration introduced a $250 million program in July as a "big piece" of its efforts to limit foreclosures, not a single loan has been refinanced.

In Maryland, the first state to create a refinancing program, officials have found it so ineffective that they are considering shutting it down. The program has made just nine loans in about a year.

A leading advocacy group said the programs simply aren't able to help most borrowers. "They're very well intentioned," said David Berenbaum of the National Community Reinvestment Coalition, "but these new products aren't fitting the needs of the consumers we see."

The vast majority of the applicants aren't eligible for refinancing. They have either fallen too far behind on their payments, have badly damaged credit, or simply owe more on their loans than the value of their homes, making refinancing effectively impossible.

In Massachusetts, more than 3,500 people have called seeking help, but only about 30 passed two stages of screening and were referred to lenders to begin the actual refinancing process. None have received a loan as yet. Ohio initially expected to serve one of every three applicants; officials say they have so far helped one in 15.

The state programs, which work in similar fashion, do not lend money directly to homeowners and are not funded with tax dollars. Instead, qualified applicants are referred to traditional lenders, who can resell the mortgages they make to state housing finance agencies. Because the agencies are assuming the lenders' risk, borrowers are able to qualify for lower rates and payments than they otherwise would receive.

But the programs primarily were designed to help only a portion of the population with problem mortgages: those who can make their payments now, but are facing unaffordable rate increases.

"It was a great program for somebody who was thinking ahead," said Tonna Phelps, director of Single Family Housing at the Maryland Department of Housing and Community Development. "The problem is that people aren't thinking ahead, so now we have to go back to the drawing board."

While the programs struggle, new states keep jumping in. Connecticut, New Jersey, and Pennsylvania all announced refinancing programs within the last month, totalling almost $300 million.

The stalled state efforts highlight the general difficulty of helping homeowners avoid foreclosure: Officials have only a short time frame to act before borrowers fall too far behind to be helped. Yet the circumstances of each loan are unique and complex - "Like snowflakes," said one official - making it is impossible to process cases routinely. Moreover, lenders often must be persuaded to accept a financial loss to make the refinancing possible.

Berenbaum said his group has helped several thousand borrowers across the country by getting lenders to modify existing loans by lowering monthly payments. That allows the group to help people without subjecting them to the increasingly difficult process of qualifying for a new loan.

More than 6,200 properties were foreclosed in Massachusetts during the first 10 months of this year, according to data released yesterday by Warren Group. That is more than three times the number of foreclosures during the same period last year.

The $250 million Massachusetts program is the largest by any state. Governor Deval Patrick introduced it with great fanfare in July, as part of a series of measures to limit foreclosures.

Officials at the Massachusetts Housing Finance Agency, the quasi-public entity administering the program, said it is too early to judge the results. They said they spent months building infrastructure to help large numbers of applicants, and that the first people who applied for help, in August, are only now approaching the end of the refinancing process.

The Patrick administration said it was committed to making sure the program succeeds.

"If we see as the months go on that this MassHousing product needs a second look, we will work with MassHousing to give it a second look," said Kofi Jones, a spokeswoman for the Massachusetts Executive Office of Housing and Economic Development. "It's only as effective as the numbers prove it to be in time."

Its success will depend on the state's ability to persuade lenders to swallow losses in connection with the refinancings, officials say. Declining property values have left many borrowers with mortgage balances greater than the current value of their homes. Those loans must be replaced with loans that do not exceed the homes' values.

The Patrick administration has said it would urge the holders of the mortgages to accept partial repayments. For example, a borrower who owed $350,000 and lived in a house that is now worth $300,000 would receive a new $300,000 loan through the state program. The original mortgage company would agree to accept a repayment of $300,000 and swallow a $50,000 loss.

Patrick officials hoped lenders would be willing to do so because a foreclosure could result in the loss of a larger sum.

So far, that hasn't happened. But MassHousing director Tom Gleason said he has seen encouraging signs in recent weeks that some mortgage companies are willing to work with the agency.

"Six weeks ago, we were not getting the kind of response from our servicers that would lead to success," Gleason said. "I don't feel that way anymore. We are getting phone calls returned."

Bruce Marks, head of the Neighborhood Assistance Corporation of America and a critic of the Patrick administration's efforts, said he doesn't think the state is putting enough pressure on lenders to accept losses.

He noted that his organization successfully pressured the nation's largest lender, Countrywide Home Loans, to allow NACA to restructure some of its loans to create payments borrowers could afford. In the month since that deal was reached, Marks said his group has restructured loans for 40 Massachusetts borrowers.

Perma-renter,

Good Bill Gross link. Good to see him own up to his role in all of this. Yes, these "loans" were basically at-the-money call options. As long as they weren't under water, not many were going to walk away.

As Peter P has often said, "All that was needs to happen is for prices to simply not rise" (or words to that effect) for this entire thing to unravel. The difference is, we were discussing it openly as early as 2004. BG admits to being wrong on FFR as well but for him to do any finger pointing over the lack of underwriting standards is beyond belief.

But if house prices didn’t rise, the call option would fall out of the money, and the put option – the right to default on the full principal value of the loan – would go into the money.

This is the reality that banks are facing, and I believe it is goes far beyond the typical FB. A friend's brother moved out of state and bought another house. They were having trouble selling the old place and finally came to the point of considering the possibility of "jingle mail" (CA non-recourse loan). Finally got the bank to agree to a short sale. When good people (or at the very least people with little/no home equity) start doing bad things... we are all in deep &%$#@!

"moved out of state and bought another house"

Ahh... the old double down, rolling bubble, call/put strip straddle option... play eh'? Yes of course. In this version the buyer plays a "split hand" after being dealt two jacks! While this can have an element of danger (especially to the lenders) it can add a certain... thrill to your adventures in specuvesting. Now, whichever home continues appreciating that's the one you keep current on the payments!

No, kidding. It's just frustrating there was so much liquidity sloshing around that everyday Americans were being lured (or allowed themselves to be lured) into thinking having 2 mort. payments was perfectly normal. Again as others have pointed out, this is a lot of the reason there was so much "demand" out there.

Yeah, we've touched on this before, but since when did it become the norm to buy your new home before selling the old one? Let's hope that bit of "baby" hooey goes out the window along with the rest of the bubble-associated "bath water" crap.

Here is a link to another blog I read regularly, where they discuss the appropriate valuation model to use for a home:

http://economistsview.typepad.com/economistsview/2007/11/the-problem-wit.html

Notice that a home is *not* worth exactly what the DCF based on its rents indicates, there is also a part of its valuation determined by the expected appreciation (or depreciation) rate. In CA, the long term rate has been ~6%, which explains the inflated home prices here. But now we are seeing the reversion to the mean.

Have home prices anywhere dropped to 130-140 times rents? Sacramento? Bakersfield? If so, those are probably good long term investments.

@skibum,

Still, it's interesting to revisit b/c with each passing day the effect takes on different (and more dire) dynamics. From 2002-2005 you could say this "straddling effect" created more demand. From peak of mkt. on I'd say these very same homes are adding to supply.

Without qual'd buyers in the mix and dwindling appetite for MBS you have to wonder where the tipping point for that particular aspect is? How many REO's have to sit on a lender's bal. sheet before they're forced to liquidate at fire sale prices?

Maybe I should have said "alledgedly bought another house" as I am not quite sure if that is the case.... at any rate, the outcome has the same effect on Kalifornistan :-( So the folks at Pimco are rambling about "put options"; would be interesting to see when this idea was first put forth in the blogosphere (we are on to you Bill Gross and company!)

It is not clear to me if Paul McCulley is joking or not right here... someone needs to tell him about the part where you check "Yes, this residence will be owner occupied" on the mortgage application.
The sufficient condition will be a combination of house price deflation and lower interest rates that re-incites animal spirits towards housing as an asset class. Which means not fair, but cheap. So cheap, perhaps, that I, who’ve never owned more than one house, might decide that a second one might not just be a fun idea, but a good speculative put.

EBGuy,

I didn't mean to sound like I was coming down on anybody but I have to share skibum's "good riddance" policy. There was a time when being new to an area, new to the job and having little or nothing down was simply not going to cut it.

Obviously I don't know their circumstances but it looks apparent the dual payments are a strain. If they haven't sold their previous where did the money for a down come from? And of course, is renting really all that awful?

Meanwhile,
With today's all-too-typical of late stock market beating, we are dangerously close to a full-on market correction (10% off the peak ~ 12,600 for the Dow). And nearly every MSM outlet has some "piece" about the impending recession. My, how things have changed...

Meanwhile,

The New York Federal Reserve, acknowledging "heightened pressures" in money markets that are expected to last through the rest of the year, said it plans to conduct a series of repurchase agreements aimed at boosting liquidity in the credit markets. The announcement from the New York Fed, which carries out monetary policy set by the U.S. Federal Reserve, essentially puts in writing many of the steps the Fed often takes at this time of year.

The Fed said it would inject $8 billion into the banking system on Wednesday. The amount of money is somewhat larger than in past years at this time.

skibum :

The trolls are also not visiting us anymore ! It's been a while since the regular scheduled appearance of FR asking "Where is the crash ?" and TOS has simply disappeared.

The chatter around me is increasing about recession. Everyone is now an expert on the falling dollar and rising gold. People also mention the return of inflation ! A lot has changed. A lot, I would say.

Oh and BTW, no one is saying the housing market will recover next spring !

Sen. Schumer Urges Scrutiny
Of FHLB Loans to Countrywide
By JAMES R. HAGERTY
November 26, 2007 2:15 p.m.

Sen. Charles Schumer, a New York Democrat, urged regulators to examine potential risks posed by a sharp increase in lending by the Federal Home Loan Bank of Atlanta to Countrywide Financial Corp., the nation's biggest mortgage lender.

In a letter sent today to Ronald Rosenfeld, chairman of the Federal Housing Finance Board, which regulates the 12 regional home loan banks, Sen. Schumer said: "I am concerned that the loans being pledged by Countrywide to secure these advances (borrowings) may pose a risk to the safety and soundness of the FHLB system as a whole." He called for a review of the Atlanta bank's policies for evaluating collateral and of the loans pledged by Countrywide to secure its advances. (See the full text of Schumer's letter.)

The home loan banks, created by Congress in 1932 to prop up failing banks and provide money for housing, have taken on a larger-than-usual role over the past few months in providing funds for mortgage lending. They have stepped up their secured loans, or "advances," to mortgage lenders to fill a void created in August, when investors' fears of default risk shut off mortgage lenders' ability to raise money through commercial paper or other short-term borrowings in the capital markets.

Countrywide has replaced that funding mainly by tapping the Atlanta bank, where its borrowings totaled $51.1 billion as of Sept. 30, up 77% from three months earlier. Countrywide, though based in Calabasas, Calif., deals with the Atlanta home-loan bank because Countrywide owns a savings bank based in Alexandria, Va., part of the Atlanta bank's territory. (See a related article.)

Countrywide's borrowings from the Atlanta bank as of Sept. 30 accounted for more than a quarter of the home-loan bank's total assets of $190.72 billion. Countrywide has put up about $62.4 billion of mortgages as collateral for those advances.

Daris Meeks, a spokesman for Mr. Rosenfeld of the finance board, declined to comment on the senator's letter. Last week, Mr. Meeks said the finance board carefully monitors lending and collateral policies of the home loan banks.

A spokesman for the Atlanta home loan bank couldn't be reached immediately for comment. Officials of that bank last week said they had remained prudent in their lending.

Countrywide representatives didn't respond immediately to a request for comment.

Sen. Schumer, a member of the Senate Banking Committee, said he was concerned about the quality of the collateral partly because many of the loans held as investments by Countrywide are so-called pay-option adjustable-rate mortgages, or option ARMs. These loans allow borrowers to make minimal payments in the early years, resulting in far higher ones later.

StuckinBA,

Please make sure to let all of your recent converts that the band wagon is getting a might crowded and we're not letting just anyone on board. We need to make sure they are bringing "something" to the party. If they've made a recent purchase (2004 on) with anything other than a fixed and conforming loan, they need to admit they were part of the problem.

If they've made use of their HATM they need to admit they were totally impulse purchases. I'm not saying we're not adding new memberships it's just that we have to have, ahem, certain standards.

One random note to add here…the banking, automobile and insurance industries have put us on a debt treadmill by making us believe we need to own cars… ---- GIVE UP YOUR CARS whenever possible….oh, and it helps the environment too

Why do you hate freedom and America?

eburbed-

I'm with you, Amen!

I didn't buy a car until 4 years ago (used VW). Prior to that was 13 years in Chicago with no car. I believe the extra money allowed me to buy my first condo (back when you needed a down payment) which allowed me to buy my house (20% down) which I sold in 2005. Those saved dollars in retrospect are probably worth hundreds of thousands in today's dollars.

No regrets on any of the above!

"Sen. Schumer, a member of the Senate Banking Committee, said he was concerned about the quality of the collateral partly because many of the loans held as investments by Countrywide are so-called pay-option adjustable-rate mortgages, or option ARMs. These loans allow borrowers to make minimal payments in the early years, resulting in far higher ones later."

Why is he concerned? Countrywide has demonstrated that it has everyone else's interests at heart. It has even modified some of its loans, and is cooperating with governor Schwarzenegger. Our popular governor is fool proof and would never pander to special interests, he's even told us so. There is no way that our governor would lend his endorsement to any company who would let his public hold the bag on worthless collateral.

Thanks to HousingTracker.

Inventory still climbing / holding steady (depending on how you compare). Very unseasonal.

Prices dropping. Well, that we can blame it on being seasonal. Maybe not. Because it's down YOY as well !

skibum Says:
With today’s all-too-typical of late stock market beating, we are dangerously close to a full-on market correction

I wouldn't be too sure it is quite "full-on" correction yet. A cow-orker of mine was on IM today with his son, who works at a small ('only' $2B). The son told the guy to sell anything that he can get a good price on, because next year is going to be really bad.

My reaction was, "your son works at a hedge fund... and he is telling you this __TODAY__???"

Things are slowing down...

New thread: 1000% hedge fund wins subprime bet

I read today that over 16% of home equity loans are over 60 days past due. And this was a acros the full spectrum of credit quality...this was not just the lower tiers. This smells like so much trouble, and here's why: even if housing prices stopped their descent today, and just stayed flat, there would be no additional equity for these folks to extract. So the banks will take a hit in 2 ways: no new home equity originations, and some losses due to the ones which won't be repaid.

Devil's in the details. If what they do is leave the payments fixed at the low rate while the unpaid balance balloons at a (reasaonble) market rate, then I'm OK with it, although you gotta wonder if you're already upside-down in a house why you'd just sit there while the hole gets deeper. If, on the other hand, they're gonna let these idiots and greedy speculators have below-market fixed-rate loans at 3%, then I and everyone else who did not overpay, did not borrow more than we can pay back, and that got a fixed-rate loan are gonna be royally pissed off. I mean, where's my 3% 30-year fixed-rate loan? I don't get one because I was conservative enough to lock in 5.25%? It's time to break out the pitchforks and torches.

This Paulson proposed bailout plan will fail all on its own. It will bailout a small sliver of the subprime homeowners, but not stop price declines and all the rest of the complex housing and credit market mess. Consumers and the markets are expecting a miracle...they won't get one...the banks haven't even completely figured out how to implement this plan.

My husband was a mortgage broker for 2 years. We can't lump everyone into the same "mold" and stereotype the whole industry. Before my husband had his own business as a broker, he worked for one of the bigger companies doing mortgages. The whole reason he got into doing it for himself is that he hated the way most lenders "talk over people's heads" so that they don't really understand what they're getting into and put stuff into the contract that they know nothing about because they don't know how to read it. He wanted to be more than that - real to the customer. He would show up to do signings and meet customers wearing shorts, a polo shirt, and sandals, because he didn't want them to see him as another one of those stuffy salesmen. He got alot of business that way and made some good money, yes, but more importantly, he helped many people out of very bad financial situations and into good ones that would help them get out of debt. If you do it for the right reasons, it's not so bad. Don't lump them all together into one stereotype - it's just not fair to all the ones that are doing the right thing. Just like stereotyping Catholic priests as all of them being pedophiles - its just not true.