San Diego Housing Bubble News and Analysis

I have no sympathy for Countrywide. Maybe hell is a place where Aguirre constantly files lawsuits. Countrywide deserves Aguirre. They preyed on a certain uninformed segment of society with limited experience as did all the greedy lenders. There was a good article in the Sunday UT about many of the fees that lenders charged to process the loans. Talk about egregious. I think there has to be a day of reckoning for this kind of usurious lending.

This one may open up the city to lawsuit because they are interfering in a business transaction after it was put in place. Investors etc can then find a big pocket for their losses... the city of San Diego. Nice..

We can take solace in the fact that NO government intervention into financial markets has EVER accomplished what it was intended to accomplish

History clearly shows that these interventions only prolong the financial agony and make the final reckoning far worse

Goes for Aguirre's brainchild (brainfart?) - goes for nationalization of Fannie and Freddie - Bear Sterns, IndyMac, etc

Now do you feel better?

Mike Aguirre needs to realize who is he really helping.

a large amount of properties during the boom went to greedy investors that speculated on the back of regular families that needed homes to live in.

one example of such greedy investors would be the RSF Triumvirate featured on my blog several times over the last year.

now that these guys are foreclosing finally, Mike is allowing them to keep the properties a bit longer? for what?

http://bubbletracking.blogspot.com/2008/...

nutjob

Acetia I have no sympathy for them either.

Yet why should MY tax money be used in that lawsuit. Why should thier be a foreclosure sanctuary? If you read the article this is not about just Countrywide. Aguirre mentioned Wamu and Wells Fargo as well. This has nothing to do about the welfare of the people and everything to do about politics.

Furthermore as predatory as all the lending was, nobody forced any buyers to sign the loan docs at gunpoint. Once again, using my money to spank a naughty lender who preyed on consumers "HAD" to buy a home they could not afford is ridiculous in my opinion.

SDR,
I agree with you on the use of taxpayer money for this kind of bail out. I personally have had negative experience with Countrywide. My relatives had a short sale set up and because CW delayed, the house and the sale was lost. This was probably the beginning of the downturn. We also had an equity line with them about four years ago and because they did not want to extend it (for some remodeling) without renegotiating including a point, we paid it off and took out one with another company. However, we receive e-mail constantly on the low rate fixed loan jumbo we have had for about 5 years. They would be happy to renegotiate that one to "lower my payment" because that one is a 15 year that is being paid off early. I just do not like the way they do business and having Mickey the bat on their butt seems like some kind of payback to a company that deserves it.

Could not agree more about the incompetence at Countrywide. I will most likely lose a transaction because of the processing time for a short sale. It is inexcusable how poorly they are performing.

Mish weighs in

Ridiculous Lawsuits Fly At Taxpayer Expense
http://globaleconomicanalysis.blogspot.c...

Same take, I think MA's presence Downtown has helped shift the direction of SD government in a good way. Doesn't seem like much of a lawyer, but it's good to see somebody in this role, check-and-balance on the establishment run afoul.

Until this... WTF? What a moron. Now, I'm going to have to admit to my friends: Aguirre's a kook.

Let's hope the new CA doesn't roll over for crooks.

Evidentially Aguirre has defaulted on his own Countrywide mortgage a couple times.

http://www.bubbleinfo.com/journal/2008/7...

Georgia tried something similar in 2003, their anti predatory lending law resulted in all of the major lenders refusing to business there. Even the VA/FHA/Fannie/Freddie curbed their dealings with anything in Georgia. They created a credit crunch and eventually reversed themselves. Perfect example of the law of unintended consequences.

Aguirre will not be successful, but on the off chance that he is, all it will accomplish is a complete implosion of the market. He will be personally responsible for causing the inability of anyone to get a loan, driving prices down further, faster, thus creating more foreclosures. Good luck Mike, it is going to be hillarious to watch. Either he effectively burns the market and the local economy to the ground or he fails and looks like an uninformed buffoon, entertaining either way and the first scenario will probably result in the first actual "tar and feather" incident in my lifetime. I can't wait.

Lets assume some sort of intervention is the most politically viable option. Lets assume that because people who are really hurting tend to un-elect those who would make such decisions.

Lets assume some of the government intervention has to be implemented locally. Lets assume that part would be required since real estate markets have a large local component.

Considering that politics works on some of the same supply and demand logic as everything else, it is likely that an innovative politician will exploit this whether or not it is Aguirre.

A better question is what would be a less irritating or offensive relief measure look like?

Here's my version:
Require any bank with loans on property in the city limits to cooperate with short sales (in a timely manner) if the situation met a certain set of criteria.

It would just mean a modest change to their SOP and would likely create minor changes in the inventory. What it would mean (that would be good) is that fewer agents would blacklist shortsales.
Maybe it would make competition more robust than it is now.

This is just an idea. I would appreciate feedback (including from those who disagree).

Does anybody have a better idea that Mr. Mike?

Not being rhetorical. Really. Does anybody have a more desirable version of intervention?

It makes some sense to go after that component or that particular breakdown in the system but you can't interfere with an existing legal contract between two parties. You cannot force these things, you need to make them voluntary and offer incentives to make the voluntary loss of money more palatable. banks should process short sales faster but you cant force them to lose money faster, they hate losing money and it is their money so they have every right to take their sweet time in losing it. I don't need politicians to tell me "yes we can" I need them to acknowledge that "can't" is a nessecary vocabulary word. You "can't" have peace in the middle east, you "can't" buy or keep a home if you can't afford it, you "can't" have free money, you "can't" have a trophy if you don't win, you "can't" have a BMW if you don't have a job, you "can't" buy things you "can't" afford and if you aren't smart or savvy or "can't" resist temptation, you "can't" be rich. My message to mike or any ambitious politician, start using the word "can't" and use it often.

Any law passed would only be in effect for loans made after the law was enacted, loans today don't need the protection of 2005 loans and they are full doc with downpayments at lower prices, 2009 loans wont default like the earlier vintages. So it's all just noise for the election and do we really need more regulation, more bail outs, more government. What we need is for a politician to stand up and say, "this is the greatest system of economics ever created, intervention distorts it, the sooner this plays out the sooner we can enjoy the recovery. We "can't" save people from themselves, for every winner there must be a loser and in this case the lenders are losers along with the borrowers, the winner sold and we "can't" go back and take their profits, both losers will be rich with wisdom and that is how is supposed to be."

This lesson is nothing new, it can be found in the writings of Lao Tzu many years B.C., it can be found in the christian bible and it is clear as day in the writings of the architect of capatalism, check out "The Wealth of Nations" circa 1776 http://en.wikipedia.org/wiki/The_Wealth_...

I saw batman this week, and while Heath Ledger's Joker exceeded Nicholson's, the previous joker had an applicable quote, "This town needs an enema."

Or if I may quote Judge Smails as I have done many times before "The world needs ditch diggers too." If Ted was alive today, that line could be rewritten "the world needs renters too."

Here is another suggestion from bubbletracking:

http://bubbletracking.blogspot.com/2008/...

wow.

Two good points (short sales regulation and loan protection), 2 good references (Caddyshack and Batman), and one long rant about how you love western capitalism.

Responding:
Shorts:
The government can do whatever the people will let it do (and vice versa). Sad but true. I suspect that the people will let the government do quite a lot considering the current climate.

Loan protection:
You are dead on that protective regulations won't be needed for newer originations. That is a point that I think is lost on most people.

References:
Well played sir. However if you cite "batdance" or any other Prince single from the last series of films, I will hunt you down. I am mean that way.

Capitalism:
We agree that it is a good way of distributing wealth. However, I do not think that it was ever created. I think it is organic and that sometimes that organic competition could benefit from help. China is a good example of getting competition going with beneficial (for the Chinese) governmental intervention. Bear in mind most forms of government are a response to wealth building and capitalism. That is as true of communism as it is of democracy. However, democracy is (in my opinion) better and more fair. It is also, why the speech you want will not happen much during this current finacial crisis.

Courts can re-write contracts but only under very limited circumstances. More likely in this context, judiciaries enact laws that nullify the terms or prohibit performance of certain types of contracts. Also possible is the voluntary amendment of existing contracts. Mortgages are contracts--bank gives X money, X promises to pay. I know there would be huge ramifications but it seems to me that maybe a simple--tho perhaps not economically educated solution--is to have the banks and the buyers rework the terms of the loans? Foreclosure will not compensate the banks in a down market. Why not allow the buyers to renegotiate loans for something they can actually afford plus a little extra (10-20%) to keep the banks from folding and create a little necessary tension for the buyers (who should have known better to begin with). The banks get at least a portion of the loan back and the buyers don't walk en masse.

The banks will have to declare losses, but soon I think they won't be able to help it either way (assuming they DO report them).

I am sure there are holes in this approach--an economic ripple effect that I am not seeing. Thoughts?

I clicked thru.
I am not sure its the right link.

Looked like an article on the same stuff and not a new suggestion.

Did I click it wrong or something?

The bailout bill already covers this, bank agrees to take 90% of appraised value and borrower refi's with fha. It's voluntary and has a few catches. Catch one is any profit when it is sold is split with FHA, they saved you, they want half. The other catch is you pay 1.5% per year in pmi. Third catch is it is voluntary. Bank can look at it as they will lose 10% in the repo process and the escrow/realtor fees. People get to basicly walk away and walk back in without ever moving, resetting to today's value.

The downside is it is too late for most and the income requirements, documentation and no missed payments will kill anyone in the pipeline already. It may save 10% but that is moving forward, we have a year of repos to chew through. At best it shortens the downturn, bringing to an end in 12 months. Softening the landing will inhibit the next rise, my guess, things will be flat from 2010 on, for a few years.

I just wrote the following to Mike Aguirre on his web-comment page:

Dear Mike Aguirre:

Please do not rescue flippers with this "foreclosure sanctuary" thing. I have been forced to live in miserable substandard rentals for the last 2 years because these *@$^#@ flippers have jacked the price of housing way out of my reach, and rents have also grown while my pay has not. The lovely place I lived in for 7 years now rents for half my take-home pay-- unaffordable!

You should 1) only allow 1 house per person/couple to be covered, and 2) Only houses sold for $700,000 or under. That way you are more likely to help regular people who were actually trying to buy a home to live in, and not rotten rat flippers. Thank you.

A city attorney in arrears like that....? Isn't there any professional backlash that can hit him..
you'd think as a "public servant" he would have to keep his nose a bit cleaner.