Archive for December, 2012

Everyone can't own a house. We tried that during the housing bubble, and it didn't work out very well. First, by pushing everyone into home ownership, it raised prices to unsustainable levels. Second, doing so by giving unqualified buyers dodgy loan products created instability in the market resulting in a credit crunch and a market crash. Increasing home ownership is a laudable goal, but there is always a segment of the population that isn't cut out for home ownership. Some people need the freedom and flexibility of renting to pursue career opportunities. Some people simply don't have the financial discipline to consistently make mortgage payments to sustain home ownership. The big lesson we should learn from the housing bust is…[READ MORE]

The banking cartel began restricting MLS inventory in 2012 by refusing to foreclose on delinquent mortgage squatters. Instead, they embarked on an aggressive can-kicking campaign of loan modifications to reduce the number of foreclosures overall and spread them over time. As a result of the reduced flow of REOs onto the market, MLS inventories plummeted, and prices began to go up. The policy was so successful in 2012, the banking cartel plans more of the same in 2013. Lenders know they are bagholders, so they hope with restricted supply and a compliant media willing to pour on the kool aid, lenders can raise the value of the sack of shit they hold on their balance sheets. Since we no longer…[READ MORE]

This the final logical step of the housing bubble and the bailouts that followed.  The banking losses have slowly been transferred to the taxpayers, then from them to the Federal Reserve.   It's been a long process and below is brief explanation the slow of transfer of losses to private banks all the way to the Federal Reserve with assistance the Federal Government over the course of five years.  We need to review a little bit to see how exactly did we reach this point and why the Federal Reserve bailout(s) will occur. A long crazy road When the housing bubble first started to burst, the first entities to feel it were local banks or mortgage bankers like Downey Saving…[READ MORE]

Have you noticed that most of the human interest stories from the housing bubble have no heroes? The housing bust has brought out the worst in mankind. Every party involved seeks to avoid any financial responsibility while simultaneously looking for ways to game the system to their advantage. The cast of characters includes lenders, realtors, delinquent mortgage squatters, holdover tenants, mortgage brokers, basically anyone involved with real estate. Today's featured article describes some of the nefarious characters, looks at their motivations and false beliefs of entitlement, and illustrates what happens when everyone is wrong, greedy and stupid. Owner leaves his loft empty — then sees a man living inside The owner had walked away, expecting a foreclosure that never came.…[READ MORE]

The home mortgage interest deduction serves to inflate house prices in high income areas without significantly promoting home ownership. Further, it costs the federal government $100,000,000,000 a year, which makes it a target of deficit hawks in Congress. The deduction has widespread support among taxpayers despite the fact only a select few gain any benefit from it. This support makes it a sacred cow in Washington, but it's starting to look increasingly likely that some compromise in the fiscal cliff debate will curb this benefit. If it does, the so-called housing recovery in high income areas like Coastal California will be stopped dead in its tracks. Long-treasured mortgage interest deduction may face changes 'Fiscal cliff' debate has put home mortgage…[READ MORE]

Edward DeMarco is a thorn in the side of the Obama administration. He has consistently resisted calls to pander to loanowners by forgiving principal on GSE loans. Many on the political left are calling for his head, and the Obama administration is poised to oblige them -- and that's not appropriate. DeMarco has proven to be a thoughtful administrator who protects the interests of the US taxpayer. Of course, that's the problem many politicians have with him. They want to raid the coffers of the treasure to buy more votes. If DeMarco is replaced by someone who will allow politicians to steal from the treasury to buy votes, it would be a travesty. Unfortunately, I am not hopeful that Conservatives…[READ MORE]

Major banks were bailed out during the financial crisis of 2008. Ever since then, they have been scrambling to avoid financial responsibility for their imprudent lending practices that precipitated the crisis. The banks entered into a large settlement with the attorneys general across the country to ostensibly pay restitution for their shoddy paperwork and foreclosure practices, but that was not the end to the pain for their misdeeds. Now, a series of both public and private entities are suing them for fraud, duping investors, and lax underwriting standards. I hope they lose. They deserve to lose. The banks must bear the full brunt of their mistakes, or they will almost certainly repeat them. Mortgage Crisis Presents a New Reckoning to…[READ MORE]

The Mortgage Forgiveness Debt Relief Act, a law temporarily amended the federal tax code to allow mortgage debt on a principal home that is canceled by a lender through a loan modification, short sale or foreclosure to escape taxation as ordinary income, is set to expire on December 31. The prospect is scaring the hell out of loan owners. If this law is not extended, millions of loan owners who plan to sell over the next several years will have to claim potentially hundreds of thousands of dollars of taxable income on the sale. The Mortgage Forgiveness Debt Relief Act was originally passed out of necessity. The tax bills were going to push millions of insolvent former debtors into bankruptcy.…[READ MORE]

Home prices have been increasing, mortgage rates are at all time low, and the cost of ownership is below the cost of renting in some market places.  So, why isn't private banking lending money to borrowers?  After the federal government took over Fannie Mae/Freddie Mac and then greatly expanded the scope of FHA there were reassurance that private lending would be reintroduced into the mortgage industry.     Currently, federal government insures or guarantees 95% of all newly originated mortgages.   Wouldn't this be a good time for private lending and private mortgage insurance to get back into the market.  Here are some news articles that indicates this will not occur any time soon. FHA FHA has a large market…[READ MORE]

We've become so accustomed to foreclosures on underwater homes that we forget that's not how it used to be. Foreclosures have always been part of the system, and prior to the housing bust, foreclosures happened to people who had equity in their properties. Foreclosures happen because people borrowed money and failed to repay it. The lender exercised their contractual right to call a public auction to recover their capital. They go to the auction and bid up the price to the outstanding value of their loan. If other bidders want to bid more, they are welcome to do so. When the loan is less than 80% of the value of the property, which used to nearly always be the case,…[READ MORE]

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