If there is any justice in our financial system, delinquent mortgage squatters will face negative consequences for receiving their free ride. Right now, millions of people are not paying their mortgages, and the banks are not foreclosing on them. I paid my rent for the last five years and many loanowners struggled to pay their bloated mortgages, but after milking their properties of all the equity, many Ponzis quit making their mortgage payments and have been living payment-free ever since. It’s not fair to those who pay for their housing to subsidize those that do not.
Delinquent mortgage squatters have been offered every chance to redeem themselves. Lenders and the government are offering loan modifications that have consistently gotten better for loanowners over time. Everyone who signed on to a toxic mortgage has been offered a stable government-subsidized loan. Anyone who is willing to pay for their housing has been given the opportunity to stay and pay. Anyone not paying their mortgage at this point is doing so by choice. In short, they are all strategic defaulters. Some may be chronically unemployed, and perhaps we should feel sorry for them, but nobody is shedding any tears over the unemployed renters sleeping in their cars.
With prices going up, squatters have greater incentive to start paying again, and many who were reluctant to pay before are applying for loan modifications now. The lure of appreciation and HELOC money will draw many back into the game. There is some risk that these squatters may get rewarded by the market with equity if they squat long enough. However, since banks are adding on lost interest, fees, and penalties, it’s unlikely squatters will ever see the green of equity again — thankfully.
The real consequence for the most committed squatters is that they will miss the recovery rally, whenever that is. The last people pushed out of their houses will be the ones who miss the steepest ascent of house prices during the recovery because they will have poor credit when everyone else is jumping back in. Whatever they may have gained by squatting will be lost to the market. Squatting creates an opportunity cost. They could have been owners when house prices are rising fast. I find comfort in knowing that squatting will have consequences.
Buyers Back After Foreclosure
‘Boomerang’ Home Seekers Become Eligible for Mortgages and Hit Market Again
By CONOR DOUGHERTY and DAWN WOTAPKA — Updated October 15, 2012, 1:08 p.m. ET
Millions of families lost their homes to foreclosure after the housing crash hit six years ago. Now, some of those families are back in the housing market. Call them the “boomerang” buyers.
The people who defaulted early and moved on with their lives will be the first to reenter the housing market during the recovery. Anyone who was responsible over the last three years regained their credit score and saved enough for a 3.5% FHA down payment. That group faced the consequences for their actions, and now they are on the road to redemption. They should be applauded.
It is difficult to quantify the exact number of boomerang buyers, but real-estate agents, mortgage brokers and home builders all say a significant number of new buyers are families and individuals who went through foreclosure as recently as three years ago, the time period that buyers who defaulted on a mortgage must typically wait before becoming eligible for a mortgage backed by the Federal Housing Administration.
On a recent conference call with investors, Stuart Miller, chief executive of Miami-based home builder Lennar Corp., said the company was seeing more people “coming out of the penalty box.” At Cornerstone Communities, a San Diego home builder, roughly 20 of the 110 closings they have had this year came from buyers who have been through a foreclosure or short sale, estimates Ure Kretowicz, the company’s chief executive.
The land developers and builders I have spoken with over the last year have reported the same thing. Many new homes are sold to people who time the closings to be three years and day after their foreclosure or bankruptcy.
“It’s more than incremental business, that’s for sure,” adds Dan Klinger, president of K. Hovnanian American Mortgage, the mortgage arm of builder Hovnanian Enterprises Inc. With growing interest from these formerly delinquent buyers, K. Hovnanian provides its sales staff with a flier with industry guidelines listing the mortgage-eligibility rules for all types of derogatory events, from foreclosure to bankruptcy filings. “The industry is saying, ‘Pay your dues and then get back into the market,’ ” Mr. Klinger says.
The key part of that statement is “pay your dues.” As long as their are consequences, moral hazard is minimized.
Using the three-year benchmark it takes to get an FHA-guaranteed loan, in this year’s second quarter there were 729,000 households that were foreclosed upon during the bust that are now eligible to apply for an FHA mortgage, up from 285,000 in the second quarter of 2011, according to an analysis of foreclosure data by Moody’s Analytics. The company projects that number will grow to 1.5 million by the first quarter of 2014.
The demand that will fuel the recovery rally will come from this group.
Typical boomerang buyers are people like April Del Rosario, who purchased her first home in 2006 when she was 24 years old. Newly married and unsure of what terms such as adjustable-rate mortgage meant, Ms. Del Rosario and her husband paid $315,000 for a two-bedroom condominium in San Diego’s Mission Valley area, a location they picked because it was central to their jobs. The $2,600 monthly mortgage payment was already a struggle, but when the mortgage rate was adjusted higher and Ms. Del Rosario became pregnant, the couple was overwhelmed. They lost the home to foreclosure in 2009.
“We were really young and stupid,” she says. “All of a sudden, our already really expensive mortgage was going to go up. I was pregnant and everything was just bad timing on our part.”
No, it was not just bad timing. It was bad planning too. They took on a mortgage knowing the payments were going up. That wasn’t a surprise. Their plan was probably to serial refinance from one teaser rate into the next or that they were somehow going to be making 50% more in a few years, which was particularly foolish knowing Mrs. Del Rosario was likely going to have children.
You can’t just ignore the foolishness of what people did that caused them problems during the bubble. It was bad decision making, not bad timing.
Three years later, the couple is back in the market. The Del Rosarios were recently approved for a loan for a $280,000 home in Chula Vista, south of San Diego, which, when it is completed in January, will have three bedrooms and a two-car garage. Instead of proximity to work, they picked the location based on its school district and their desire to live there a long time. And while they now must pay $300 a month in mortgage insurance, the family’s income has grown, and their total mortgage payment is still a little lower than before, around $2,400. “We’re trying to be really conservative. We just want to have a nice place for our son,” she says.
I wonder how long people will remember their mistakes from the bubble? How long will it take for kool aid to take over and for people to forget their are risks involved.
There is a web of rules for when and how people who have lost homes to foreclosure or short sales or have gone through a bankruptcy can become eligible for a new mortgage. It typically takes three years after a foreclosure or short sale for a buyer to qualify for an FHA-backed loan. In many cases, it takes just one year after a Chapter 13 bankruptcy discharge, according to the agency.
Fannie Mae or Freddie Mac require a wait period of as much as seven years after a foreclosure or short sale before a consumer can become eligible for a conventional mortgage, though some short sellers can purchase again after as little as two years.
Prior to the collapse of the housing bubble, the waiting periods used to be five or seven years depending on the transgression. Obviously, lenders are under pressure to lower these standards to get more warm bodies to qualify for loans so they can recycle their properties. However, reducing the waiting period also encourages strategic default. When a loanowner comes to realize they will obtain equity faster by defaulting and buying back at a lower price later, many choose to bail out. The whole point of a waiting period is to provide consequences for default.
Becoming eligible for a new mortgage doesn’t mean that buyers will necessarily qualify for one. Lenders still require borrowers to have strong credit score and to have been paying their other bills on time.
The waiting period is not the only hurdle.
But as rental rates continue rising—they climbed 0.8% in the third quarter to a national average of $1,090 per month, according to Reis Inc. homeownership is increasingly becoming cheaper than renting.
My reports show prices locally finally fell below rental parity last year.
That is part of what enticed Ronda Martinez, 39, back in to the market. In 2007, she and her husband, Mark, let their two-story, $430,000 home in Perris, Calif., go into foreclosure when they were unable to sell it when required to move to Phoenix for a job. …
“Initially people are upset and think, ‘I’ll never buy again,’ ” she said. But “there’s no reason to give up on owning.”
Actually, there are plenty of reasons to give up on owning. I have enjoyed the flexibility renting has provided me, not to mention the significant monthly cost savings over the last decade. Now that it’s cheaper to own than to rent, I am feeling pushed toward ownership — which is how the system is supposed to work. If there were supply in the local market, I would be looking to buy. Unfortunately, that isn’t the market we have right now.
Squatters lose in the end
Besides missing the recovery rally, squatters will lose another way as well. Since it looks like Congress is going to allow the debt-forgiveness tax bread to expire, today’s squatters will also face a huge tax bill once it’s finally over. Remember, these people are much deeper underwater than they realize because banks keep adding on fees, penalties, and lost interest. When these people get 1099s in a few years for several hundred thousand dollars, they will be in for a really rude surprise.
More than million dollars HELOC abuse and five years squatting
There are some squatters you really wan to see lose. The former owners of today’s featured property fall into that category. These people extracted about $1,500,000 from their property, and when they couldn’t pay the mortgage, they were allowed to squat for a very long time. They certainly obtained maximum benefit from loanership of this property.
- This property was purchased for $450,000 on 3/24/1988. Their first mortgage information is not available.
- On 7/13/1999 they refinanced with a $600,000 first mortgage and obtained a $50,000 HELOC. They had to wait out the downturn, but the moment they had equity, they went to the bank to extract it. I expect millions of Californians to follow in their footsteps once prices go up.
- On 5/1/2002 they refinanced with a $908,600 first mortgage.
- On 5/29/2002 they obtained a $224,000 stand-alone second.
- On 8/17/2005 they refinanced with a $1,500,000 first mortgage and obtained a $110,000 HELOC.
- On 6/1/2006 they obtained a $497,500 HELOC.
- Total property debt was $1,997,500 assuming they maxed out the final HELOC.
- Total mortgage equity withdrawal was at least $1,547,500 plus their down payment.
- Total squatting time was well over five years.
Their first notice of default was 2/15/2007. That was prior to when I started writing for the Irvine Housing Blog. The entirety of the last five and one half years I have been writing about HELOC abuse and squatting, these people have been living without a payment in a luxury property.
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Proprietary OC Housing News home purchase analysis
9882 WILDWOOD Way Villa Park, CA 92861
$1,399,900 …….. Asking Price
$450,000 ………. Purchase Price
3/25/1988 ………. Purchase Date
$949,900 ………. Gross Gain (Loss)
($36,000) ………… Commissions and Costs at 8%
============================================
$913,900 ………. Net Gain (Loss)
============================================
211.1% ………. Gross Percent Change
203.1% ………. Net Percent Change
4.6% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$1,399,900 …….. Asking Price
$279,980 ………… 20% Down Conventional
3.96% …………. Mortgage Interest Rate
30 ……………… Number of Years
$1,119,920 …….. Mortgage
$266,481 ………. Income Requirement
$5,321 ………… Monthly Mortgage Payment
$1,213 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$350 ………… Homeowners Insurance at 0.3%
$0 ………… Private Mortgage Insurance
$0 ………… Homeowners Association Fees
============================================
$6,884 ………. Monthly Cash Outlays
($1,264) ………. Tax Savings
($1,625) ………. Equity Hidden in Payment
$383 ………….. Lost Income to Down Payment
$370 ………….. Maintenance and Replacement Reserves
============================================
$4,748 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$15,499 ………… Furnishing and Move In at 1% + $1,500
$15,499 ………… Closing Costs at 1% + $1,500
$11,199 ………… Interest Points
$279,980 ………… Down Payment
============================================
$322,177 ………. Total Cash Costs
$72,700 ………. Emergency Cash Reserves
============================================
$394,877 ………. Total Savings Needed
The property above is available for sale on the MLS.
Contact us for a comparative market analysis, a cost of ownership analysis, or information on how you can make an offer today!
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32 Responses to “Delinquent mortgage squatters will miss the recovery rally”
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Guess what? If banks stop foreclosing on people, they default in large numbers to get free housing.
LPS: Delinquency Rate Suddenly Spikes in September
Foreclosure inventory continued to diminish in September, but the delinquency rate saw a sudden month-over-month surge, according to the “first look” mortgage report from Lender Processing Servicers (LPS), which has a loan-level database covering about 70 percent of the market.
The delinquency rate, which stood at 7.40 percent in September, hiked up 7.72 percent from August, but is still down by 4.19 percent from a year ago. The delinquency rate includes loans 30 days or more past due, but not in foreclosure. The rate actually increased in April, May, and June before falling in July and August.
The foreclosure inventory rate dropped further, falling to 3.87 percent, the first time in nearly two years the rate was below 4 percent. The foreclosure inventory rate was down from the previous month by 4.05 percent and down from a year ago by 7.37 percent.
As of September, there are 5.64 million properties that are 30 days or more past due or in foreclosure.
Loans that were 30 days or past due but not in foreclosure totaled 3.7 million; in that group, 1.53 million were 90 days or more past due, or on the verge of going into foreclosure. Foreclosure inventory numbered 1.94 million.
The states with the highest percentage of past due loans were Florida, Mississippi, New Jersey, Nevada, and Louisiana.
The states with the smallest percentage of loans still unpaid were Montana, Alaska, South Dakota, Wyoming, and North Dakota.
Year over year is still declining. The monthly changes will be choppy because they depend on foreclosure filings. This month filings dropped, so delinquency went up. When filings go up again, delinquency will drop.
They are still relying on declines from last year. For the last nine months or so, delinquency rates have been flat, mostly due to the dramatic slowdown in foreclosure processing. The banks are barely treading water, and some of the loans that exited the delinquency pool are going to be recycled when the loan modification fails.
Over-indebted borrowers are finally starting to realize you can’t borrow your way to prosperity. With the open-ended commitment to low interest rates, people who would borrow feel no urgency to do so today.
Borrow money? ‘No thanks,’ say consumers
The Federal Reserve’s latest declaration to keep interest rates shockingly low until 2015 has not galvanized the populace into borrowing truckloads of money. In fact, most consumers say the Fed’s announcement does little to make them more inclined to borrow money, according to Bankrate’s October Financial Security Index.
Just 23 percent of consumers say they are tempted to take on more debt, but 74 percent say “no thanks” to low-rate borrowing right now, Bankrate’s survey reveals.
At the Sept. 13 meeting of the Federal Open Market Committee, the Federal Reserve’s monetary policy group, it was announced that the federal funds rate — the very short-term interest rate controlled by the Fed — will remain close to zero percent for a year longer than the group previously thought.
Though one of the stated aims of the central bank’s policy is to stimulate economic activity through consumer spending and borrowing, economic theory posits that the announcement may have the opposite consequence in the short term, according to Bill Hampel, senior vice president of research and policy analysis and chief economist at the Credit Union National Association.
“If anything, the effect of the announcement itself would be to reduce borrowing today,” he says. “Some people may want to borrow now because credit is so cheap, but you’ve just told them you don’t need to rush out and borrow now because it is going to be cheap next quarter, next year, the year after that and the year after that.”
Reality is, we’ve already seen the ”steepest ascent of house prices during the recovery” because the half-life of central bank intervention keeps getting shorter and shorter; soon to reach zero.
Sep 12, fed announces QE3
Oct 22, fed considers upping QE3 size and language
http://www.marketwatch.com/story/fed-considering-upping-qe3-size-and-language-2012-10-22
“Oct 22, fed considers upping QE3 size and language”
You got to be kidding me. I wish I had the inflation table from yesterday, because 100% increase in milk for 4 years wasn’t enough.
You beat me to it. I posted the story below.
This really is starting to look more and more desperate. How much stimulus does the country need? At what point do you stop and let nature take its course?
Sovereign Default
or FED as treasury bagholder of last resort as the bond bubble is finally pricked.
This is when the shit hits the fan.
As prices of goods begin to increasingly accelerate, even the most slack-jawed of our ‘honey boo boo’ culture have enough mental capacity to realize a jar of peanut butter holds value while a dollar loses value.
If they can grasp ‘inherent value’ in zimbabwe, we can figure it out. Rising prices will send the velocity of money into orbit.
“Rising prices will send the velocity of money into orbit.”
Bernanke wants to see some of this. The velocity of money is very low right now which is what he perceives as the problem with the economy. The question is will he stop the stimulus before it gets out of control. Based on his recent policies and statements, I have my doubts.
QE Infinity is on the table at the Federal Reserve.
Fed considers upping QE3 size and language
WASHINGTON (MarketWatch) — After historic changes last month, Federal Reserve officials this week will discuss a possible expansion of the size of its third round of bond buying and better ways to guide markets about future policy actions.
At its two-day meeting that starts Tuesday, the Fed may abandon its calendar-date approach to forward guidance and adopt some form of numerical target for policy, according to analysts.
And the central bank will consider whether to expand its bond-buying at the end of the year to take account of Treasury purchases under its Operation Twist plan that finishes at year-end.
No final decisions are expected when the Federal Open Market Committee releases a statement at 2:15 p.m. Eastern on Wednesday. Economists will parse the summary of the Fed’s deliberations to be released on Nov. 15 for clues to what actions may come at the last meeting of the year in mid-December.
After the drama of the central bank’s meeting in September, this week’s meeting is viewed as less of a cliff hanger.
Last month, the Fed announced a plan to purchase $40 billion of mortgage-backed securities per month in an open-ended approach that would continue until the labor market improved.
While it may not sound like much, the Fed may buy over $1 trillion in MBS based on current forecasts, analysts at Capital Economics estimate.
The Fed also took the dramatic step of saying it expects to keep short-term interest rates unchanged even if the recovery strengthens. It also pushed out the calendar date for the expected first rate hike until mid-2015.
…
Those last actions are what convinced me that house prices won’t go down.
IR, you know you are early for Halloween. The Federal Reserve House of Horrors.
“Those last actions are what convinced me that house prices won’t go down.”
It’s getting scary….like Wiemar Germany scary. I watched all 4 debates and no mention of the Fed and their printing press. The fed will spur massive inflation just to keep home prices in check and bailout the banks.
” The fed will spur massive inflation just to keep home prices in check and bailout the banks.”
Yes, they will. To the average American, nominal prices are what matters. They won’t see the connection between stabilizing house prices and rampant inflation of prices on consumer staples. As house prices crash headlines fade, news about inflation will take its place, and nobody will realize saving one caused the other.
Speaking of nominal…. looks like the mere existence of an IMF paper that discusses a return to a fully-reserved banking system could mean the nominalist-era may be coming to its gradual end……
A recent IMF working paper called “The Chicago Plan Revisited” (embedded below) is making its way to our in-box because it discusses a return to fully-reserved banking systems – a policy for which we have long strongly advocated. The paper discusses replacing the current monetary arrangement – using unreserved private bank system credit as money – with money directly sponsored and distributed by federal governments.
http://www.zerohedge.com/news/2012-10-22/qbamco-nominalists-realists-and-madness-chicago-plans
It is shocking how poor nearly everyone’s math/finance skills are. During the bubble, it was very common to hear, “We made $100k on the sale of our house.” There is no consideration for any costs. It’s basic math for them – “I paid $500k and I sold it for $600k three years later. Hence, $100k profit.”
“It is shocking how poor nearly everyone’s math/finance skills are. ”
Where this really shows up is not just in the forgotten transaction costs but also in the increased monthly cost of ownership. If it costs someone $2,000 per month more to own than to rent — a common occurrence during the bubble — then they should knock $24,000 per year off the profit just to get back to a nominal equivalent. That’s not taking into account any opportunity cost of investing that money in something else.
1% interest rates (bush) = housing bubble and ’08 financial debacle
0% interest rates (obama) = bond bubble/reinflated housing bubble and CURRENCY CRISIS
Centrally planned, artificially cheap interest rates create false signals and everyone does stupid shit with their money. Austrian Econ 101 in real time.
Home Affordability Still Elusive in Some Major Markets
Despite a drop in prices since the housing market crash and historically low mortgage rates, many families still can’t afford to buy a home in many major cities, a new analysis finds.
Despite lower prices, a median-income household can afford a median-priced home in just 14 of the country’s 25 largest metropolitan areas due to rising expenses and stagnant wages, research from Interest.com finds.
The home affordability study finds that Detroit, Atlanta and Minneapolis are the most affordable markets, and San Diego, New York and San Francisco are the least affordable.
“Even after years of declining home prices and record-low mortgage rates, median-income households are unable to afford a median-priced home in nearly half of the metropolitan areas that we looked at,” explained Mike Sante, the site’s managing editor, in a statement.
To determine their rankings, Interest.com gathered the median home prices in the 25 largest metropolitan areas in the United States and calculated how much financing would be required for a buyer with a 20 percent down payment. The site crunched data from the National Association of Realtors, the Census Bureau and other sources, including data on insurance costs and taxes, to arrive at its findings.
Interest.com gave each market a letter-grade for overall affordability, as well as a “paycheck power” rating, which indicates the percentage by which the median income exceeds, or falls short of, the income necessary to buy a median-priced home.
Atlanta scored an “A” on affordability and a paycheck power rating of 40 percent, which means that the median income in the city exceeds that needed to buy a median-priced home there by 40 percent. The city has relatively low home prices — the median sale price of $103,200 is well below the average of nearly $230,000 for the 25 largest cities — and slightly higher income. (Detroit’s rating was even higher, but the city represents a special situation, Interest.com notes, because the low home prices reflect a large number of abandoned properties).
The least affordable city was San Francisco, where the median income falls 33 percent short of the income needed to buy a median-priced home.
The most-affordable and least-affordable markets and their paycheck power ratings are:
1. Detroit (+45.32 percent)
2. Atlanta (+40 percent)
3. Minneapolis (+32.2 percent)
4. Phoenix (+23.67 percent)
5. St. Louis (+23.49 percent)
Least Affordable Metropolitan Areas
21. Los Angeles (-12.52 percent)
22. Miami (-12.59 percent)
23. San Diego (-25.9 percent)
24. New York (-29.71 percent)
25. San Francisco (-32.76 percent)
Do you live in one of the more expensive markets? Do you think you will be able to buy a home there?
…
Although many of these markets are not affordable, many of them never were. I have data going back to 1988, and the least expensive period was 1993 to 1999, and even then many markets were grossly inflated. Relative to the previous lows, nearly every market in Orange County is a bargain.
Here’s what I don’t understand. If you bail because you can’t afford the place AND the banks want it now (you drew the short straw) BUT you didn’t run up all your credit cards and stiff every merchant in town, you are treated the exact same as someone who did! It’s like everyone who takes a life (self-defense or vicious, deliberate homicide) gets the same sentence!
I agree with most of what you say here except that squatters had “every chance” to save themselves. They had one lie after another from government agencies that help was on its way, help they rarely seemed to qualify for (like sanctuary in Logan’s Run). On the other side of the equation, many had lenders who were happy to leave them be. So what should they have done?
When told “wait at home until we come for you–could be a long time, could be tomorrow,” most people will do just as they are told. We may not like it, but that seems to be human nature.
I like your Logan’s Run analogy. That is very apt to describe the loan modification process. Perhaps I could generate some cartoons from that…
The sheeple have been lead astray at every turn during the collapse. The advice from lenders and the government was not designed to benefit the people, it was intended to benefit the banks — which it did. By convincing people relief was coming even when they knew it was not, a few more people made a few more payments than they otherwise would have. The system is rigged. However, with the final round of loan modifications when they opened the door to everyone, people have little excuse not to refinance or obtain a loan mod.
The programs were really not designed to benefit banks, but rather politicians. HAMP was designed around the PR it could generate, not around actually helping borrowers. The Obama administration was afraid of looking like they were helping banks, so they didn’t consult with banks on how to make the program successful. Had they treated the banks like partners, the administration would have hit their target of helping 3-4 million borrowers….easily. Instead, the heavy PR focus caused the program to fail. Sheila Bair’s new book confirms this.
Interesting perspective on the issue. The government did get maximum PR value from the effort. As I pointed out in a post months ago, the Obama administration succeeded by failing miserably. If they really had helped 3 or 4 million people, the fallout from moral hazard would have created even larger problems in the future.
I completely agree that the program succeeded by failing miserably. Not only was moral hazard dealt a blow, but taxpayers saved a bundle. Only about $5 billion of the original $75 billion allocation has been spent. Due to the failure of the program, the allocation has been lowered a couple of times, and now stands at $35 billion if I’m not mistaken. If the program ends at the end of 2013 as it is scheduled to, then there’s no chance that money will be spent either.
We will not be Weimar Germany. We will be like Japan. The government will fight like hell to keep the prices of everything from plunging while people struggle to make ends meet working multiple low paying part time jobs with zero benefits.
I think we will see both. For the foreseeable future, we will be Japan, but once the economy kicks into gear, the federal reserve will keep the pedal to the metal too long and create a lot of inflation to make the debt service burdens manageable. I don’t think we will see either extreme (Japan or Weimar Germany), but we will see both ends of the spectrum before we return to some form of stable normalcy.
Bullshit. We are monetizing to keep interest rates low with diminishing returns (each round is less successful). Our country is on an Adjustable Rate Mortgage. 0% interest rates are the equivalent of 1920s Germany productive assets being siezed by foreigners as reparation. Too low interest rates gut the productive capacity of an economy by creating capital distortions. We are either going to default honestly or the FED is going to monetize the majority of treasuries when the market demands higher returns to offset loss of dollar purchasing power. The engineered soft landing will be a disaster.
Out of curiosity, where does one put their money if they expect “japan style” future?
“We are either going to default honestly or the FED is going to monetize the majority of treasuries when the market demands higher returns to offset loss of dollar purchasing power.”
I think our own political debates about the deficit show that we will monetize the debt. Default will never be a real options politicians will consider.
“Since it looks like Congress is going to allow the debt-forgiveness tax bread to expire, today’s squatters will also face a huge tax bill once it’s finally over. Remember, these people are much deeper underwater than they realize because banks keep adding on fees, penalties, and lost interest. When these people get 1099s in a few years for several hundred thousand dollars, they will be in for a really rude surprise.”
It looks like with the discussion of phasing out the Mortgage Interest Tax Deduction and now the debt-forgiveness tax bread to expire. It seems the feds want to re inflate housing bubble, but they also want their tax money. At $16 trillion in debt, the free ride might be over.
Bernanke Probably Won’t Stand for Third Term at Fed: Report
Reporting by Sakthi Prasad in Bangalore and William Schomberg in New York; Editing by Ted Kerr and W Simon
REUTERS – U.S. Federal Reserve Chairman Ben Bernanke has told close friends he probably will not stand for a third term at the central bank even if President Barack Obama wins the November 6 election, the New York Times reported.
Republican presidential nominee Mitt Romney has already said he would not re-nominate Bernanke if he wins the presidency. Bernanke’s term as chairman ends in January 2014.
Bernanke, who was first appointed to run the U.S. central bank by former president George W. Bush and was given a second term by Obama, has declined to comment publicly on whether he would accept another four-year term.
“I am very focused on my work, I don’t have any decision or any information to give you on my personal plans,” he told a news conference last month after the Fed announced a new and open-ended round of bond buying to support the U.S. economy.
The Fed’s unconventional efforts to spur growth have been criticized by many Republicans and some economists who argue that they threaten future inflation and abet profligate spending in Washington.
Treasury Secretary Timothy Geithner has already made it clear he wants to leave by the end of the year.
Former Treasury Secretary Lawrence Summers would be at the top of Obama’s list to replace Bernanke, although his reputation for not being a team player could count against him, New York Times columnist Andrew Ross Sorkin wrote.
Longer shots include Janet Yellen, the vice chairwoman at the Fed, and economist Alan Krueger, a former assistant secretary of the Treasury for economic policy, or even Geithner, Sorkin wrote in his “Dealbook” column.
Glenn Hubbard, who headed the Council of Economic Advisers under George W. Bush, is often mentioned as Romney’s most likely nominee for the Fed chairmanship or the top job at the Treasury Department.
Why should Ben stay to see the SHTF? It just a matter of time. The banks have receive their juice and needs another fix. Each round of QE’s become less effective. If he leaves during this wonderful recovery, Ben will be the hero and the new guy the goat. The second replacement can blame the first replacement, the goat. Does this sound familiar?
Not a recovery:
http://www.zerohedge.com/news/2012-10-23/when-brazilian-model-brothers-come-miami-and-buy-rent-top-near
[...] to live for free, probably for a very long time. Rising prices will prompt many to keep paying, and delinquent mortgage squatters will miss the recovery rally, but despite these incentives to stay current, the September delinquency rates mysteriously and [...]