Archive for 2010

People form strong attachments to their homes. Walking away is never a decision they take lightly. We can discuss the pros and cons and come up with our own beliefs and attitudes about it, but the turnover of our housing stock caused by the housing crash will be very painful for those who go through it. Ruthless default or accelerated default? I write often about hidden premises buried within the arguments writers make. These distinctions are important, and unless we uncover our fallacious beliefs, we make erroneous judgments and carry false beliefs. I have written many times about strategic default, and in my last post on the subject, I uncovered something new. There is no accepted definition of strategic default. Lenders…[READ MORE]

I am shocked by the squatting. I really am. It never occurred to me that lenders would simply give away homes to people. Do lenders really believe they can do this without dramatic long-term consequences on borrower behavior? Back in 2004 to 2007 I was very confident the market would crash. The Option ARM was an obvious Ponzi loan, and it was only a matter of time before the market imploded. To me, it seemed like a really foolish time to buy because I knew the decline in value would put me underwater. If I had known that I could borrow 100% of the money, possibly get some HELOC booty, then squat indefinitely while the lenders denied there was a problem, I might have made different…[READ MORE]

In the housing bubble debate, the bears clearly won the first round. People defaulted, banks foreclosed, and prices crashed just as predicted. However, round two has gone to the bulls. Banks stopped foreclosing, people squatted, interest rates went down, and the few buyers that remained pushed prices up slightly. Now we are on to round three: the Great Housing Liquidation. Distressed sales equal lower prices The general concept is obvious to everyone including the lenders: distressed sales cause lower prices. Statistical experience over the last several years clearly demonstrates that markets can only absorb about 30% of its sales as distressed inventory. But what happens when more houses are in distress than can be absorbed by the market? Squatting.   As we…[READ MORE]

We are giving Congress plenty of time to think through the GSE problem. Unfortunately, as we pass through this season, the GSEs continue to cheat taxpayers out of billions of dollars. Our view on housing finance: Don't let Fannie and Freddie return to old neighborhood As bailouts go, nothing quite matches the torrent of taxpayer money still pouring into Fannie Mae and Freddie Mac, the housing giants that now guarantee nearly half of the nation's $11.7 trillion in mortgages. To cover loans that go sour, the federal government has already doled out almost $145 billion, and the non-partisan Congressional Budget Office estimates the final tab will be about $381 billion. That's about half the size of the 2008 bank bailout but,…[READ MORE]

You want to buy with your fancy friends? I'm tellin' you the rally's got to end. Don't bring them down. I'll tell you once more as prices bounce off the floor, they will go down. Prices have crashed nationwide because buying only made sense as long as prices were going up. Once the rally stopped, prices were doomed to crash because the only alternate reason to buy is to save money versus renting. In many areas of the country, prices are low enough that buying makes sense because it is cheaper to own than to rent. Locally, that is not the case. During the rally kool aid intoxication caused people to buy to capture appreciation, but this is not the only manifestation of kool aid intoxication.…[READ MORE]

The HELOC abusers stimulated the economy when they borrowed all that money and spent it. Now that these same people are walking away from their mortgages, they no longer have housing payments, and their spending amounts to about $10,000,000,000 each month. Perhaps we should thank them for all their spending? I think not. As long as lenders allow this to go on, and as long as the US taxpayer is paying the bills, these squatters are stealing from each of us. Lenders need to process their foreclosures, and borrowers need to experience the consequences of their actions. Owners Stop Paying Mortgages, and Stop Fretting By DAVID STREITFELD Published: May 31, 2010 ST. PETERSBURG, Fla. — For Alex Pemberton and Susan Reboyras,…[READ MORE]

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]

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