Archive for 2014

Excessive debt-service burdens reduces a borrower's ability to leverage themselves to buy houses at today's inflated prices. During the 00s lenders saddled borrowers with excessive loads of debt: housing, car, consumer, student. Debt was cheap and apparently getting cheaper every day, so neither lenders nor borrowers concerned themselves with worries of repayment, particularly with housing debt because the house was supposed to pay that off for the borrower, the borrower never needing their own income or savings to repay. Like all unsustainable constructs, it went on until it collapsed of its own weight in excess. In the past such episodes of excess were followed by painful purges, most painful for bankers who didn't get repaid; however, this time around, with…[READ MORE]

David J. Stern, the infamous robo-signer, lost his law license. He walks away with the $58 million he earned from selling his law firm in 2010. Delinquent mortgage squatters in Florida will still lose their homes. Nobody symbolizes the foreclosure purge like David J. Stern, the former owner of the largest of Florida's foreclosure mill, now defunct. Mr. Stern and his associates filled out thousands of foreclosure filings and routinely fabricated paperwork when the original lender files missed key documents. This fabrication of paperwork infuriated judges who didn't want to see the public record inundated with forged documents. David J. Stern was never charged with or convicted of any crime, and the people who lost their homes in foreclosure were…[READ MORE]

The housing market shows early signs of a new housing bubble; market psychology shifts toward foolish optimism, and lenders provide toxic loans to enable foolish buyers. The rapid increase in house prices since early 2012 concerns many housing market analysts. Federal reserve economists noted the 2013 housing recovery was different, in a bad way. Further, Mark Hanson and Nobel prize winner Robert Shiller warn of a housing bubble because of rising prices, excessive valuations, and changing consumer psychology. In the post OCHN Housing Market Update: Is OC forming a bubble?, I argued that we are not in a housing bubble -- at least not yet. My analysis of value -- a method of establishing value that properly identified the housing…[READ MORE]

If you repeat something enough times, does it make it true? One of the great Real Estate canards of the past year is the “myth of shadow inventory”. The realtor community had been drum beating this meme throughout 2013 in an effort to show how strong the market has been, and why you need to buy because inventory isn't coming back.  A simple Google Search for that phrase yields hundreds of articles posted just last year.... A myth-busting cacophony, or conspiracy, if you like. But does repeating that shadow inventory is a myth mean it’s true? I don't think so. Yes, there are fewer foreclosures thanks to market interference/consumer protective laws like California’s “Homeowner’s Bill Of Rights” and Nevada’s similar…[READ MORE]

 The price of gold is heavily manipulated. On Monday, January 6, a sell order for 4,200 contracts of February gold futures was executed; all at once.  If you are familiar with the gold futures market, and who is, you would know that a sell order for 4,200 contracts of gold futures represents a future sale of 420,000 troy ounces of gold in February, and the market price of those 420,000 ounces of gold on Monday morning was about $516,600,000.  In words, that is over 516 million dollars or about half a billion dollars.  Another report gives the figure as 11,000 contracts, or  1,100,000 ounces of gold, or 1.3 trillion in dollars.  But the exact numbers are not so important to this particular post.…[READ MORE]

Anticipate tougher standards; Expect your loan balance to be limited; Save more money; Gather abundant documentation; Obtain a fully underwritten loan approval; Pay off other debts. And expect your future homebuyer to do the same. On January 10, 2014, lenders must fully comply with the provisions of the Dodd-Frank Qualified Mortgage Standards. Why does this matter? Because lenders want the safe harbor protections bestowed on Qualified Mortgages. Given the legal environment favoring loanowners in response to the collapse of the bubble (loan modification entitlements, Loanoweners Bill of Rights, and so on), lenders will not be eager to stick their necks out and make loans outside the parameters of a qualified mortgage. Imagine what will happen if they do. Let’s say…[READ MORE]

Housing market manipulation in Great Britain even more foolish than US. The United States government in cahoots with the federal reserve and our too-big-too-fail banks openly and brazenly conspire to reflate the collapsed housing bubble. Under the guise of economic recovery, ostensibly to help homeowners regain equity, the powers-that-be implemented a variety of market props and manipulations over the last several years. Their first efforts, comprised of tax credits and interest rate stimulus, failed miserably. After an initial boost brought out a chorus of bottom callers, prices reversed and declined for 18 consecutive months. Their most recent efforts involved widespread can-kicking by repackaging bad loans as "permanent" modifications into junk securities purchased by the federal reserve for nosebleed prices. So…[READ MORE]

Current conditions favors loan modifications and squatting over short sales or foreclosures. Higher prices, slowing appreciation, rising lender costs, and stronger lender balance sheets will tip the balance in favor of foreclosure. Banks delay foreclosures on delinquent loans because it's in their best interest to do so. Many houses languish beneath excessive mortgage balances, and if lenders foreclosed on underwater delinquent borrowers, the lenders would lose a great deal of money. Even if the borrowers are current and want to sell the property in a short sale, lenders no longer approve those sales unless the borrower makes up for any shortfall because to accept less than the outstanding balance on the loan would also create a colossal loss. Since either…[READ MORE]

Purchase mortgage applications must increase to compensate for declining investor demand, a difficult proposition considering higher prices, tighter lending standards, and slow job growth. When a financed buyer contracts to buy a home, they apply for a purchase-money mortgage. The Mortgage Banker's Association tracks the number of these applications, and has done so for many years. Studying the chart of purchase mortgage applications reveals much about the health of the overall housing market. In the post 2013 housing recovery was different, in a bad way, an economist with the federal reserve documented how the rapid housing recovery (bubble reflation) in 2013 was unique among price rallies over the last 60 years -- in a bad way; prices did not rise…[READ MORE]

The Orange County housing market holds steady at the limit of affordability for a sixth consecutive month. Price momentum peters to zero. The Orange County housing market fully reflated last year. At the end of a wild 18-month rally, the market reestablished equilibrium at the ceiling of affordability, with momentum abruptly ceasing when rising mortgage rates removed excess affordability. Since housing markets normally pause during the fall and winter, most interested observers believe house prices will resume their powerful upward momentum when the spring buying season produces a bumper crop of eager buyers. If a spring rally does materialize in 2014, it probably won't be lead by owner-occupant buyers. The mainstream media overflows with optimistic (wishful) projections of legions of…[READ MORE]

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