Archive for May, 2010

The housing bubble and the kool aid mindset it spawned has been very disruptive to American life. Large segments of our population are addicted to Ponzi finance, and the prudent are being robbed to pay for the mistakes of the Ponzis. I find the IHB is an outlet for the frustrations with the insanity being inflicted upon us all. The sad part is how little has been done to correct the mistakes. We will do this again. The Root of the Housing Bubble Remains Unchanged Charles Hugh Smith (May 27, 2010) The fundamental root of the housing bubble--the collusion of the Central State and banks to extend home ownership to millions of citizens who did not qualify for that burden-- remains firmly in place. The…[READ MORE]

Ponzi borrowing and HELOC Abuse Most people fail to budget properly for unexpected expenses or expenses that do not occur monthly. When these expenses occur, most will borrow the money, often on credit cards. During the year, this debt will accumulate like tooth plaque, and at the end of the year, many debtors hope for a work bonus or a tax refund to clean the debt from their balance sheets. Homeowners, particularly in California, would go to the housing ATM and add to their mortgage to pay for these un-budgeted expenses of daily life. The sad reality is that this method of Ponzi borrowing can work as long as (1) the amounts added to the home mortgage are less than the sustained rate of appreciation and (2) if the payments are still…[READ MORE]

Borrowers bow down before their lenders. Borrowers give up control of their own lives when they take on debt as their time and effort go toward paying for the past rather than investing for the future. Borrowing is a weakness, a crushing weight, a debilitating pile of paper detailing a life of servitude in exchange for a borrower's entitlements. Of course, most borrowers don't see it that way. They feel powerful. Borrowers believe they are rich because someone was willing to loan them money. The more money people borrow, the stronger they feel and the weaker they get. Ponzi Schemes of debt are the highest form of borrower sophistication and financial management. These structures take borrowers to the heights of borrower power and the depths of borrower weakness.…[READ MORE]

I love Las Vegas. I have family there. It makes me sad to see what lenders did to the people there. I want to do something about it. I want to save Las Vegas. Attention Las Vegas Homeowners, I will save your home. I have assembled a team of real estate super heroes. We are Superfund.   The market statistics are pretty grim. Your house is probably worth less than half of its peak value, and it will not be going up any time soon. What's worse, you can probably rent the house across the street for half of your mortgage payment. You are going to be underwater forever, and you are paying out hundreds or even thousands of dollars each month and getting little in return. I suspect…[READ MORE]

The banks blew it. We all know that, and now we are all being asked to pay the bills for their catastrophic mistakes. I didn't cast the first stone, but I hope my writing about this issue has left a lasting impression. I also hope we can all learn something from this are avoid the mistakes again in the future. I have my doubts. We can all see the problem and the solution, but we all know the government is likely to blow it. Excessive debt is the problem Ever since the Great Housing Bubble began to deflate, everyone has incorrectly identified the problem as foreclosure. The real problem is not foreclosure, the real problem is that borrowers have excessive debts…[READ MORE]

Most people purchase real estate in California because they believe they will get rich. Few want to spend money to provide a home for their family as most expect their home to provide money for the family. Houses are the new wage earners, not through rental cashflow but through appreciation. Life doesn't work that way. Real estate can be a profitable cashflow investment, and it can make people rich -- not through speculation on buying and selling, but through owning for positive cashflow. Cash value of real property Establishing the cash value of real property requires an understanding of risk and relative rates of investment return. Today, we will review these basics and apply a little simple math to show how to value real estate based on…[READ MORE]

Borrowers are done paying, and their hanging up on lenders. The lenders are still hesitating, waiting for borrowers to pay. Lenders will wake up one day and start the foreclosure process in earnest. Will it be too late? The Lender Decision Tree When lenders make loans, they far prefer borrowers to repay those loans; in fact, their entire business plan relies on it. As long as borrowers are current with their payments, lenders are happy and making money. When borrowers don't make their payments, the end result is a distressed sale. If there are enough of these, market prices are reduced dramatically which causes significant lender losses. Below is the lender decision tree for delinquent borrowers. Today we will explore this diagram in some…[READ MORE]

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