San Diego Housing Bubble News and Analysis

If the government eats all of these losses generated by the housing "Ponzi Scheme" that got us to this point, the U.S. may lose its AAA sovereign debt rating and eventually wind up like an insolvent banana republic. The fools in Washington (all of them: Democrats & Republicans) seem intent on breaking the country.

I have read that quite a few pension funds held stock in these companies so you can imagine the havoc this is going to cause with people's pensions which is going to cause more instability with the finances of a lot of people.

This is going to push the recession up the next rung in the ladder so I think it's going to cause more sellers to panic and lower their prices quicker than they would have otherwise.

With so much foreign investment in the US mortgage markets, if the US didn't make good on these investments who else would finance future wars.

Mr. Mortgage has a good writeup about possible implications:

http://mrmortgage.ml-implode.com/

Well the government asked for this, when it tired to prop up real estate last year. When Countrywide, Downey, etc stopped making the most foolish loans the government had FHA and the GSEs take over the market. This is why all incumbents should be voted out.

So now GSEs are put into a conservatorship, while FHA is still making the most foolish loans to the most unqualified buyers. The only reason that FHA is not in trouble right now, is that it just starts to get popular this year. Is the government planning FHA bailout by the tax payers next year? When will this end??

If it forces traditional 20% down <36% DTI 30 year loans then it will definitely have downward pressure on the market. Non-conforming loans have still been given out lately and this will likely put the final nail in that coffin. If interest rates do go up due to the backstop then it will have even more downward pressure on pricing.

Absolutely brilliant!

Replace the heads of two failed institutions with the heads of two other failing institutions.

I sometimes wonder if our Government says to themselves, let's see if the people get a kick out of this one!

The justification is pathetic. In other words, if you want to be bailed out (Washington Mutual, Bank of America, Citi Bank, etc, et al.) make as many reckless loans as you possibly can.

Mother of all takeovers!

This instantly converts US from a capitalist nation to socialist nation. All homes with mortgages are essentially owned by the government; the owners are living in government quarters. By $ amount, this economic entity may be larger than the old Soviet Union.

Next bailout/takeover to watch would be GM & Ford.

Imperceptibly we are heading towards a socialist state. The Congress probably doesn't even know about it. Social Security & Medicare are already the largest components of budget. That, military, other government entities and now with banking and housing will probably be more that half of the economy.

Pulson laid out his plan.

http://www.cnbc.com/id/26591428

someone here needs to figure out what it means to us, not as taxpayers but as R/E investors. What will it do to rates? Downpayments? PMI? and ultimately...values? I know it will be a watershed momment and we will define this as before takeover/after takeover when talking in the future but I want to know right now what it will do. Somebody jump on this and translate it for the rest of us.

As if on cue, Detroit wants a bailout too!

http://www.breitbart.com/article.php?id=...

Detroit's sputtering Big Three turn to Washington for help

Battered by weak sales, declining market share and miserable credit ratings, Detroit's Big Three automakers are now turning to the US government for help.

General Motors Corp., Ford Motor Co. and Chrysler LLC will be launching a campaign in the coming days to secure at least 25 billion dollars in federal loans to help get past the current economic malaise.

"This isn't a bail out," said Greg Martin, Washington spokesman for GM, the largest US automaker which has been awash in speculation for months that it is running short of cash.

"These are direct loans that we have to pay back," added Ford spokesman Mike Moran.

Detroit's goal is to have new legislation in place for the aid package by the time Congress adjourns in late September or early October.

The combination of an economic slowdown, the credit crunch and presidential politics, have enhanced the prospects of such a plan.

The possibility of one or more of the Big Three seeking bankruptcy protection -- which could have an enormous economic impact -- has created a sense of urgency.

"We are encouraging Congress to take this up now," said John Bozzella, vice president of external affairs and public policy at Chrysler LLC, created by private equity investors for the spinoff of the former Chrysler Corp. operations from Germany's Daimler.

Bozzella said the loan authorization was included in energy legislation was signed into law last December by President George W. Bush after passing through the Democratic-controlled Congress.

The law requires automakers to raise the fuel economy of vehicles sold in the US market to 35 miles (56 kilometers) per gallon (3.8 liters).

The Bush administration has estimated that retooling for the new standards would cost the automakers 100 billion dollars.

"This was authorized by Congress. There was a consensus this was needed to transform and drive new technology," Bozzella said.

The bill also authorized the US Department of Energy to approve up to 25 billion dollars in loans to fund technology reseach.

The legislation, however, requires that any loans authorized under the measure have to be guaranteed by the federal government. To do that Congress needs to appropriate 3.7 billion dollars for the insurance premiums, automakers said.

The bill for the insurance could rise to more than seven billion dollars if Congress boosts the loan total to 50 billion dollars.

"The long term goal of the legislation was to increase energy security and to ensure the US has the domestic capacity necessary for building more efficient vehicles," Bozzella said.

Suppliers and even foreign carmakers operating in the US could qualify for the loans, notes Bozzella.

"There are no restrictions in the language on which companies are in and which companies are out," he said.

The automakers say they have a commitment from the congressional leadership to take up the enabling legislation when both the House and Senate reconvene in the coming week....

Comrades....Comrades....What's the big fuss??

Wait, something is wrong here...

Why aren't Richard Syron and Daniel Mudd, chief executives of Freddie Mac and Fannie Mae respectively, being given millions in severance as they walk out the door??

I thought that was the norm these days, bankrupt the company, get fired, get rewarded, go to the Bahamas...

Impact

As I understand it

1) Interest rates on Frannie connected mortgages will fall as Frannie will pay less to borrow in the market.
2) Frannie will temporarily buy more mortage backed bonds; presumably new ones. So this will help supply.

BIG Question ( as alluded to above). Will Frannie tighten conditions. I can't see anything written about that. If acceptance terms stay the same, then taking into account all the above, will it not be positive for the market???

The impact is significant. Interest rates on conforming and jumbo-conforming mortgages may fall as much as 1%. That's a 10% drop in monthly payments at the same price. House prices will rally for a while.

"House prices will rally for a while."

OR

more than likely the rate of price declines may slow. Lets see what the unintended consequences are first. In many ways japan basically did the same thing we are doing now. Lets take all this bad paper and pretend it is not there. Yet Japanese land values continued to tank and they faced what is now called the "Lost Decade".

Maybe they will bring back no-doc loans. What they hell it's backed by the taxpayer.

Can I refinance to 4%? Lol....That sucks. So much for being responsible. Should of taken out a no-doc 100% financed loan for that....

On the flip side, glad i didn't throw money out the the door for the past 4 years and possibly another 3-4 years on top of that on rent waiting for home prices to fall (sarcasm off).

Actually, the increased debt undertaken by the Gov should push yields on Treasuries higher thus causing mortgage rates to follow, including FNMA and FREDDIE MAC backed loans

I'd watch for the 10 Year to head north of 5.25 before the end of the year - ergo - more downward pressure on housing prices.

Who won here? I'd say anybody who may have been buying FNMA and FREDDIE MAC Sub Debt debt within the past month.

Here is the MSM take, this from the AP

http://biz.yahoo.com/ap/080907/mortgage_...

"By placing Fannie and Freddie into a conservatorship, the government is promising investors that the companies' debt is as safe as the Treasury Department's.

While not a cure-all, the bailout is still a step in the right direction, industry observers say. It will at least "keep the lanes in the mortgage freeway open," said Greg McBride, a senior financial analyst at Bankrate.com, possibly putting the market on the road to recovery.

If mortgage rates fall, that will attract more potential buyers into the market, which, in turn, will help to prop up home prices, he said.

He expects mortgage rates on a conventional, 30-year fixed-rate home loan to fall over the next few weeks as the dust settles on the bailout. Rates, which now average 6.35 percent, could fall as much as half a percentage point, he said. But continued investor wariness and a depreciating housing market will keep rates from dropping further.

"We're not looking at sunshine and daffodils in the housing market anytime soon," he said."

This will probably have a bigger impact in the middle part of the country. If you ask me California is still toast.

Bill Gross (from Pimco) has asserted that the feds needed to act for the greater good of the economy and the financial system, not just for the continued health of his Pimco Total Return bond fund, the world’s largest. The $130-billion-asset fund is up 3.5% this year, ranking it in the 96th percentile for performance among bond funds.

Gross said he believed that the Treasury’s rescue plan would go a long way toward improving sentiment in the financial and housing markets.

For the financial system, "The Category 4 hurricane has been downgraded to a tropical storm," he said.

He predicts that mortgage rates will fall this week as the rates that Fannie and Freddie pay to borrow money begin to decline.

He also expects the stock market overall to rally Monday.

And Gross has revised his estimate of how much more of a decline is in store for home prices. He had been expecting average home prices nationwide to fall an additional 10% to 15%. With Fannie and Freddie preserved, he sees prices bottoming after a further decline of 5% to 10%.

But that isn’t his forecast for California, where market conditions are much worse and likely to stay that way, he said.

link to article: http://latimesblogs.latimes.com/money_co...

Bill Gross has a pretty good idea of what is good for Bill Gross. But "opening up the balance sheet of the U.S. Treasury", as he insists is needed, is not so good for those of us who are not Bill Gross.

His warnings are right on the money, very much so; his solutions are self-serving.