Uh oh. FHA negative reserves...Say it ain't so!

User Forum Topic
Submitted by flu on November 15, 2012 - 2:30pm

http://finance.yahoo.com/news/fha-may-sh...

The Federal Housing Administration (FHA), in a report due out Friday, could disclose that its reserves for future mortgage-insurance claims dipped into negative territory for the first time in almost a quarter of a century.
Every year, the FHA, the government insurer of home loans, is required to issue an independent analysis of the "economic net worth and soundness" of its insurance fund.
This is the fund that pays lenders on loans that go bad, which is why FHA loans are available for borrowers with relatively lower credit scores. The FHA insures roughly $1.1 trillion in mortgages.
The report also looks at the FHA's capital reserves, which are there to cover future loan losses.

Submitted by UCGal on November 15, 2012 - 2:33pm.

Time to up the PMI requirements....

Submitted by The-Shoveler on November 15, 2012 - 2:40pm.

Maybe that was why the posturing Ben was doing today, talking about the need to for easier lending standards,
Maybe a move to get additional funding.
Housing is all about credit markets (well and inflation).

Submitted by The-Shoveler on November 15, 2012 - 2:49pm.

If U.S. housing falters here, there is really not much back stop for the world economy at this point,

IMO,

What's too painful will be avoided at all costs.

The cost of a world wide recession right now would be way more costly than I want to think about, but that's just me.

That Said, Iran is still a real wild card right now, anyone read about rockets being volleyed, just saying,

Submitted by flu on November 15, 2012 - 3:09pm.

The-Shoveler wrote:
Maybe that was why the posturing Ben was doing today, talking about the need to for easier lending standards,
Maybe a move to get additional funding.
Housing is all about credit markets (well and inflation).

I caught that... I was thinking "are you nuts?"
But actually, at this point i would prefer if Ben had a way to cause mortgage rates to drop to 1% or better 0%.

Submitted by livinincali on November 15, 2012 - 4:05pm.

The-Shoveler wrote:
Maybe that was why the posturing Ben was doing today, talking about the need to for easier lending standards,
Maybe a move to get additional funding.
Housing is all about credit markets (well and inflation).

The problem is that all the growth in the economy for the past 20-30 years has come from increases in debt. If you back out the debt the economy has been shrinking. The entire goal of the fed is to trick people into taking on debt or at least spending every penny they have to grow the economy. 40-50 years ago growth came from saved capital, now it comes from debt. Now that the masses cannot or will not participate the leaders are getting desperate because they fully understand that all assets are priced in credit/debt. If that debt has to be liquidated then all the assets are going to fall in price,the big banks are going to go bankrupt and the masses are going to revolt because their retirement depends on that debt backed wealth. I.e. their retirement depends on their children and grand children to be obligated to produce them goods and services in the future. What better way that larding on student loan and government debt.

In essence people are holding wealth backed by debt and the debtors can't pay in full so much of the wealth needs to be discounted. The big banks are playing a game of musical chairs in which they hope to be the one that isn't holding the empty bag when the music stops. They are putting the taxpayer on the hook slowly over time. In my opinion the fed's QE game is essentially a counterfeiting operation that has to walk the fine line between stimulating demand and not being detectable in prices. I.e. similar to somebody counterfeiting a million dollars in $5 bills and spending little bits here and there so that they don't draw attention.

Submitted by The-Shoveler on November 15, 2012 - 4:17pm.

You may not think this is related but I think it is.

Every 50-70 years the world goes through technology pyridine shifts, (guns, steamships, railroads, electricity, cars, airplanes, computers etc…)
These shifts always result in dislocations and disruptions.

Right Now we are going through a new one “AUTOMATION”
This is the real story.

Submitted by spdrun on November 15, 2012 - 4:38pm.

Amazing. Ben opened his stinking piehole and the stock market still fell today!

Submitted by UCGal on November 15, 2012 - 4:39pm.

The-Shoveler wrote:
You may not think this is related but I think it is.

Every 50-70 years the world goes through technology pyridine shifts, (guns, steamships, railroads, electricity, cars, airplanes, computers etc…)
These shifts always result in dislocations and disruptions.

Right Now we are going through a new one “AUTOMATION”
This is the real story.


pyridine - so a chemical uses as a solvent or reagent is going to save the world?
http://en.wikipedia.org/wiki/Pyridine

(I know you meant paradigm... but I was curious if pyridine was a word... and it turns out it is.)

Submitted by The-Shoveler on November 15, 2012 - 4:46pm.

UCGal wrote:
The-Shoveler wrote:
You may not think this is related but I think it is.

Every 50-70 years the world goes through technology pyridine shifts, (guns, steamships, railroads, electricity, cars, airplanes, computers etc…)
These shifts always result in dislocations and disruptions.

Right Now we are going through a new one “AUTOMATION”
This is the real story.


pyridine - so a chemical uses as a solvent or reagent is going to save the world?
http://en.wikipedia.org/wiki/Pyridine

(I know you meant paradigm... but I was curious if pyridine was a word... and it turns out it is.)

Ha! OK you caught me, This is what happens when you rely too much on tech. to catch your errors.

i need a proofreader.

Submitted by flu on November 15, 2012 - 4:56pm.

New article.

Running a deficit of 13.5 billion

http://finance.yahoo.com/news/fha-capita...

Hey, it's the american way.


SAN FRANCISCO (MarketWatch) -- The Federal Housing Administration has exhausted its capital reserves and is currently running at a deficit of $13.5 billion, The Wall Street Journal reported late Thursday, citing an independent audit. The FHA, which is expected to release the audit on Friday, is the arm of the Department of Housing and Urban Development that insures home mortgages. The audit is expected to show the FHA's reserves were not enough to cover losses on $1.1 trillion in guaranteed loans, and that the agency will need taxpayer funding for the first time in 78 years, according to the Journal.

lol... bend over people.....

Submitted by NicMM on November 15, 2012 - 5:10pm.

Folks, I can share what is happening in bay area. Housing market is hot here! Houses in decent areas got multiple offers and often sold at a price 50k ~ 100k over asking price. Some of the houses ended up to or over their 2006's price. It feels crazy to see this.

-NicMM

Submitted by The-Shoveler on November 15, 2012 - 5:18pm.

actually 13.5 billion is not too bad (almost a rounding error when we are talking trillions).

I was expecting much worse.

Submitted by The-Shoveler on November 15, 2012 - 5:22pm.

Glad I don't need to move to the bay area.

Well good luck with that.

Submitted by bearishgurl on November 15, 2012 - 5:32pm.

flu wrote:
New article.

Running a deficit of 13.5 billion

http://finance.yahoo.com/news/fha-capita...

Hey, it's the american way.


SAN FRANCISCO (MarketWatch) -- The Federal Housing Administration has exhausted its capital reserves and is currently running at a deficit of $13.5 billion, The Wall Street Journal reported late Thursday, citing an independent audit. The FHA, which is expected to release the audit on Friday, is the arm of the Department of Housing and Urban Development that insures home mortgages. The audit is expected to show the FHA's reserves were not enough to cover losses on $1.1 trillion in guaranteed loans, and that the agency will need taxpayer funding for the first time in 78 years, according to the Journal.

lol... bend over people.....

Duh . . . we should expect nothing more and nothing less than hearing that the FHA now needs a "bailout" for the first time in history! The writing was on the wall long ago. "Buyers" using its "flagship" 203b program to purchase a residence have on average a FICO score in the low 600's :-0

see: http://piggington.com/fha_loaning_to_reb...

http://piggington.com/fha_loans_blowing_up

http://piggington.com/fha_mortgage_insur...

http://piggington.com/fha_insurance_cost

http://piggington.com/i_am_shocked_shock...

http://piggington.com/need_neighborhood

ETC...

Submitted by dumbrenter on November 15, 2012 - 5:35pm.

livinincali wrote:
The-Shoveler wrote:
Maybe that was why the posturing Ben was doing today, talking about the need to for easier lending standards,
Maybe a move to get additional funding.
Housing is all about credit markets (well and inflation).

The problem is that all the growth in the economy for the past 20-30 years has come from increases in debt. If you back out the debt the economy has been shrinking. The entire goal of the fed is to trick people into taking on debt or at least spending every penny they have to grow the economy. 40-50 years ago growth came from saved capital, now it comes from debt. Now that the masses cannot or will not participate the leaders are getting desperate because they fully understand that all assets are priced in credit/debt. If that debt has to be liquidated then all the assets are going to fall in price,the big banks are going to go bankrupt and the masses are going to revolt because their retirement depends on that debt backed wealth. I.e. their retirement depends on their children and grand children to be obligated to produce them goods and services in the future. What better way that larding on student loan and government debt.

In essence people are holding wealth backed by debt and the debtors can't pay in full so much of the wealth needs to be discounted. The big banks are playing a game of musical chairs in which they hope to be the one that isn't holding the empty bag when the music stops. They are putting the taxpayer on the hook slowly over time. In my opinion the fed's QE game is essentially a counterfeiting operation that has to walk the fine line between stimulating demand and not being detectable in prices. I.e. similar to somebody counterfeiting a million dollars in $5 bills and spending little bits here and there so that they don't draw attention.

That's a pretty good explanation of wealth backed by debt, livinincali.
But if there is a debtor, there needs to be the counter-party creditor.
In this situation, who is the creditor? folks who buy the treasury bonds?
Is it the banks? The FED? Treasury? Foreign governments that peg their currency to dollar?

How are they going to react once they find out that there is very little for them to claim in terms of what they lent against (i.e. assets)?

Submitted by The-Shoveler on November 15, 2012 - 5:46pm.

dumbrenter wrote:
livinincali wrote:
The-Shoveler wrote:
Maybe that was why the posturing Ben was doing today, talking about the need to for easier lending standards,
Maybe a move to get additional funding.
Housing is all about credit markets (well and inflation).

The problem is that all the growth in the economy for the past 20-30 years has come from increases in debt. If you back out the debt the economy has been shrinking. The entire goal of the fed is to trick people into taking on debt or at least spending every penny they have to grow the economy. 40-50 years ago growth came from saved capital, now it comes from debt. Now that the masses cannot or will not participate the leaders are getting desperate because they fully understand that all assets are priced in credit/debt. If that debt has to be liquidated then all the assets are going to fall in price,the big banks are going to go bankrupt and the masses are going to revolt because their retirement depends on that debt backed wealth. I.e. their retirement depends on their children and grand children to be obligated to produce them goods and services in the future. What better way that larding on student loan and government debt.

In essence people are holding wealth backed by debt and the debtors can't pay in full so much of the wealth needs to be discounted. The big banks are playing a game of musical chairs in which they hope to be the one that isn't holding the empty bag when the music stops. They are putting the taxpayer on the hook slowly over time. In my opinion the fed's QE game is essentially a counterfeiting operation that has to walk the fine line between stimulating demand and not being detectable in prices. I.e. similar to somebody counterfeiting a million dollars in $5 bills and spending little bits here and there so that they don't draw attention.

That's a pretty good explanation of wealth backed by debt, livinincali.
But if there is a debtor, there needs to be the counter-party creditor.
In this situation, who is the creditor? folks who buy the treasury bonds?
Is it the banks? The FED? Treasury? Foreign governments that peg their currency to dollar?

How are they going to react once they find out that there is very little for them to claim in terms of what they lent against (i.e. assets)?

I am still waiting for the Chinese to stop selling us stuff.

Oh please Oh please,

It's too painful for anyone to stop at least for the moment.

Submitted by The-Shoveler on November 15, 2012 - 6:06pm.

Actually were doing about average as far as debt,
pretty much the whole world is in debt.

except china and a few other exceptions.

Automation and other Tech, will be a big equalizer in the end IMO.

Submitted by AN on November 15, 2012 - 6:36pm.

NicMM wrote:
Folks, I can share what is happening in bay area. Housing market is hot here! Houses in decent areas got multiple offers and often sold at a price 50k ~ 100k over asking price. Some of the houses ended up to or over their 2006's price. It feels crazy to see this.

-NicMM


But but, bay area's house are only 0-25% more than SD's house :-) j/k.

Submitted by dumbrenter on November 15, 2012 - 6:43pm.

The-Shoveler wrote:
Actually were doing about average as far as debt,
pretty much the whole world is in debt.

except china and a few other exceptions.

Automation and other Tech, will be a big equalizer in the end IMO.

Again, if everyone is in debt, who and where are the creditors?
Anybody, Anybody other than the Chinese bogeyman for which the numbers don't add up anyway?

And if other countries stop selling us stuff, doesn't this mean our own economy will improve due to more manufacturing jobs? Somebody gotta make the stuff that goes for sale on WalMart.

Submitted by The-Shoveler on November 15, 2012 - 6:53pm.

dumbrenter wrote:
The-Shoveler wrote:
Actually were doing about average as far as debt,
pretty much the whole world is in debt.

except china and a few other exceptions.

Automation and other Tech, will be a big equalizer in the end IMO.

Again, if everyone is in debt, who and where are the creditors?
Anybody, Anybody other than the Chinese bogeyman for which the numbers don't add up anyway?

And if other countries stop selling us stuff, doesn't this mean our own economy will improve due to more manufacturing jobs? Somebody gotta make the stuff that goes for sale on WalMart.

Yes my point, we will have to make our own stuff, but don't count on me to put your shoes together LOL.

Actually the biggest buyer right now is our FED reserve, there are a lot of good things (ie… the debt can become a paper error at any point) and a lot of Bad things (ie… the foreign owners of our debt are dumping on the fed, actually I think this is also good).

To be honest I think the Chinese are really playing the same game internally, and I would look for them to step that up after these elections they just went through, who knows maybe in 5 years they will be in Debt TOOO!!! LOL.

Submitted by dumbrenter on November 15, 2012 - 6:55pm.

The-Shoveler wrote:
dumbrenter wrote:
The-Shoveler wrote:
Actually were doing about average as far as debt,
pretty much the whole world is in debt.

except china and a few other exceptions.

Automation and other Tech, will be a big equalizer in the end IMO.

Again, if everyone is in debt, who and where are the creditors?
Anybody, Anybody other than the Chinese bogeyman for which the numbers don't add up anyway?

And if other countries stop selling us stuff, doesn't this mean our own economy will improve due to more manufacturing jobs? Somebody gotta make the stuff that goes for sale on WalMart.

Yes my point, we will have to make our own stuff, but don't count on me to put your shoes together LOL.

Actually the biggest buyer right now is our FED reserve, there are a lot of good things (ie… the debt can become a paper error at any point) and a lot of Bad things (ie… the foreign owners of our debt are dumping on the fed, actually I think this is also good).

To be honest I think the Chinese are really playing the same game internally, and I would look for them to step that up after these elections they just went through, who knows maybe in 5 years they will be in Debt TOOO!!! LOL.

But the FED is made up of member banks which are rational profit making entities. Why would they want to keep buying debt that they know is becoming worthless soon?

Submitted by The-Shoveler on November 15, 2012 - 6:58pm.

dumbrenter wrote:
The-Shoveler wrote:
dumbrenter wrote:
The-Shoveler wrote:
Actually were doing about average as far as debt,
pretty much the whole world is in debt.

except china and a few other exceptions.

Automation and other Tech, will be a big equalizer in the end IMO.

Again, if everyone is in debt, who and where are the creditors?
Anybody, Anybody other than the Chinese bogeyman for which the numbers don't add up anyway?

And if other countries stop selling us stuff, doesn't this mean our own economy will improve due to more manufacturing jobs? Somebody gotta make the stuff that goes for sale on WalMart.

Yes my point, we will have to make our own stuff, but don't count on me to put your shoes together LOL.

Actually the biggest buyer right now is our FED reserve, there are a lot of good things (ie… the debt can become a paper error at any point) and a lot of Bad things (ie… the foreign owners of our debt are dumping on the fed, actually I think this is also good).

To be honest I think the Chinese are really playing the same game internally, and I would look for them to step that up after these elections they just went through, who knows maybe in 5 years they will be in Debt TOOO!!! LOL.

But the FED is made up of member banks which are rational profit making entities. Why would they want to keep buying debt that they know is becoming worthless soon?

Not quite, The fed is a branch of the Gov,
The Federal Reserve is not a private bank it works for and is part of the U.S Gov., whatever profit it makes it must return to the USA treasury the first of every year.
If it wanted to it could buy all the outstanding T-notes (treasuries) and burn them essentially ending our debt.

Submitted by dumbrenter on November 15, 2012 - 8:24pm.

The-Shoveler wrote:

Not quite, The fed is a branch of the Gov,
The Federal Reserve is not a private bank it works for and is part of the U.S Gov., whatever profit it makes it must return to the USA treasury the first of every year.
If it wanted to it could buy all the outstanding T-notes (treasuries) and burn them essentially ending our debt.

So let's see: The Gov prints T-bills, creates debt and uses up that debt for defence/infra/medicare/whatever. This debt represented as a t-bill is sold to FED which is another part of the Gov.
And this other part of Gov can simply burn this off thus ending our debt.

This sounds like a really good deal. {Dumbrenter scratching his head here} So may I ask what exactly is this problem with debt? Why do we have CNBC anchors and folks on this board hyperventilating over such a good deal.

We are in a unique position in human history where one country's printed note is good in any corner of the world. This has never happened before and once we screw up, this will never happen again. This is why we have to make this count and screw up big time. There will be no second chance to screw up again.

Submitted by moneymaker on November 15, 2012 - 9:32pm.

Is the whole world in debt because of leveraged borrowing? I loan paul $6 and based on that he loans peter $180, then Peter can in turn loan out money to someone else. Either it's that or the rich are hoarding their money, my bet is on the hoarding theory as I see on TV, hoarding is a very common problem.

Submitted by CA renter on November 16, 2012 - 1:45am.

livinincali wrote:
The-Shoveler wrote:
Maybe that was why the posturing Ben was doing today, talking about the need to for easier lending standards,
Maybe a move to get additional funding.
Housing is all about credit markets (well and inflation).

The problem is that all the growth in the economy for the past 20-30 years has come from increases in debt. If you back out the debt the economy has been shrinking. The entire goal of the fed is to trick people into taking on debt or at least spending every penny they have to grow the economy. 40-50 years ago growth came from saved capital, now it comes from debt. Now that the masses cannot or will not participate the leaders are getting desperate because they fully understand that all assets are priced in credit/debt. If that debt has to be liquidated then all the assets are going to fall in price,the big banks are going to go bankrupt and the masses are going to revolt because their retirement depends on that debt backed wealth. I.e. their retirement depends on their children and grand children to be obligated to produce them goods and services in the future. What better way that larding on student loan and government debt.

In essence people are holding wealth backed by debt and the debtors can't pay in full so much of the wealth needs to be discounted. The big banks are playing a game of musical chairs in which they hope to be the one that isn't holding the empty bag when the music stops. They are putting the taxpayer on the hook slowly over time. In my opinion the fed's QE game is essentially a counterfeiting operation that has to walk the fine line between stimulating demand and not being detectable in prices. I.e. similar to somebody counterfeiting a million dollars in $5 bills and spending little bits here and there so that they don't draw attention.

Yep. Good post, livinincali.

Submitted by livinincali on November 16, 2012 - 7:44am.

dumbrenter wrote:

That's a pretty good explanation of wealth backed by debt, livinincali.
But if there is a debtor, there needs to be the counter-party creditor.
In this situation, who is the creditor? folks who buy the treasury bonds?
Is it the banks? The FED? Treasury? Foreign governments that peg their currency to dollar?

How are they going to react once they find out that there is very little for them to claim in terms of what they lent against (i.e. assets)?

The creditor is the big banks, pension funds, the growing wealth gap between rich and poor. As the American populace has taken on increasing amounts of debt to buy things they want now rather then waiting they made the rich people wealthy. They are responsible for the large wealth gap in this country.

In all honesty I think this is just the natural state of affairs based on the demographics. People are growing older and are desperate to acquire assets to be sold to finance consumption in retirement. The need for somebody to owe you in retirement has lead to the loose money policies. People nearing retirement are desperate to claim part of a future workers productivity.

Submitted by flu on November 16, 2012 - 8:00am.

Quote:

The creditor is the big banks, pension funds, the growing wealth gap between rich and poor. As the American populace has taken on increasing amounts of debt to buy things they want now rather then waiting they made the rich people wealthy. They are responsible for the large wealth gap in this country.

In all honesty I think this is just the natural state of affairs based on the demographics. People are growing older and are desperate to acquire assets to be sold to finance consumption in retirement. The need for somebody to owe you in retirement has lead to the loose money policies. People nearing retirement are desperate to claim part of a future workers productivity.


+100

Submitted by dumbrenter on November 16, 2012 - 8:05am.

livinincali wrote:
dumbrenter wrote:

That's a pretty good explanation of wealth backed by debt, livinincali.
But if there is a debtor, there needs to be the counter-party creditor.
In this situation, who is the creditor? folks who buy the treasury bonds?
Is it the banks? The FED? Treasury? Foreign governments that peg their currency to dollar?

How are they going to react once they find out that there is very little for them to claim in terms of what they lent against (i.e. assets)?

The creditor is the big banks, pension funds, the growing wealth gap between rich and poor. As the American populace has taken on increasing amounts of debt to buy things they want now rather then waiting they made the rich people wealthy. They are responsible for the large wealth gap in this country.

In all honesty I think this is just the natural state of affairs based on the demographics. People are growing older and are desperate to acquire assets to be sold to finance consumption in retirement. The need for somebody to owe you in retirement has lead to the loose money policies. People nearing retirement are desperate to claim part of a future workers productivity.

How can a creditor be a "wealth gap between rich and poor"? Shouldn't the rich become poorer because of loss of wealth.
Let me see if this makes sense:
Poor need "things" right now.
Rich have Money.
Rich loan money to poor buy "things"
Poor default
Rich are left holding a highly devalued asset as a repo.
Poor are exactly where they began other than losing FICO score.
Rich have lost wealth (in real terms).

So from above, the deleveraging process actually evens out the wealth field rather than concentrating it.

Maybe unless the rich get the government to buy the devalued asset and make them whole and stick the difference to the tax payers who are mostly poor. But that would never happen in a democracy, right? :-)

Submitted by flu on November 16, 2012 - 8:19am.

Note to self...Never rent to someone with shitty credit....

Submitted by livinincali on November 16, 2012 - 8:58am.

dumbrenter wrote:

So from above, the deleveraging process actually evens out the wealth field rather than concentrating it.

Maybe unless the rich get the government to buy the devalued asset and make them whole and stick the difference to the tax payers who are mostly poor. But that would never happen in a democracy, right? :-)

Exactly. The reality is we're aren't actually deleveraging. If you look at the fed Z1 for total debt you see it slightly increasing with the government deficits replacing any deleveraging in the financial sector. Any deleveraging in the consumer space (i.e. mortgages and car loans) is being replaced by student loan debt. In the great depression we actually deleveraged the debt to a manageable level. In Japan they haven't deleveraged from 1990. So while it might be possible to carry on like Japan for the next 20 years and avoid the deleveraging process, we aren't going to see any significant asset price increases assuming nobody does anything stupid to cause hyper inflation.

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