San Diego Housing Bubble News and Analysis

looks like communism is alive and well in the US of A

Has anyone else heard about this? Why would our govt do this? Isn't the republican party in support of less govt and letting the market run it's own path?

It is called Fat Cat capitalism. The socialist aspects coming from this party are just a result of trickle down economic theory. Ketchup is a vegetable too.

I stick to my initial thoughts that we are throwing out 200 years of contract law with this. Law that is IN THE CONSTITUTION. Wow this is really going to be bad.

Hillary Clinton has a similar plan. She also wants a 90 day moratorium on foreclosures. It's not just the Republicans. Gov't always feels they need to "do something" when more often than not "doing something" actually makes the problem worse. In this case, let the market correct the problem. In the long run we'll all be better off.

But but a Republican president should never do this...I expect a democratic one to do it though.

I will spare my broken record approach... this is and should be no surprise to anyone.

Look it is not about solving the right? This is about buying time for everyone. The enormity of this problem cannot just be "solved" without pretty much catastrophic consequences to the banking system, the economy, Wall Street ... the list goes on. Furthermore, if you start to examine the list of "investors" who have purchased CDO's and such, it may scare you. Maybe you are a teacher, a state employee, maybe your county or state government....

Obviously the most efficient solution is to let the market adjust on it's own however like weaning a herion addict off the drug, it is messy and you get vomit everywhere.

****

A friend and I were having a chat yeaterday on this subject. At some point in the future... I do not know when but some day, there may just be this one HUGE receivership formed to tell EVERYONE that "you are screwed" we are the court appointed receiver and here are the crumbs left on the table. Now obviously there could be a pretty big crisis if all these investors get 100% screwed. So our theory is that Uncle Sam will go ahead and provide some backing to the payouts. 100%? No probably not, but some fraction that will at least mitigate serious liquidation events by many of the investors. The problem is that it CANNOT happen now. There is a war to fund, there are serious problems with the dollar, there are alot of things going on. However if there can be some delay, maybe 5 years down the road the war costs will be done with, perhaps housing will have already bottomed out... who knows... the key is to buy some time, let the market continue to adjust albeit in a manner that is somewhat delayed. Hey if a guy cannot afford his home now he cannot afford it in 5 years.

Anyways that was our interesting but probably full of holes theory on how it may play out...

Go ahead and stomp on it.

SD Realtor

The latest ...

http://today.reuters.com/news/articleinv...

Moral of the story: When you do something stupid, make sure it's the stupid thing that ALL the other sheep are doing so you are part of the future bailout.

Final details of the plan are still being worked out after the American Securitization Forum, a trade group that represents large mortgage investors, presented its framework for implementing a broad rate freeze

a trade group that represents large mortgage investors

represents large mortgage investors

large mortgage investors

FB's are truly F'd if they opt for this "bailout". Anyone dumb enough to take it will find that all it does is force them to pay up for an overpriced non-asset in a declining market.

So our government is puppeteered by large mortgage investors. This is all straight out of an Ayn Rand novel... except where is the secret society all the smart and outraged people flee to?

"except where is the secret society all the smart and outraged people flee to?"

right here, my friend.

I understand what you're saying but there are always going to be risks so rather than dealing with this now, we're just making an even larger problem for the future. Local, state, and Fed gov'ts aren't going to trim spending anytime soon. Consumers will continue to rack up debt and with the proposed bailouts, little will be learned other than bad choices will not be punished. Plus, who knows what new challenges we'll have in five years. Its amazing how quickly we went from the tech bubble to the housing bubble. You'd think that many people learned from the tech mania. Nope, they were busily running off to cash in on the next mania. Heck, many people think 9/11 is now ancient history. People's memories are short and selective. I have little faith that delaying the day of reckoning for this problem will make it better.

freezing rated to keep housing prices high is socialism for the rich.... i'm still convinced this will have little effect though..

Mostly smoke with only a flicker of flame here and there. The most positive outcome they can realistically hope for is a postponement of the collapse until 02/2009. At that point the (I assume) Democrat President will be able to blame all the problems of the world on the previous president and take credit for doing the right thing.

"You can pay me now, or you can pay me later."

I read an article in the UT or Daily Transcript that said that the proposed loan freeze would help about 12% of those in San Diego, but I can't remember if it said it would help 12% of those with variable rate loans or 12% of the total pool of San Diego mortgage holders.

Either way, this will do little to slow the current surge of foreclosures.

In my opinion, loan rate freezes will have an overall negative impact on the housing market over the next few years. Having the government move in and renegotiate these contracts adds another element of risk to the lenders. Borrowers will pay for the added risk.

THIS IS WHY I JUST BOUGHT A HOUSE I NOT SURE I CAN AFFORD!

WHO CARES JOIN THE OTHER BLIND AMERICANS!!!

Who is to lose in this deal? The banks or the tax payers? The banks will never do business without profit, so I doubt the banks must have some goodies from the gov. Then, we the tax payers, what do we lose from this.

Although I don't think this will help a lot of people, "thousands over millions", but this is against the concept of capitalism and open market economy. We always blame China about too much legislative and administrative control over their economy and currency policy. What happen to us. We are doing the same thing here big time. What open market, it is purely "artificial". Our new economic direction is "communitalism".

Four years ago I believed Bush's legacy would become stellar many years down the road. I have done a 180 on this thinking. This is one of the lamest polictal proposals ever conceived. Sends the wrong message, helps the wrong people etc..etc..

This is Sad... Very very Sad. Maybe the white house is stepping in because it has become a threat to our national security.

SD Realtor,

I'm on board with you. It's a bitter pill to swallow, but anything is better than a systemic failure of our financial systems.

I agree with SDR, I think this is delaying the inevitable, and hopefully preventing a major collapse in our financial system here in America...

I think what a lot of you angry people are not understanding is that our governmen is NOT bailing any one out. We're not writing a check to these homeowners, or to the banks. It's a NEGOTIATION that lawmakers and the Fed made with banks to get them to voluntarilly agree to freeze these rates for 5 years. The only people loosing on this deal are the investors who bought the securities in the first place.... And whateve trickle down effect they have... So while you may think this is a government bailout it's not..

And, with that said, looks like it's not going to help very many folks, including myself... Says loans had to be originated in 2005, mine was in late 2004, so I'm a day late and a dollar short... LOL Plus, it's only for SUBPRIME loans, looks like loans in the higher interest rate bracket. My "initial" rate was 5.875, with a reset to 8.875, so I'm assuming I'm not in subprime territory, but who knows, I don't remember what my credit score was when I bought my house... Oh well, I signed the papers now I have to deal with the consequences.

The Whitehouse is so concerned for these people with resetting ARMs. This new policy implies that the govt thinks these people should be saved from themselves.

I propose the govt goes one step further, and completely eliminates the ability to finance using ARMs. This will further save the American people from their inability to make sound financial decisions.

Then, maybe I'll be able to afford a house with a 30 year fixed... bringing true long term stability to the American people.

Seriously though... what would eliminating all but 30 year fixed mortgages do to the housing market?

I'm fine with that type of government intervention.

So what happens in five years? The payments reset and they foreclose anyways?

Seems to make much more sense from a financial perspective to toss the keys now and walk.

While we're at it let's go one step even further and get subprime borrowers "fixed" (i.e. spayed or neutered). This will fix a lot of future problems! :) It is only a matter of time, with all the new gov't intervention.

Gents,

Like SD Realtor said this will only delay the inevitable. The point people aren't talking about but what is the key problem here is the Securitization of Mortgages. The mechanism that took us to these unaffordable levels was a massive boom in this market. This market is now dead and it isn't coming back anytime soon. Prices will come down regardless of whether they freeze rates or foreclosures. Now that we are back to much tighter lending standards prices will come down. It is that simple. All this may do is slow down the drop. Instead of the cliff jump we would be looking at in 2008 it won't be so vertical. If they don't want the housing market to have a large correction they will have to resurrect this market. That won't happen.

My2Cents

Mr Paulson's going to have an live chat session on Friday:

Friday at 1:00 PM EST
Henry Paulson
Secretary of the Treasury

Ask a question:
http://www.whitehouse.gov/ask/question.html

;-)

This has nothing to do with communism or government bailout (no tax money needs to be involved here). It is more of a "mutual defense pact". The lenders and the investors all recognize that it is far cheaper to keep the borrowers who are solvent in the house than foreclosing on them. Then at least someone will take care of the property, pay the property tax, amortize the loan principal and not add further pressure to price of foreclosed properties etc. However they also know that acting individually, they are better off to be the first to foreclose as home prices are currently on a downward slope. That is why they need a collective pact to promise to take the same sacrifices. Now knowing human nature this is also what makes one wonder if the deal can stick in the long term. There is incentive for people to break the pact and profit from others' actions and I don't see how they can enforce such a pact legally.

When I read about this bailout, I have to admit I have mixed feelings on it.

On one hand, I don't think it's right that people who were in over their heads gets a handout at the expense of others who are financially responsible.

However, at the same time, it does seem like this will at least sort of bring some stability to the financial markets. It seems like it's a strategy to just buy time, and string out the pain, so that less of it is endured all at once. As such, I'm thinking (hoping) that this helps stabilize some of the equities market. I think the consequences of not doing that would hurt a lot more people who have 401k's, investments,etc who are financially responsible. Also, I have to say, these people that are overstretched- we sort of need them to keep spending to prop up the markets. Either way, they're going to loose in the long run. At least if gives the rest of us time to make the necessary financial adjustments to weather a bigger storm in the future.

I guess we can't have it both ways.

As far as picking up good investment property, it looks like I'll have to wait longer. It's a little disconcerting. My wife and I have 800+ credit scores, never missed a payment on anything and have a fixed rate mortgage at 5.625%. On the other extreme, you'll probably have <600 people scores that will get the same temporary fixed rate mortgage.  Also, are taxes are going to go way higher to subsidize these people.

Unreal.

The conditions are:

1) Must have made all payments to date on the existing loan
2) wouldn't be able to afford the loan if it adjusted

most of these people won't even pass condition 1

also, lets not forget that these subprime teaser rate low intrest loans are neg amo and at the moment the mortgage balances are higher then the house is worth, in five years the mortgages balances will be even higher.

besides, the mortgage mess is just as bad or worse with Alt A loans.

IMO the goverment should just buy up all the repo homes in CA,AZ,AR and FL for .50 on the dollar, then rent them out and use the income towards paying down there dept!

The liquidity issue is caused by the declining value of the mortgages underlying the CDO, not the numnber of foreclosures. The value is lowered by Moodys downgrades, FAS 157, and revenue below projections. This plan further reduces revenue, and hence should create a whole new round of losses for the big Wall Street firms.

If the plan has any real impact on the real estate market, it will bankrupt CITI, Morgan Stanley et. al. The plan only deals with the revenue side and completely misses the asset losses - unless Ben is going to allow the CDOs to remain at par, or pay the difference.

I think highly of most people in this group, but have been surprised at the number of posts in which people can't believe this is happening.

The one and only rule, whether it be housing or any other area that generates profit, is that you need to "follow the money". The people with leverage will adjust events to their financial advantage. So people post their prophecies based on the known rules at the time. Guess what - there will ALWAYS be an unforeseen event.

So for all of you that KNOW when a crash will occur, I can provide the formula based on the last years worth of posts:

Housing bottom = (2 years) + (date of post)

Just keep posting and eventually you will be right. All US government is controlled by financial interests.