Archive for 2011

Money won't buy happiness, but it can provide the finest forms of misery. Everyone wants money. If given the chance to do nothing and obtain money, most people would take it. Such was the lure of the housing bubble. People only had to do two things to obtain copious amounts of cash. First, they needed to buy a house. Then they needed to find a lender who would give them money for signing some paperwork. That's it. No work, no skills, no risk, no sacrifice, nothing. Buy a house, sign some papers, and anyone could obtain hundreds of thousands of dollars. It shouldn't be surprising that kool aid intoxication is so strong. Who wants to give up on that deal?…[READ MORE]

Lenders and loan owners have problems. Lenders made loans their borrowers can't repay, and now both parties to the deal are turning to the US taxpayer for a bailout. Somehow, these two groups have convinced themselves they deserve some of my money. I was not a participant in their transaction. I did not sign on to the risks and rewards of the deal they made, yet both groups feel I should be compelled to bail them out. Screw them both. Their problem is not my problem. There is a problem here: excessive debt. There is also a solution in the system: foreclosure and bankruptcy. Both parties to this private financial transaction want to avoid the consequences of foreclosure and bankruptcy…[READ MORE]

Most people who leave their houses behind under duress believe they have no liability. Even the ones who suspect they might will generally duck their lender's calls and letters and hope the problem goes away on its own. It won't. California recently passed legislation barring lenders from seeking collection on deficiencies after a short sale. Of course, this has merely contributed to the already slow pace of short sale approvals. California borrowers already had non-recourse protections on purchase-money mortgages, and there are statutory limits on collecting debts severed from the property in foreclosure. I think these are good policies in California. Perhaps lenders will be more cautious next time when they want to extend stupid loans to California Ponzis. Although,…[READ MORE]

Strategic default: the abandonment of mortgage and property. A financial explosion. Most buyers of property were seeking riches from appreciation. They all enjoyed the synchronized movements of the market when everyone was clamoring for more property. Trees don't grow to the sky, and no matter how close prices get to heaven, nirvana is always out of reach. Strategic Defaults Threaten All Major U.S. Housing Markets Posted by Keith Jurow 09/30/10 8:00 AM EST In my last article, we examined the shadow inventory to determine how many distressed properties (not on MLS) were almost certain to be forced onto the market in the not-to-distant future. For a sensible follow up, let's take an in-depth look at so-called "strategic defaults" to see how…[READ MORE]

Shadow inventory can not be absorbed by first-time buyers. There are simply not enough owner-occupants to absorb the inventory due to come to the market over the next several years. Real estate cashflow investors are needed to stabilize the housing market. These investors are the only other source of demand available. There are investment holdings companies that buy and hold rentals, and they will be part of the solution. I have recently formed Radiant Homes for this purpose. However, due to the practical problems with managing many properties over diverse geographies, it will still fall to individual investors to buy and hold the remaining properties on the market. I have recently made a change to the business plan of my…[READ MORE]

The fact that prices are falling is not a bad thing, not that loan owners who rely on HELOC income would agree. Financial market implosions purge irresponsible and unsustainable habits from the populace. HELOC dependency serves no one, not even the sheeple who got to enjoy it for a time. The unceremonious fall from entitlement is inevitable, and although the fall is emotionally devastating, getting off the HELOC heroin is better for borrowers in the long term. Falling prices bring affordability to the prudent who understand valuation and their cost of ownership. Many people have put off their purchases because they understand the power of rental parity. Those people will be rewarded with lower debts, and the ability to move…[READ MORE]

The current low interest rates are truly remarkable. We are approaching the all-time recorded low from the early 1950s. The reason for the latest drop in interest rates is more market manipulation by the federal reserve. However, in a broader context, the continually dropping interest rates are a sign of monetary deflation caused by the ongoing write-offs of bank debt. It can be argued that today's low interest rates are high in real terms. If you accept Mish's definition of inflation as the expansion of money supply and credit, we are currently experiencing deflation caused by all the write downs. When you have deflation, even low interest rates are high relative to inflation. Another way to look at the situation…[READ MORE]

I first covered the flopping phenomenon a few months ago in Flopping: unscrupulous realtors deceive lender clients and profit from fraud. Apparently, the occurrence is common enough the story is gaining traction in the mainstream media. The main reason I am covering it again is because a reader posted a property that looks like a particularly egregious case of flopping. I'll let you decide. More short sales bring new scam: flopping In 'flopping,' a home is purchased by insiders at a steep discount, then immediately sold for a big profit. By Melinda Fulmer of MSN Real Estate Real-estate agent Lynne Wright thought she had found the perfect home for her clients. The quiet house on a cul-de-sac in one of the most prestigious…[READ MORE]

Today's featured article is a commentary from Housing Wire's Kerri Panchuk. Apparently, she does not accept the wisdom of strategic default. For a variety of reasons, I believe strategic default is a wise course of action for underwater loan owners who are paying more to own than the cost of rental. Let's read the counter-arguments to check their validity. The new slap in the face of foreclosure by KERRI PANCHUK -- Tuesday, September 20th, 2011, 2:33 pm Every American upset with the state of mortgage lending should read the Fox Business News article on strategic default in order to meet the "New Face of Foreclosure." Strategic defaulters are underwater borrowers who intend to remedy their "upside-down situation" by simply walking…[READ MORE]

Some foreclosure and eviction cases can be heartbreaking. However, we live by rule of law in this country, and unless we want to start giving away real estate to those with the saddest story, these evictions must take place. Elderly woman, 101, in tears as she's evicted from her home and her possessions are thrown into dumpster Texana Hollis's son failed to pay her property tax Detroit woman had lived at her home for 58 years Rushed to hospital after eviction over heart attack fears By Paul Thompson Last updated at 7:44 PM on 13th September 2011 A 101-year-old woman has been evicted from her home of the last six decades after her son failed to pay property taxes on…[READ MORE]

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