Archive for November, 2012

Besides credit qualification barriers due to low FICO scores, there are two barriers to originating more loans and selling more houses to owner occupants: (1) insufficient down payment, and (2) increasing loan costs. The FHA still originates loans at 3.5% down, and the credit barriers are limited, despite realtor pleas and rhetoric to the contrary. However, since the FHA is losing a great deal of money and facing a bailout, they are continually raising their insurance fees as they become the replacement for subprime lending. These increasing costs are making houses less affordable and thereby reducing access to credit. As a result, many borrowers are opting for conventional mortgages with their higher down payment requirements. And since fewer potential buyers…[READ MORE]

The monthly housing market reports I publish each month became bullish late last year due to the relative undervaluation of properties at the time. I was still cautious due to weak demand, excessive shadow inventory, the uncertainty of the duration of the interest rate stimulus, and an overall skepticism of the lending cartel's ability to manage their liquidations. In 2012, the lending cartel managed to completely shut off the flow of foreclosures on the market, and with ever-declining interest rates, a small uptick in demand coupled with a dramatic reduction in supply caused the housing market to bottom. Even with the bottom in the rear-view mirror, I remained skeptical of the so-called housing recovery because the market headwinds remained, and…[READ MORE]

The Great Housing Bubble cultivated a gentility of entitlement, a sordid societal residue, a system of reliance, a conviction among people that they may possess anything they wish just because; deserving without earning; Grace. Divine acceptance is given; whereas, worldly possessions are earned -- a basic truth lost through possessory entitlement. Few construct and contribute to the greater good, and many expect easy money from lenders, Governments, housing and stock markets or free-money Ponzi Schemes. We are impaired by our lender's failure and our Government's response to the crisis our lenders created; a wound that lingers as a festering sore no bailout balm can remedy. The emotional fall from Grace has barely begun. The amend-pretend-extend dance will continue until lenders…[READ MORE]

Everyone active in the real estate market today laments the lack of available inventory. Orange County housing market prices are rising due to the restricted inventory. Banks are focus on loan modifications and short sales to resolve their prior bad loans. In the interim, delinquent mortgage squatters are enjoying their free ride. Earlier this year, the State of California passed the Homeowner Bill of Rights (Detailed review of the new changes to California foreclosure law). In the new law, banks are no longer allowed to pursue dual-track foreclosure processing. If a loanowner is seeking a loan modification, the process must be allowed to run its course -- gaming the system included -- before the bank and finally push out the committed…[READ MORE]

Do we really want to let Ponzis back into the housing market? There is a large group of people who've proven to be completely irresponsible with mortgage debt as evidenced by my daily debtor debacles. I wrote yesterday that Pent-up demand from boomerang buyers may not materialize, but isn't stopping the FHA from trying. I have no problem with peak buyers whose only mistake was poor timing from reentering the housing market, but do we really want to let the irresponsible Ponzis back in? And do we as taxpayers want to be on the hook when they resume their old habits? That's where the FHA is headed. It shouldn't be surprising that Ponzis want to own another cash cow. They…[READ MORE]

A big part of the bullish sentiment toward real estate is the believe that former owners who lost their houses in foreclosure will return in droves to mop up the supply of shadow inventory and push prices higher. But what if they don't come back? What if they were so burned by the experience that they choose a lifetime of renting instead? A recent study from the federal reserve suggests this may be the case. Almost 75% of those who lost their homes to foreclosure may never return, and if they don't the so-called recovery may be much weaker than the bulls expect. Credit Access Following a Mortgage Default By William Hedberg and John Krainer -- October 29, 2012 Borrowers…[READ MORE]

Based on their recent behavior, it's safe to conclude the government and the banking cartel believe they can resolve all their ills through loan modifications and short sales. Despite a huge shadow inventory of delinquent loans, lenders have slowed their foreclosure processing, and they show no signs of picking up the pace despite the recent increase in delinquencies likely caused by people opting for a free ride. I believe lenders will ultimately be forced to push out committed squatters in a foreclosure, but I also believe that lenders will also try and fail at every other alternative first. The push for loan modifications Lenders have good reasons to pursue loan modifications. If these failing programs could be made successful, they…[READ MORE]

The current real estate market is the most heavily subsidized and manipulated in US History. More than 90% of loans used to buy real estate in the US carry direct government guarantees. The federal reserve embarked on an unprecedented policy of buying mortgage-backed securities to artificially lower mortgage interest rates on the government-backed loans. Add to that the manipulation of the market by the banking cartel which engineered a 60% reduction in available housing inventory, and it becomes obvious that we navigate a housing market which has little or no semblance to a free market. In Barack Obama's second term, he can guide policymakers in one of two directions. Either he seeks to reduce the government's manipulation of the housing…[READ MORE]

Renting Versus Owning Renting versus owning is both an intellectual decision and an emotional one. The intellectual decision is first and foremost a financial analysis of the comparative cost of renting versus owning. The cost of a rental can be determined fairly easily as there are usually a number of comparable properties on the market to establish a realistic rental rate for any given property. Of course, it is easy to justify in one's mind a comparative rent that is higher than the market will bear. A house someone is in love with will almost certainly rent above market in their minds. Also when looking at similar products the rental rates may not be realistic in the marketplace. It is…[READ MORE]

Everyone knew this was coming. The FHA needs a bailout. When the final tally of losses at the FHA come in, everyone will act surprised. Nobody paying careful attention to what the FHA is doing will be shocked. They are absorbing the losses the banks could not by insuring loans with low down payments in a declining market. No private lender or mortgage insurer would do this because the losses would put them out of business. Instead these losses will be absorbed by the US taxpayer — by you. FHA has been the lender of last resort since its inception. It was started in 1934 during the depths of the Great Depression to provide mortgage lending at a time when private…[READ MORE]

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