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DaCounselor.
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July 6, 2007 at 10:59 PM #64503July 7, 2007 at 8:00 AM #64454
lendingbubblecontinues
ParticipantAll of these interesting and creative ways lenders have of keeping people in “their” homes means very little to me.
That light you believe you see at the end of the tunnel is “just a freight train coming your way” (Metallica). Home prices are falling and there is nothing anyone can do about it.
DaC–You can hope for the best all you like, but don’t you think it might be wise to at least consider the worst?
July 7, 2007 at 8:00 AM #64513ParticipantAll of these interesting and creative ways lenders have of keeping people in “their” homes means very little to me.
That light you believe you see at the end of the tunnel is “just a freight train coming your way” (Metallica). Home prices are falling and there is nothing anyone can do about it.
DaC–You can hope for the best all you like, but don’t you think it might be wise to at least consider the worst?
July 7, 2007 at 8:38 AM #64460JWM in SD
ParticipantAll of these efforts sound nice and fuzzy, but they don’t address the ultimate bagholders though. Unless the investors in the MBAs, CDOs, CDSs can be made whole, then who holds the bag??? The pension funds? The taxpayers??? You better hope not, because that means hyperinflation and hyperinflation means end of the current political system. I just don’t think people on this site and drawing conclusions far enough into the reality what’s happening a global monetary scale. The Fed doesn’t give a crap about your San Diego house prices at the end of the day.
July 7, 2007 at 8:38 AM #64519ParticipantAll of these efforts sound nice and fuzzy, but they don’t address the ultimate bagholders though. Unless the investors in the MBAs, CDOs, CDSs can be made whole, then who holds the bag??? The pension funds? The taxpayers??? You better hope not, because that means hyperinflation and hyperinflation means end of the current political system. I just don’t think people on this site and drawing conclusions far enough into the reality what’s happening a global monetary scale. The Fed doesn’t give a crap about your San Diego house prices at the end of the day.
July 7, 2007 at 1:23 PM #64551patientrenter
Participant“All of these efforts sound nice and fuzzy, but they don’t address the ultimate bagholders though”.
The ultimate bagholders are:
A. Investors very hungry for yield, and unable to find much because of a wave of “global liquidity” coming from prodigious savings of the Chinese and some oil producers.
B. Future generations of taxpayers who will pay off the additional government debt incurred by the various new guarantee and rescue programs that FNMA, FDIC etc.
are all busily working on right now.C. Chinese and other foreign institutional investors buying dollar-denominated bonds subject to inflation/devaluation losses.
Where do you direct the pain? Igniting inflation sends it to C. Congress can direct it to B. Doing nothing will send it to A. Likely, all parties will be asked to take some. The one place that Congress doesn’t want the pain to go to is the voters, i.e. homeowners, in their district. So which of the above 3 is least likely to hurt current homeowners?
What if the price drop in San Diego never exceeds 20-30%, and the rest of the country dips just 10-15%? Then maybe Congress will just go for A. But if price drops in SD exceed that, other areas of the country are likely to be hit hard too, and that will probably trigger some B and/or C.
Patient renter in OC
July 7, 2007 at 1:23 PM #64492Participant“All of these efforts sound nice and fuzzy, but they don’t address the ultimate bagholders though”.
The ultimate bagholders are:
A. Investors very hungry for yield, and unable to find much because of a wave of “global liquidity” coming from prodigious savings of the Chinese and some oil producers.
B. Future generations of taxpayers who will pay off the additional government debt incurred by the various new guarantee and rescue programs that FNMA, FDIC etc.
are all busily working on right now.C. Chinese and other foreign institutional investors buying dollar-denominated bonds subject to inflation/devaluation losses.
Where do you direct the pain? Igniting inflation sends it to C. Congress can direct it to B. Doing nothing will send it to A. Likely, all parties will be asked to take some. The one place that Congress doesn’t want the pain to go to is the voters, i.e. homeowners, in their district. So which of the above 3 is least likely to hurt current homeowners?
What if the price drop in San Diego never exceeds 20-30%, and the rest of the country dips just 10-15%? Then maybe Congress will just go for A. But if price drops in SD exceed that, other areas of the country are likely to be hit hard too, and that will probably trigger some B and/or C.
Patient renter in OC
July 7, 2007 at 4:08 PM #64526Nancy_s soothsayer
ParticipantThe “loan modification” game being worked out by the accountants is similar to the most recent bankruptcy laws where a debtor gets shackled and tied to his loans and contractual obligations till there is no more blood to squeeze. The debtors can’t walk away easily – the rule makers are making sure of that! Inspite of this effort of minimizing foreclosures, the deflation of housing prices won’t be stopped because the FLIPPING GAME which created the bubble is way over.
They make it sound like they are “helping” the homedebtors. The truth is, the banks will punish those who got into the flipping game by not letting them easily off the hook. As a consequence, these homedebtors can’t go buy another house or two to flip down the road. Let me guess, if these homedebtors won’t cooperate with their lenders to get “loan modification”, somehow, they would be blacklisted and would end up as Forever-Renters.
It’s all good, in the end. These homedebtors are prevented from buying another house (ever) again, I hope.
July 7, 2007 at 4:08 PM #64585ParticipantThe “loan modification” game being worked out by the accountants is similar to the most recent bankruptcy laws where a debtor gets shackled and tied to his loans and contractual obligations till there is no more blood to squeeze. The debtors can’t walk away easily – the rule makers are making sure of that! Inspite of this effort of minimizing foreclosures, the deflation of housing prices won’t be stopped because the FLIPPING GAME which created the bubble is way over.
They make it sound like they are “helping” the homedebtors. The truth is, the banks will punish those who got into the flipping game by not letting them easily off the hook. As a consequence, these homedebtors can’t go buy another house or two to flip down the road. Let me guess, if these homedebtors won’t cooperate with their lenders to get “loan modification”, somehow, they would be blacklisted and would end up as Forever-Renters.
It’s all good, in the end. These homedebtors are prevented from buying another house (ever) again, I hope.
July 7, 2007 at 5:12 PM #64540Participant“So which of the above 3 is least likely to hurt current homeowners?”
Depends on which homeowners you are talking about. Is it the homeowners who have owned for 10 plus years and have not heloced their home to death? Or, is those who have and more recent bubble run up buyers (2003 to 2006)? If it’s the latter, then so what? The reality is that they are not a majority. However, prices are set at the margins. I guess what I’m saying is that you are missing another choice. Choice D. Bernanke lets the bubble assets deflate on their own. No inflation to deal with, no interest rate hikes to deal with and no wage inflation issues. In my opinion, that is the easiest thing for them to do while still protecting the dollar.
July 7, 2007 at 5:12 PM #64599Participant“So which of the above 3 is least likely to hurt current homeowners?”
Depends on which homeowners you are talking about. Is it the homeowners who have owned for 10 plus years and have not heloced their home to death? Or, is those who have and more recent bubble run up buyers (2003 to 2006)? If it’s the latter, then so what? The reality is that they are not a majority. However, prices are set at the margins. I guess what I’m saying is that you are missing another choice. Choice D. Bernanke lets the bubble assets deflate on their own. No inflation to deal with, no interest rate hikes to deal with and no wage inflation issues. In my opinion, that is the easiest thing for them to do while still protecting the dollar.
July 7, 2007 at 8:27 PM #64617ParticipantNancy-s,
I agree that a little blood will be extracted from flippers, just enough to keep most of ’em away for a few years. But buying an asset worth $1/2 million to several $million with just a few % of your own money at risk will always bring people back, since it’s a way to go from near-poverty to riches, and the worst that can happen is you go from poverty to poverty. If you’re dishonest and belligerent, then you don’t even have to go into poverty. I know people earning good incomes and with some savings who made their banks accept a lousy payoff in the last downturn, and they walked away free and clear. Now they own million-dollar homes they bought dirt-cheap right after. As long as lenders are dumb enough to allow this, it will continue.
JWM,
The scenario you describe as D. is what I was trying to express under A. In that scenario, prices go down with no government bailout and mortgage lenders take a big hit. At some point, if prices drop a lot, then even the homeowners who bought 10 years ago will get restless and call their congressman, and then B and/or C start to kick in.
Patient renter in OC
July 7, 2007 at 8:27 PM #64558ParticipantNancy-s,
I agree that a little blood will be extracted from flippers, just enough to keep most of ’em away for a few years. But buying an asset worth $1/2 million to several $million with just a few % of your own money at risk will always bring people back, since it’s a way to go from near-poverty to riches, and the worst that can happen is you go from poverty to poverty. If you’re dishonest and belligerent, then you don’t even have to go into poverty. I know people earning good incomes and with some savings who made their banks accept a lousy payoff in the last downturn, and they walked away free and clear. Now they own million-dollar homes they bought dirt-cheap right after. As long as lenders are dumb enough to allow this, it will continue.
JWM,
The scenario you describe as D. is what I was trying to express under A. In that scenario, prices go down with no government bailout and mortgage lenders take a big hit. At some point, if prices drop a lot, then even the homeowners who bought 10 years ago will get restless and call their congressman, and then B and/or C start to kick in.
Patient renter in OC
July 7, 2007 at 10:08 PM #64572Participant“As long as lenders are dumb enough to allow this, it will continue.”
And their customers like Merril Lynch will continue to allow them to do that??? I think not…no in fact I know they won’t because they sure as hell didn’t let New Century and Bear Stearns continue to sell them garbage rated and top shelf now did they? NO.
“At some point, if prices drop a lot, then even the homeowners who bought 10 years ago will get restless and call their congressman, and then B and/or C start to kick in.”
And then who is left to sell their house to because their wages have stagnated and now they are going to be taxed even more to death??? Tell me, who are boomers going to be sell their houses to when the prices drop and they demand that the Govt do what exactly? Hold a gun to every Gen X and Gen Y to buy an overpriced asset and become a debt slave? I’m not sure how that can be done exactly.
Your last assumption assumes that the Chinese won’t depeg the Yuan. That is a big assumption because their economy is choking on all of the dollars they are buying an putting treasuries.
Look PD, house prices are going to correct significantly no matter you and DaCounselor like to believe is in the offing to save it. I don’t know why this is so hard for certain people accept…well, other than those who are in mortgage debt up their eyeballs and waiting for that reset to finally do them in.
If it doesn’t, well then I will just keep on renting at half the cost of owning.
July 7, 2007 at 10:08 PM #64631Participant“As long as lenders are dumb enough to allow this, it will continue.”
And their customers like Merril Lynch will continue to allow them to do that??? I think not…no in fact I know they won’t because they sure as hell didn’t let New Century and Bear Stearns continue to sell them garbage rated and top shelf now did they? NO.
“At some point, if prices drop a lot, then even the homeowners who bought 10 years ago will get restless and call their congressman, and then B and/or C start to kick in.”
And then who is left to sell their house to because their wages have stagnated and now they are going to be taxed even more to death??? Tell me, who are boomers going to be sell their houses to when the prices drop and they demand that the Govt do what exactly? Hold a gun to every Gen X and Gen Y to buy an overpriced asset and become a debt slave? I’m not sure how that can be done exactly.
Your last assumption assumes that the Chinese won’t depeg the Yuan. That is a big assumption because their economy is choking on all of the dollars they are buying an putting treasuries.
Look PD, house prices are going to correct significantly no matter you and DaCounselor like to believe is in the offing to save it. I don’t know why this is so hard for certain people accept…well, other than those who are in mortgage debt up their eyeballs and waiting for that reset to finally do them in.
If it doesn’t, well then I will just keep on renting at half the cost of owning.
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