Page 4 of 10 FirstFirst 123456789 ... LastLast
Results 61 to 80 of 182
  1. #61  
    Are the parts of the country where housing may fall by half the parts of the country where housing was already drastically overinflated?
    ‎"Is that suck and salvage the Kevin Costner method?" - Chris Matthews on Hardball, July 6, 2010. Wonder if he's talking about his oil device or his movie career...
  2.    #62  
    Quote Originally Posted by Toby
    Are the parts of the country where housing may fall by half the parts of the country where housing was already drastically overinflated?

    Toby, I have been real busy -- I want to reply to that question in a more in depth way when I have more time, but in brief:

    I expect it could happen in areas like Florida (Miami) where there was rampant Condo speculation -- and other places where you have a combination of bad local economic conditions and massive foreclosures that self perpetuate the collapse of housing prices
    755P Sprint SERO (upgraded from unlocked GSM 650 on T-Mobile)
  3. #63  
    Bayre and a lot of people have zero clue about this.

    Bottom line on the housing market - the repeated rate cuts that Greenspan did in order to "avoid a recession" fueled the mortagae industry and real estate. 18 months after that subsided, the chickens come home to roost.

    And the mortgage industry and Wall Street made some bets and lost. That's life in the big city. Grow up.

    As much as I hear the whine of people affected by this, quite frankly, they got themselves into this mess. Life's tough. Learn your lesson. First internet stock, now cheap mortgages.

    The foreclosure actions will take a year to flush out, and then we are back to "normal", with hopefully people being a bit wiser.
  4.    #64  
    the Fed (finally) cut interest rates by 1/2 percent today.

    Today was also when we learned that forclosure rates have more than doubled in the last year.

    Though cutting a half point was better than the alernative they had been considering (which was to continue to raise rates to fight "inflation"), it will have only a modest effect on the housing crisis.

    Those at risk of losing their homes will unfortunately likely still lose them. They are almost by definition the type of borrower who is not going to get refinancing in this current environment

    Though lower mortgage rates will help some buyers to buy some homes, the larger problem of too many homes for sale and an insufficient number of buyers (and who can get financing), and are willing to pay what home sellers are asking -- remains.

    Nor does the rate cut change the micro economic environments that have been directly damaged by the housing meltdown.

    (I may write more on this later, when I get free...)
    Last edited by BARYE; 09/19/2007 at 04:12 AM.
    755P Sprint SERO (upgraded from unlocked GSM 650 on T-Mobile)
  5. #65  
    It will be interesting to see some breakdown by numbers:

    What percentage of distressed mortgages are caused by fraud?
    What percentage are caused by people who should never have tried to purchase a home (that they could not afford) anyways?

    Owning a home is everyone's dream, not a birthright.

    I have no sympathies the greedy investors and financially illiterate/naive homeowner. However, straight fraud by the mortgage broker is a different matter ...
    --
    Aloke
    Cingular GSM
    Software:Treo650-1.17-CNG
    Firmware:01.51 Hardware:A
  6. #66  
    Quote Originally Posted by aprasad View Post
    It will be interesting to see some breakdown by numbers:

    What percentage of distressed mortgages are caused by fraud?
    What percentage are caused by people who should never have tried to purchase a home (that they could not afford) anyways?

    Owning a home is everyone's dream, not a birthright.

    I have no sympathies the greedy investors and financially illiterate/naive homeowner. However, straight fraud by the mortgage broker is a different matter ...
    Not to mention predatory lending practices at the corporate level whereby borderline credit-worthy potential buyers are inundated with offers of 0 points, nothing down, low-low monthly payments, preapprovals, etc. For the lenders, it's primarily a turkey-shoot because this demographic does not have the resources of education or legal counsel to know the long-term effects of their loan terms, yet they are bombarded with these attractive offers. Maybe there are low/no-fee resources available which are qualified to provide sound advice, but usually these are nonprofits without enough than to be a drop in the bucket of what is needed.
  7.    #67  
    yes (as I acknowledged in an earlier post) there was considerable fraud in the housing mortgage market in the last few years.

    Any half way smart bank robber without an incarceration wish knew the easiest way to steal from the bank was through housing.

    For instance they would sometimes "borrow" identies, buy houses grossly over valued by "bought" appraisers. Or get equity "loans" from property without equity.

    Their efforts ironically benefitted home sellers by artificially inflating housing demand, and the prices that buyers would pay for a house.

    This was particularly true in places like Atlanta.

    Those areas especially hit by this sort of fraud, are going to be the most effected by the valuation depression that will come.

    And because these houses were bought with the intention of theft, they were often neglected or even savaged -- further hurting the value of neighboring homes.

    In the overall scheme of things though, this type of fraud represents a very very small fraction of the larger housing market problem.
    Last edited by BARYE; 09/19/2007 at 11:51 AM.
    755P Sprint SERO (upgraded from unlocked GSM 650 on T-Mobile)
  8.    #68  
    as a result of the Fed's (much needed) cut in interest rates, the dollar has plummeted in value against most other currencies -- especially the Euro and the Yen.

    At some point the dollar's role as the "reserve" currency, as the safe instrument into which assets can be warehoused and international trade conducted, will be threatened.

    OPEC oil trade is priced everywhere in dollars. Nations who are already unhappy with american policies are being further upset by the dollars discounting effect upon their wealth. The dollar's drop means that they get less value for everything they sell.

    China -- with its stupendous trade imbalance with the US, has been largely investing in dollar denominated assets to warehouse its huge dollar surplus. As the dollar falls in value, those assets fall as well -- increasing their anxiety, and natural desire to diversify where they store their money.

    The "carry trade", where hedge funds had borrowed gigantic amounts of yen (because of low interest rates and a stable or appreciating dollar), has been reversed -- and now hedge funds have had to pay back these gigantic loans because the yen has been rising so aggressively versus the dollar.

    The US benefits immeasurably from the "float" of our currency that exists in the world: the billions and billions of dollars stuffed in mattresses, passed between foreign banks, held in dollar denominated assets, and used as an international trading currency. One of our biggest and most valuable exports is all this green paper.

    If oil markets, international traders, and asian exporters begin to reverse their reliance on dollars, a tipping point can occur overnight that could take the dollar's value down precipitously.

    The potential effects on the US could be profound.
    Last edited by BARYE; 09/25/2007 at 03:35 PM.
    755P Sprint SERO (upgraded from unlocked GSM 650 on T-Mobile)
  9. #69  
    Quote Originally Posted by BARYE View Post
    as a result of the Fed's (much needed) cut in interest rates, the dollar has plummeted in value against most other currencies -- especially the Euro and the Yen.

    At some point the dollar's role as the "reserve" currency, as the safe instrument into which assets can be warehoused and international trade conducted, will be threatened.

    OPEC oil trade is priced everywhere in dollars. Nations who are already unhappy with american policies are being further upset by the dollars discounting effect upon their wealth. The dollar's drop means that they get less value for everything they sell.

    China -- with its stupendous trade imbalance with the US, has been largely investing in dollar denominated assets to warehouse its huge dollar surplus. As the dollar falls in value, those assets fall as well -- increasing their anxiety, and natural desire to diversify where they store their money.

    The "carry trade", where hedge funds had borrowed gigantic amounts of yen (because of low interest rates and a stable or appreciating dollar), has been reversed -- and now hedge funds have had to pay back these gigantic loans because the yen has been rising so aggressively versus the dollar.

    The US benefits immeasurably from the "float" of our currency that exists in the world. The billions and billions of dollars stuffed in mattresses, passed between foreign banks, held in dollar denominated assets, and used as an international trading currency. One of our biggest and most valuable exports is all this green paper.

    If oil markets, international traders, and asian exporters begin to reverse their reliance on dollars, a tipping point can occur overnight that could take the dollar's value down precipitously.

    The potential effects on the US could be profound.
    The sky is falling the sky is falling!

    Boy, it's like you never lived through a tough time.

    I remember when mortagage rates were like credit cards (19%), and that the Japanese would own the US in 10 years and blah blah blah

    This is a bump, just like everything else. The lower dollar is directly related to war and terror spending. As that eases, so will the "dollar crisis"

    As for housing markets, I can agree about Atlanta - I think that area is turdville and amazed people would spend so much there. If you are going to buy real estate, buy where you know it will always go up, not the markets that flux up and down dramtically.

    Everyone was saying the country was doomed when Enron collapsed.
    It didn't.
    Now we flush out the mortgage industry. Big deal. In the grand scheme of things, it will work itself out.

    This economy is much stronger than people recognize. The problem is are accustomed to a high standard of living and disposable income, so when something crimps it, we whine more.
  10.    #70  
    Quote Originally Posted by mikec View Post
    ...This economy is much stronger than people recognize...
    most "experts" I think, agree with you.

    The consensus that I've seen among respected economic observers is that the Fed cut was enought to stave off a recession.

    And with an election coming up next year, junior's Fed will be under enormous pressure to ensure that any downturn happens after November '08.

    Jim Cramer -- whose opinions I highly respect (despite his idiotic support of Mitt Romney), also believes that the Fed's action has been timely enough to avert that recession.

    Over the next year I see the Fed cutting at least a full point off interest rates, perhaps even more.

    It will be enough to dampen the fall that's already begun, but the damage and its momentum -- are already too huge to be stopped.

    The Fed cannot catch up to this falling piano.
    755P Sprint SERO (upgraded from unlocked GSM 650 on T-Mobile)
  11.    #71  
    Quote Originally Posted by BARYE View Post
    ...The Fed cannot catch up to this falling piano.
    The Fed Chairman and Treasury Secretary both made speeches during the last day or so in which they warned of the dire consequences the mortgage/housing crisis has for the national economy, and for the potential of a recession.

    Treasury Secretary Paulson ideas for a solution include maybe lessening junior's blocking of Fanny Mae and Freddy Mac's efforts to support the mortgage/housing markets, and his implied "wish" that Wall Street securitized mortgages become more flexible -- that they begin to renegotiate some of their ARM interest rate time bombs that are behind much of the housing catastrophe.

    Paulson, and Bernake (and junior) are slowly recognizing that the housing /mortgage crisis is not like some bruised ankle that can be walked off with some modest tinkering and some salutory words.

    They are beginning to see how the financial distress and foreclosure of neighbors (even relatively distant and remote neighbors), can induce fiscal inhibitions that can bleed to death even a healthy economy (and this economy ain't healthy).

    There are multiple forces at work that re-enforce each other. Forces that combine to produce an excess of housing supply, while reducing demand.

    Foreclosures, ARMs resetting, mortgages being hard to get (limiting potential housing buyers), buyers holding back because they are seeing prices fall and want to wait until they "bottom", the continuing arrival of additional housing supply in the form of foreclosed houses put up for distressed sale by lenders, and newly finished projects put on sale by desperate builders -- all contribute to this imbalance.

    These things also reasonate in the larger economy -- damaging consumer's confidence. People as a result defer larger purchases whenever possible.

    Falling economic demand leads to further pressures on the economy, which causes more pressure on housing demand and prices.

    Paulson and junior are advocating band-aids for someone who has a slashed artery.

    Their ideas conform to their usual expressions of rhetoric over reality.



    Paulson Says Housing Woes to Worsen

    NY Times By EDMUND L. ANDREWS October 17, 2007
    WASHINGTON, Oct. 16 — Treasury Secretary Henry M. Paulson Jr. acknowledged on Tuesday what home builders and debt-loaded homeowners have felt for the last year: The meltdown in housing is worse than expected and has not yet hit bottom.

    “The housing decline is still unfolding, and I view it as the most significant current risk to the economy,” Mr. Paulson said on Tuesday ...

    “The longer housing prices remain stagnant or fall, the greater the penalty to our future economic growth,” he warned.

    But even as Mr. Paulson highlighted a number of underlying problems he wanted to fix, he was cautious about proposing specific changes...

    ...He acknowledged that he had learned of “shameful” behavior by mortgage brokers, but he defended the use of two practices that Democratic lawmakers and some housing advocacy groups want to prohibit: hidden brokerage fees, which push up a person’s interest rate, and prepayment penalties, which lock people into expensive subprime loans for two or three years.

    “There are clearly circumstances in which any one of these features can make sense for the borrower,” Mr. Paulson said, echoing what industry lobbyists have said for years in defending their practices...

    ...On Tuesday, the National Association of Homebuilders’ index of sentiment among home builders dropped to its lowest point since it was started 22 years ago.

    ...Mr. Paulson predicted that foreclosure proceedings would begin on one million homes this year.

    ...He suggested areas in which the administration might be able to resolve long-standing differences with Democrats, like expanding the role of Fannie Mae and Freddie Mac, the two government-sponsored mortgage finance companies.

    But he carefully resisted a number of Democratic proposals, including those that could make it possible for homeowners to sue Wall Street firms for mortgages that turned out badly.

    The Treasury secretary expressed concern about the difficulties faced by borrowers who try to renegotiate loan terms, because most subprime mortgages are bundled into securities and sold by anonymous investors. But his main proposal was a voluntary alliance of mortgage-servicing companies that would try to reach out to homeowners before they fell behind on payments.

    ...He sharply criticized credit rating agencies that had failed to recognize the risks in hundreds of billions of dollars worth of mortgage-backed securities. But he tiptoed around the issue that many analysts have argued is a central conflict of interest for rating agencies: that they earn their fees for evaluating a new security offering only after the offering has been sold to investors.
    Last edited by BARYE; 10/17/2007 at 03:54 AM.
    755P Sprint SERO (upgraded from unlocked GSM 650 on T-Mobile)
  12.    #72  
    Quote Originally Posted by JOEBIALEK View Post
    Until recently I was an underwriter for a sub-prime mortgage company that is about to close. It seems that most media outlets and government officials fain ignorance about the real underlying cause of the problem. There is either a tendency to blame the borrower or act as though no one in the industry {or outside of it} saw this coming. They fail to mention that those who gained the most financially got off scot free while leaving the mess behind for everyone else to clean up. In my former company, the sales managers and loan officers "held the keys to the safe" while deciding which guidelines to ignore sometimes going so far as to bribe fellow underwriters to "look the other way". Sales managers often overrode an underwriter's decision they did not agree with. Other times fellow underwriters would be threatened with their job for "impeding company growth and progress" just because they refused to go along with the flagrant disregard of guidelines . I complained to the sales managers about the bribing but all I got was a formal write-up for making "inappropriate comments".


    There was absolutely no support from the owner of the company all the way to the human resource representative. This company is as corrupt as they come. I can't tell you the number of sexual affairs that occurred between married and unmarried people; primarily among the management staff {at the workplace itself}. Promotions were strictly political thus moving people "up the ladder" who never proved themselves worthy or were on a final written warning to be terminated {for poor performance}. As a result of the corrupt management of this company, I and several hundred others were laid off. I believe the federal government needs to investigate this company and bring to trial those corrupt individuals who broke the law. This would set an example for the rest of the mortgage industry that absolute corruption corrupts absolutely.

    Has your former company already declared bankruptcy ??

    Were the senior officers of the company -- those who gained the most from the corruption that you saw -- significantly injured in the meltdown themselves ?? Were they able to protect and isolate ("firewall") most of their il gotten profits from the bankruptcy (if there has been one) ??

    Can you tell me any specifics about the arrangements and incentives that went to brokers, appraisers etc. to seduce them to approve loans that they knew would be impossible to pay ??
    Last edited by BARYE; 10/22/2007 at 10:01 PM.
    755P Sprint SERO (upgraded from unlocked GSM 650 on T-Mobile)
  13.    #73  
    Quote Originally Posted by treosensei View Post
    Ahhhhhhhhh... America. And they'll raise the PEOPLE'S taxes to pay for the egregious subprime corruption perpetuated by the unprincipled a$$holes within these mortgage companies. Make no mistake, they won't make the lenders, ( the ones who pushed or allowed these contracts to be signed), pay for the crisis they created. Oh heavens, no. They'll punish the people as a whole to alleviate the crisis. Isn't that going to be one hell of a sweetheart deal?
    you're right unfortunately.

    The alternative though is to do nothing in order to attempt to punish those mortgage brokers and Wall St. paper pushers -- and watch as millions of people lose their homes and the housing market (and millions of people's nest eggs) are eviserated.

    Also what about the effect the collapsing housing market is having on the economy as a whole -- a recession is likely and the american dollar in free fall (worth almost half of what it was versus the Euro).
    755P Sprint SERO (upgraded from unlocked GSM 650 on T-Mobile)
  14. #74  
    I definitely think it will be another year or two before this housing swamp is cleaned up. Surely it will continue to be a tug at future market growth as far as stocks and funds go.

    Such times make one very nervous. Do you stay in the market hoping to recover recent losses in nest egg values or do you pull everything out and park it within "safer" income vehicles like money markets until the storm passes?

    I don't claim to be an expert here, but I think we'll be seeing wild volatility for the next 6-8 mths.

    While I think its grossly unfair, I'd rather pay slightly higher taxes than watch my savings evaporate before my very eyes here.

    Market analysts claim the US economy, while strained, is still strong - as is the global economy. This strength should hopefully help to limit whatever negative impacts the credit crisis may have in the quarters to come. Being optimistic, I hope it might stave off a recession, in keeping at least low single digit growth for a while.

    I would think the stratospheric heights the euro has recently reached may gradually begin to hurt the european exports and tourist economies after a while though, so they may have to do something there to curb its rise.

    Interesting times. What to do now about one's current investments?
  15.    #75  
    Quote Originally Posted by treosensei View Post
    I definitely think it will be another year or two before this housing swamp is cleaned up. Surely it will continue to be a tug at future market growth as far as stocks and funds go...

    I would think the stratospheric heights the euro has recently reached may gradually begin to hurt the european exports and tourist economies after a while though, so they may have to do something there to curb its rise...
    if you have a chance to read the earlier posts in this thread you'll see how pessimistic I am about the state of the housing market.

    I have been more bearish for longer than most anyone I know of.

    Its not any single problem that has to be overcome for the market to recover -- its a combination of forces that all reasonate on the same harmonic and that self reenforce the larger negative trend.

    Its supply and demand. Its the overbuilding of condos and homes by builders during the bubble. Its buyers who are now on strike. Its huge swaths of the population that can't get financing even should they decide to purchase a home.

    What should a home sell for ?? What is something worth ??

    When one sells their home it is worth whatever a buyer tells you he's willing to pay you for it.

    I attended Solar home exhibition in Washington this week. A friend tried to persuade me about how spending money on PV (solar) panels could raise the value of a property.

    I told him that what you spend on your house is ultimately irrelevant.

    What a house is worth is entirely determined by what others would be willing to pay.

    This calculation is the product of costs: the monthy expense of a house which is a product of mortgage interest rates and the terms at which money is lent, and the tax burden -- and desirability: the rate of apreciation of property in an area, the quality of its schools, the proximity to job centers, the strength of a region's economy. and the relative scarcity of comparable property.

    conversely, bad schools, crime, a bad regional economy, a long commute to job centers, high taxes, and depreciating home values in an area, will have a devasting effect on a region's home prices --


    These almost unconscious calculations are why a McMansion in Detroit will sell for far less than a Bungalow in Hollywood or Silicon Valley. Why a NYC efficientcy can be worth more than a house in Kansas.

    Though no candidate has spoken much about the housing crisis in so far as I'm aware, I fully expect the democratic nominee (whomever she happens to be) to use the prospective destruction of so many families through foreclosure, as a wedge issue in the fall election campaign.

    I think that Hillary will understand how important it will be to do whatever is required to recover from this disaster.

    Similar to how FDR understood how important it was to get people back to work in the 30's.

    As for the strong Euro -- this is largely a reflection of junior's destruction of the american economy.

    World markets understand how he financed his fun little war in Iraq through deficits and borrowing. Plus our ballooning trade deficit and the fact that good paying American jobs routinely get transferred out to China and India.
    Last edited by BARYE; 10/27/2007 at 01:39 PM.
    755P Sprint SERO (upgraded from unlocked GSM 650 on T-Mobile)
  16.    #76  
    Barney Frank and the democrats are beginning to attempt to address the mortgage crisis.

    Their ideas are well intended, but limited and imperfect.



    Bill Allowing Mortgage Lawsuits Expected to Stir Fierce Opposition
    By EDMUND L. ANDREWS NYTimes October 23, 2007

    WASHINGTON, Oct. 22 — House Democrats introduced legislation on Monday that would for the first time let homeowners sue Wall Street firms for relief from mortgages that the borrowers never had a realistic chance of repaying.

    The measure, which is expected to generate intense opposition from the financial services industry, addresses some of the problems tied to the transformation of the mortgage lending industry from an often local business into a trillion-dollar global market for investors in search of higher returns...

    The legislation, introduced by Representative Barney Frank, Democrat of Massachusetts and chairman of the House Financial Services Committee, would require any mortgage lender to verify that the borrower has a “reasonable ability to repay” based on documented income, credit history and debt level.

    “The people who package mortgages and sell them into the secondary market were a major cause of the single biggest world financial crisis since the Asian crisis” of 1997-8, Mr. Frank said...

    More than two million people took out subprime loans in the last two years that offered relatively low initial rates but are to jump sharply when the introductory periods expire. Analysts predict that at least a quarter of these people may default and lose their homes.

    Under the House bill, people who can show that they never had a reasonable ability to repay the loans would still have to pay for their homes, but would have new statutory power to demand better deals from the lenders. They could demand that their original mortgage lender offer a better loan. Or they could demand relief from the Wall Street firm that bought the mortgage and resold it to investors.

    The measure would also restrict several practices that industry critics have long said were deceptive and amounted to “predatory lending.” It would prohibit incentives to brokers for steering borrowers to more expensive mortgages. It would sharply restrict prepayment penalties — something common with subprime loans, which effectively lock borrowers into the loans...
    755P Sprint SERO (upgraded from unlocked GSM 650 on T-Mobile)
  17.    #77  
    "Experts" are beginning to catch up to BARYE's analysis of the depth of the mortgage crisis.

    They still have not offered solutions anywhere commensurate to the catastrophe that confronts them.

    As I've written previously, there can be nothing except more bloodletting and foreclosures going forward, until the issuers of the doomed to fail mortgages and the parties behind those securitized loans are coerced into renegotiating terms that could remain affordable for their borrowers.

    Though I'm normally dead against using tax incentives to achieve socially desirable actions, I would make an exception in this case.

    A tax change must be made that will encourage lenders to renegotiate their loans so that they have an incentive to have significantly fewer foreclosures.

    Conversely, that same law would impose a major tax penalty as punishment on companies that have above average foreclosure rates.

    Until lenders begin to see themselves on the same side as their borrowers, we are in for a very bumpy ride.


    Reports Suggest Broader Losses From Mortgages
    By VIKAS BAJAJ and EDMUND L. ANDREWS NY Times

    Every time economists and Wall Street executives think they have acknowledged the full extent of the losses from the meltdown in real estate mortgages, more bad news turns up.

    Merrill Lynch said yesterday that it would take a charge for mortgage-related securities on its books that is $3 billion more than the $5 billion it expected just two weeks ago. And a report from the National Association of Realtors showed that sales of existing homes in September fell twice as much as economists had expected, to their lowest level in nearly 10 years.

    economists say the troubles in the mortgage market could, all told, cost financial firms and investors up to $400 billion.
    That is far more than the roughly $240 billion cost, adjusted for inflation, of the savings and loan crisis of the early 1990's...The loss in total real estate wealth is expected to range from $2 trillion to $4 trillion, depending on how far home prices fall,

    ... these estimates are preliminary and the total costs could get bigger still. They also note that the loss of real estate wealth could prove more damaging for the general public than falling stock values because more American families own homes than own stock.

    In recent years, the rise in real estate values has helped propel consumer spending, as homeowners refinanced mortgages and took out home equity loans.

    “There weren’t a lot of people living off their capital gains from stocks,” said Jane Caron, chief economic strategist at Dwight Asset Management. “There were a lot people using their home as a piggy bank.”

    ... Joint Economic Committee of Congress predicts about two million foreclosures by the end of next year on homes purchased with subprime mortgages. That estimate is far higher than the Bush administration’s prediction in September of 500,000 foreclosures, which in itself would be a tidal wave compared with recent years.

    the lost of real estate wealth just from foreclosures on subprime loans will be about $71 billion. An additional $32 billion would be lost because foreclosed homes tend to drive down the prices of other houses in the neighborhood.

    Those figures would cause a decline of $917 million in lost property tax revenue to state and local governments, which will also have to spend more on policing neighborhoods with vacant homes. The states most likely to be hard hit fall into two categories: those where prices had been rising fastest, like California and Florida, and Midwest states with weak economies, like Michigan and Ohio, where people with low or moderate incomes made heavy use of subprime loans to become homeowners and consolidate debts.

    Economists at Goldman Sachs have predicted prices will drop by 15 percent, meaning an overall decline of more than $3 trillion; other forecasters have said the decline could be 20 percent or more.

    House prices decline slowly, because many potential sellers simply stay in their current homes when they think prices are too low. But that becomes more difficult as people have to move either because of job changes or, increasingly, because their monthly payments are rising sharply. In the next 18 months, interest rates on more than two million homes loans will reset to higher adjustable rates.

    Inventories of unsold existing homes rose last month to their highest level in almost 20 years.

    The housing bust has also led to job losses. From the start of 2003 to March 2006, housing-related businesses like mortgage companies, home builders and contractors added 1.3 million jobs, or about 23 percent of all new jobs created in that period, according to an analysis by Mark Zandi, chief economist at Moody’s Economy.com.
    Last edited by BARYE; 10/26/2007 at 02:38 AM.
    755P Sprint SERO (upgraded from unlocked GSM 650 on T-Mobile)
  18.    #78  
    As millions lose their homes, and thousands of others their jobs, the heads of the corporations who were charge are walking away with millions in compensation.

    In this case the man who managed Merrill Lynch into losing 8 BILLION dollars on subprime mortgage securities is getting around $160 Million dollars to leave.


    The Price of Any Departure Will Be at Least $159 Million

    By ERIC DASH NY Times October 27, 2007

    Merrill Lynch’s directors may be weighing E. Stanley O’Neal’s future, but one thing is already guaranteed: a payday of at least $159 million if he steps down.

    Mr. O’Neal, the company’s chairman and chief executive, is entitled to $30 million in retirement benefits as well as $129 million in stock and option holdings, according to an analysis by James F. Reda & Associates using yesterday’s share price of $66.09. That would be on top of the roughly $160 million he took home in his nearly five years on the job.

    Under Mr. O’Neal, Merrill moved aggressively into lucrative businesses like the packaging of subprime mortgages and other complex debt securities. That led to a string of blow-out quarters — and blow-out paydays. Last year, Mr. O’Neal’s $46.4 million pay package made him Wall Street’s second-highest paid chief executive...

    ...those big bets appeared to go bust this week. Merrill announced an $8.4 billion write-down, raising questions about whether Mr. O’Neal will keep his job. One thing that he surely will hold onto, though, are the giant paychecks he has collected.

    At Merrill, Mr. O’Neal works without a severance contract and would be expected to forfeit any unvested options. But the Merrill proxy says the compensation committee has “discretion” to award severance benefits...
    755P Sprint SERO (upgraded from unlocked GSM 650 on T-Mobile)
  19.    #79  
    Quote Originally Posted by gojeda View Post
    ...You cause and effect relationships are a bit confused.

    The subprime market was speculatory in nature and could have come about in a bull or bear market. Now they are getting burned because of bad loans - not because of some downturn in the market.

    ...
    The mortgage securitization meltdown was the product of a perfect confluence of separate events -- events that combined into a supercell of an economic cyclone.

    I’ve said some of this before in this thread, but the shared assumption that everyone had was that housing always went up. This is what I’ve called: the Golden Predicate.

    The borrowers shared in this illusion, borrowing more than they could afford -- expecting that prices would always appreciate, and that they either could soon flip for a profit, or refinance and take out some of their appreciated equity.

    Their mortgages came from mortgage brokers. Those brokers were incentivized to shove out complex loans to borrowers irrespective of the borrowers ability to afford the loan after it reset. Commissions were structured so that brokers received the most compensation when borrowers took the riskiest, least suitable loans.

    And because these brokers retained no real ownership or responsibility for the loan after it was securitized, they were disconnected from the consequences of their irresponsible behavior.

    Investment bankers also believed in the Golden Predicate. They bought huge amounts of securities that were based on high interest paying subprime mortgages. They believed that people would always pay their mortgage, and that if they couldn’t, in a foreclose the underlying home would always be worth more than the debt.

    Low interest rates internationally tempted everyone to aggressively chase any incremental interest rate advantage -- irrespective of the underlying riskiness of the housing upon which the original loans were made. These securities were based on loans in which there was little if any oversight as to the lending, or research performed into the worthiness of those underlying loans.

    Competing to attract investors, banks, brokerages, and hedge funds from around the world aggressively bought these securities because of their higher interest rate yield. European investment banks were among the biggest buyers.

    This golden predicate broke when the Fed began to raise rates.

    (FWIW, I first spoke publicly about the end of the housing boom in January 2006.)
    Last edited by BARYE; 11/14/2007 at 09:03 AM.
    755P Sprint SERO (upgraded from unlocked GSM 650 on T-Mobile)
  20.    #80  
    Todays NYTimes has what I think is one of the first really positive developments in the mortage meltdown mess.

    A judge has ruled that in many if not most cases, the mechanism through which securitized mortgages are foreclosed upon is illegal because the mortgage's ties to specific property is not properly documented.

    Because of the way that these loans were securitzed (i.e. pooled into quasi bonds, and then resold in various fragments), often the note trustee hasn't the documents to support their legal standing to sue to take the property.

    Should other judges reach a similar understanding, lenders will soon feel compelled to renegotiate unworkable loans to prevent themselves from being decimated in court.

    As I have said earlier, the only solution to this crisis is to mark the mortgage value to the market -- thereby discounting a mortgage by sometimes as much as 70 %. Borrowers would then be able to redo their mortgage loans at far more realistic and reasonable levels.

    In most cases now, everyone is losing.

    Borrowers who can't get a loan restructured are now doomed to foreclosure. And lenders usually won't get the full value of their loan after a foreclosure because housing prices are falling so fast.

    Discounting a loan down to its market value will rescue homeowners, making it possible for them to be able to afford to stay in that home.

    Perversely, the current system harms even responsible owners who are repaying their loans.

    For example, there are large swaths of Cleveland where houses were stripped of anything of value soon after a foreclosure: Pipes, wiring, aluminum siding... Soon criminals and drug dealers move in.

    Whole neighborhoods are devastated overnight -- even people being responsible and keeping up with their loans, watch their homes lose all value as their communities are surrounded by decay and crime.


    Foreclosures Hit a Snag for Lenders

    By GRETCHEN MORGENSON NY Times November 15, 2007

    A federal judge in Ohio has...dismissed 14 foreclosure cases brought on behalf of mortgage investors, ruling that they had failed to prove that they owned the properties they were trying to seize.

    The pooling of home loans into securities has been practiced for decades and helped propel real estate prices in recent years as investors sought the higher yields that such mortgage trusts could provide. Some $6.5 trillion of securitized mortgage debt was outstanding at the end of 2006.

    But as foreclosures have surged, the complex structure and disparate ownership of mortgage securities have made it harder for borrowers to work out troubled loans, in part because they cannot identify who holds the mortgage notes, consumer advocates say.

    ...the intricacies of the mortgage pools are starting to create problems for lenders as well. Lawyers for troubled homeowners are expected to seize upon the district judge’s opinion as a way to impede foreclosures across the country or force investors to settle with homeowners...

    ...“The institutions seem to adopt the attitude that since they have been doing this for so long, unchallenged, this practice equates with legal compliance...

    ... the inability of Deutsche Bank, as trustee for the pools, to produce proof of ownership at the time of the foreclosures will fuel borrowers’ concerns that they are being forced out of their homes by entities that may not even hold the underlying loans.

    “This is the miracle of not having securities mapped to the underlying loans,” said Josh Rosner, a specialist in mortgage securities...I have heard of instances where the same loan is in two or three pools.”

    The process of putting together a mortgage pool begins when a home loan is originated by a bank or mortgage lender. That loan is typically sold to a Wall Street firm that pools it with thousands of others. Once a pool is packaged, it is sold to investors in different slices, based on risk...

    Lawyers who represent troubled borrowers complain that trustees overseeing home loan pools often do not produce proof, usually in the form of a mortgage note, that their investors own a foreclosed property. And a recent study of 1,733 foreclosures by Katherine M. Porter, an associate professor of law at the University of Iowa, found that 40 percent of the creditors foreclosing on borrowers did not show proof of ownership. Such proof gives a creditor standing to foreclose against a borrower and is required by law.

    “The big issue in all these cases...is who really owns the mortgage note, and that is allegedly what they securitized,” ...has that mortgage note really been transferred and assigned to the securitization trust? If not, then they really don’t have standing. It’s Law School 101.”

    ...Because most foreclosures proceed without challenges from borrowers, few judges have forced trustees like Deutsche Bank and Bank of New York to prove ownership by producing a mortgage note in each case.

    ... a consumer lawyer ...rarely sees proof of ownership in cases involving securitization trusts. Her group has 30 to 50 such cases and not one of the lenders’ representatives has produced proof of ownership predating the foreclosure action.

    ...“Hopefully this will convince everybody that the time to work out these home loans is now.”
    Last edited by BARYE; 11/15/2007 at 03:51 AM.
    755P Sprint SERO (upgraded from unlocked GSM 650 on T-Mobile)
Page 4 of 10 FirstFirst 123456789 ... LastLast

Posting Permissions