MISSION VIEJO

62% of delinquent loans are more than 90 days past due

 MISSION VIEJO, NEWS
May 142013
 
62% of delinquent loans are more than 90 days past due

Lenders created a kinder, gentler euphemism for their stupid bubble-era loans; legacy loans. The word legacy has a regal connotation conjuring up images of revered ancestors and royal traditions. In reality, label is being applied to some of the most unconscionably stupid and irresponsible loans ever underwritten. What lenders call legacy loans should be called cancer loans because they are a malignant tumor on the balance sheets of lenders everywhere. Since the credit crunch of August 2007, lenders clamped down on their foolish underwriting standards. The stopped making all sorts of loans nobody would ever repay. Unfortunately, that also meant [Read More...]

Mortgage lending standards remain prudently restrictive

 MISSION VIEJO, NEWS
May 092013
 
Mortgage lending standards remain prudently restrictive

realtors, homebuilders and others who profit on real estate transactions hold the false belief that lenders are holding back the market with tight lending standards. It’s an easy position to hold for those who have no risk of loss when loans go bad. The reality is that lenders are not willing to make bad loans anymore because if the do, they will lose money — which is how it should be. Lenders are supposed to be the adults looking over real estate transactions. After all, it’s mostly their money being used to fund the purchase. During the housing bubble lenders [Read More...]

The bearish case for another leg down in housing

 MISSION VIEJO, NEWS
Apr 162013
 
The bearish case for another leg down in housing

It’s a difficult time to be a housing bear. The chorus of cheerleaders in the financial media are keen to report on the supposed strength in housing, and locally prices are going straight up. Given those realities, are the rantings and ravings of housing bears just noise to be ignored? Mark Hanson, an independent housing market analyst, correctly and accurately predicted the crash in housing. He is one of the last remaining housing bears. Let’s take a careful look at the well-reasoned positions of housing bears and see if there is any merit to their concerns. California Housing Still Bouncing [Read More...]

A lack of first-time homebuyers is a drag on the housing market

 MISSION VIEJO, NEWS
Mar 042013
 
A lack of first-time homebuyers is a drag on the housing market

The foundation of any housing market is the first-time homebuyer. By definition, people buying their first home don’t have equity (free money) from a previous sale to extend their borrowing power. Without the activity of first-time homebuyers, those who own homes at the entry level (previous first-time homebuyers) can’t sell and buy a move-up property. The first level move-ups ignite a chain reaction throughout the move-up market stimulating sales across all price points. If the first-time homebuyer cohort is not active, the entire housing market seizes up, and sales volumes are low. Recently, reports in the mainstream media are touting [Read More...]

Government home loan guarantees ensure the misallocation of credit

 MISSION VIEJO, NEWS
Jan 102013
 
Government home loan guarantees ensure the misallocation of credit

Yesterday, with special thanks to Matt138, I introduced the writings of Frédéric Bastiat, a 19th century French economist. I always find it interesting when writings from many years ago resonate through the ages as if they were written yesterday. If you’ve never read Plato’s Republic, it has a similar resonance. Plato’s critique of the shortcomings of democracy are still just as valid today as they were 2,500 years ago when he wrote it. Usually, I feature recent news articles less than a few weeks old. Today, I am featuring an essay written more than 160 years ago. The fact that [Read More...]

Higher prices and rising interest rates will slow housing market appreciation

 MISSION VIEJO, NEWS
Dec 202012
 
Higher prices and rising interest rates will slow housing market appreciation

The restricted inventory condition we are dealing with here in the Southwest has caused prices to go up. However, for buying to keep pushing prices higher, interest rates must keep falling to sustain affordability at higher price levels. In a market like ours where demand is less than robust (most increased demand this year came from all-cash investors and hedge funds), any decrease in affordability is going to hurt sales. At first it will show up in decreased sales volumes. If affordability continues to crumble, prices will begin falling again. Housing Affordability Begins to Slide Published: Tuesday, 11 Dec 2012 [Read More...]

Crooks, thieves, and liars: the nefarious characters of the housing bust

 MISSION VIEJO, NEWS
Dec 142012
 
Crooks, thieves, and liars: the nefarious characters of the housing bust

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 [Read More...]

Man refuses to sell house he couldn’t afford, complains about foreclosure

 MISSION VIEJO, NEWS
Dec 072012
 
Man refuses to sell house he couldn't afford, complains about foreclosure

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 [Read More...]

17% of FHA loans delinquent in September, bailout coming

 MISSION VIEJO, NEWS
Nov 092012
 
17% of FHA loans delinquent in September, bailout coming

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 [Read More...]

Southern California’s cultural pathology (redux)

 MISSION VIEJO, NEWS
Oct 312012
 
Southern California's cultural pathology (redux)

I began writing about the housing market back in February of 2007. Over the last five and one half years, I’ve covered a lot of ground. Many of my earliest posts serve as a foundation for my philosophy that comes through my daily posts. I know many of you who read this blog have been with me from the beginning, but I have also picked up many new readers along the way. Since we are entering the recovery stage of the market, and since this material will be new to many I plan to revisit many of my old posts [Read More...]

Five good and unusual tips for buying or selling a house

 MISSION VIEJO, NEWS
Oct 192012
 
Five good and unusual tips for buying or selling a house

There are thousands of how-to and tips articles related to homebuying. Most of them are crap written by realtors as the one post on their website before they give up blogging. Most of the advice in these articles is useless generalities that waste everyone’s time. Back in 2007, I wrote my tongue-in-cheek Buying and Selling During a Decline with tips for buying in a buyer’s market. Unfortunately, those days have come and gone: The First Offer is the Best Offer This is the most counter-intuitive part of buying in a buyer’s market. Ordinarily sellers, or more accurately the seller’s realtor, [Read More...]

Bank’s residential loan delinquency rates more than FIVE times historic norms

 MISSION VIEJO, NEWS
Sep 062012
 
Bank's residential loan delinquency rates more than FIVE times historic norms

Shadow inventory is primarily a problem for major commercial banks. The GSEs have been processing their foreclosures, and although delinquencies at the FHA are increasing, these are fresh delinquencies, not long-term shadow inventory. The too-big-to-fail commercial banks have been endlessly can-kicking to delay what I believe are inevitable write downs. For as long as records on delinquencies were kept, rarely did the rate exceed 2%. Currently, it is over 10%! To make matters worse, the delinquency rate for commercial banks is not declining as fast as delinquencies overall. Over the last two years, the rate dropped from from a peak [Read More...]

Principal forgiveness with equity recapture: a workable solution for loanowners

 MISSION VIEJO, NEWS
Aug 022012
 
Principal forgiveness with equity recapture: a workable solution for loanowners

Millions of people are underwater on their mortgages, and many of those borrowers have payments straining their ability to pay. The favorite solution of pandering lefties is to simply forgive the debt and lower the borrower’s payments. Of course, the solution would bankrupt the banks and cause significant future problems with moral hazard because borrowers would have a strong incentive to borrow imprudently in hopes of obtaining free money. Principal forgiveness is not the answer, and despite loanowner’s false hope, no significant principal forgiveness is forthcoming. Excessive mortgage debt is a drain on our economy as too much money is [Read More...]

FHA mortgage delinquencies skyrocket more than 25%

 MISSION VIEJO, NEWS
Jul 102012
 
FHA mortgage delinquencies skyrocket more than 25%

The FHA has been the lender of last resort throughout the housing bubble crash. They insured loans which didn’t properly price in risk during a declining market. No private lender would have made such loans, particularly as the super-low interest rates engineered by the federal reserve. The FHA has tried to raise its cost of money to cover the risk by increasing the insurance fees which drives up the effective interest rate, but their onerous fees have fallen short of covering the upcoming losses. In the FHA’s defense, the loans they underwrote were of high quality, and although they reached [Read More...]

Foreclosure prevention laws extend the slump, experts agree

 MISSION VIEJO, NEWS
Jul 022012
 
Foreclosure prevention laws extend the slump, experts agree

Our real property system functioned well for centuries with very little change. Prior to the housing bubble, it was widely accepted that people borrowed money to buy houses and if they didn’t pay it back according to the terms of the promissory note, the mortgage agreement allowed the lender to call an auction to get their money back. Housing was an earned reward, not an entitlement. The basic dilemma is simple, most people don’t have the cash to buy a house, and it would take them most of their adult lives to save for one, so lenders designed loan programs [Read More...]

Planning to buy a home this spring? Why not wait?

 MISSION VIEJO, NEWS
Jun 112012
 
Planning to buy a home this spring? Why not wait?

Several months ago, I had a meeting with a representative of the OC Register who wanted to sell me ad space. During the conversation, he said the realtor community in conjunction with the OC Register needed to create a “buying frenzy” to help liquidate the abundance of distressed inventory. Obviously, he was not a reader of the blog. Perhaps in the era before blogs, a coordinated mis-information program conducted by realtors and the local media would succeed in persuading buyers to act when it is not in their best interest to do so. We have certainly seen consistent examples of [Read More...]

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