[bsrsharma]

I watched his speech and he was just perfect. (I am not his admirer). He mouthed a few platitudes and sympathies, and offered trivial amount of useful help through FHA expansion.
The sensible real policy change is going to be the possible elimination of tax obligation on forgiven loans. An interesting consequence may be borrowers may interpret it as a suggestion to walk away from loans that don’t make sense in the new home value regime. That may multiply REO a lot more.

[bsrsharma]

I thought that line towards the end is some sort of joke. But guess what I found! And the Pope is a German!
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From the Telegraph of London, 2005-Jan-30, by Clare Chapman:

‘If you don’t take a job as a prostitute, we can stop your benefits’

A 25-year-old waitress who turned down a job providing “sexual services” at a brothel in Berlin faces possible cuts to her unemployment benefit under laws introduced this year.

Prostitution was legalised in Germany just over two years ago and brothel owners — who must pay tax and employee health insurance — were granted access to official databases of jobseekers.

The waitress, an unemployed information technology professional, had said that she was willing to work in a bar at night and had worked in a cafe.

She received a letter from the job centre telling her that an employer was interested in her “profile” and that she should ring them. Only on doing so did the woman, who has not been identified for legal reasons, realise that she was calling a brothel.

Under Germany’s welfare reforms, any woman under 55 who has been out of work for more than a year can be forced to take an available job — including in the sex industry — or lose her unemployment benefit. Last month German unemployment rose for the 11th consecutive month to 4.5 million, taking the number out of work to its highest since reunification in 1990.

The government had considered making brothels an exception on moral grounds, but decided that it would be too difficult to distinguish them from bars. As a result, job centres must treat employers looking for a prostitute in the same way as those looking for a dental nurse.

When the waitress looked into suing the job centre, she found out that it had not broken the law. Job centres that refuse to penalise people who turn down a job by cutting their benefits face legal action from the potential employer.

“There is now nothing in the law to stop women from being sent into the sex industry,” said Merchthild Garweg, a lawyer from Hamburg who specialises in such cases. “The new regulations say that working in the sex industry is not immoral any more, and so jobs cannot be turned down without a risk to benefits.”

Miss Garweg said that women who had worked in call centres had been offered jobs on telephone sex lines. At one job centre in the city of Gotha, a 23-year-old woman was told that she had to attend an interview as a “nude model”, and should report back on the meeting. Employers in the sex industry can also advertise in job centres, a move that came into force this month. A job centre that refuses to accept the advertisement can be sued.

Tatiana Ulyanova, who owns a brothel in central Berlin, has been searching the online database of her local job centre for recruits.

“Why shouldn’t I look for employees through the job centre when I pay my taxes just like anybody else?” said Miss Ulyanova.

Ulrich Kueperkoch wanted to open a brothel in Goerlitz, in former East Germany, but his local job centre withdrew his advertisement for 12 prostitutes, saying it would be impossible to find them.

Mr Kueperkoch said that he was confident of demand for a brothel in the area and planned to take a claim for compensation to the highest court. Prostitution was legalised in Germany in 2002 because the government believed that this would help to combat trafficking in women and cut links to organised crime.

Miss Garweg believes that pressure on job centres to meet employment targets will soon result in them using their powers to cut the benefits of women who refuse jobs providing sexual services.

“They are already prepared to push women into jobs related to sexual services, but which don’t count as prostitution,” she said.

“Now that prostitution is no longer considered by the law to be immoral, there is really nothing but the goodwill of the job centres to stop them from pushing women into jobs they don’t want to do.”

[bsrsharma]

See http://www.rgemonitor.com/blog/setser/212133 for a report on foreign central bank sales. They are profiting from the flight to quality and using it as a selling opportunity.

[bsrsharma]

isn’t it a manufactured/mobile home? Lot of money if so.

[bsrsharma]

Thanks, But I am still puzzled. If 91-day is used as a collateral, FFR is a secured loan, right? The Treasury rate is set by market while FFR is a fiat rate. Why should they match? I can think of one reason – some sort of interest rate arbitrage. Borrowing at FFR to buy higher yielding treasuries. But if FFR is higher than treasury, what do you do? This is not a hypothetical question. What is happening in the treasuries now is foreign central banks are liquidating their holdings to lower their $ exposure. They are attracted by higher price of treasuries driven by all the investments that are avoiding private debt paper (CDO/CMO etc.,). So, in a round about way, investors are replacing foreign central banks as treasury holders. This is causing a drought in private sector debt. Goodbye cheap mortgages/credit card/auto loans etc.,

[bsrsharma]

Shiloh – FED is really a very mysterious creature. Being the source of all “paper money” it is a very special entity different and distinct from government. Think of it as a “god” of paper money. It has to practice absolute scrupulousness in maintaining the value of paper money – so that people don’t lose confidence in it. That is a very tricky juggling act between economic growth and inflation.
It does not function according to U.S. Constitution – like rest of the governments. {There is no mention of FED in the Constitution!} War, hurricane are government expenses paid by US Treasury. No one knows what the phrase “mortgage debt bail out” means so far. In a worst case scenario – this has to be Great Depression like crisis – FED may buy some weak Mortgage backed securities to forestall a financial meltdown. That is what people refer to as “Helicopter Ben” dropping money. Basically FED loans out money (with no assurance of getting it back) for weak securities to keep the “pump primed”.

But, the FED can play a tricky game of tilting the balance a little by changing interest rates. That shifts the balance between savings and consumption. Higher interest rate rewards savers and hurts consumers that hurts producers causing lower employment. Lower interest rate hurts savers and rewards consumption – hence increases production – increasing employment.

[bsrsharma]

a home on a couple of acres for 200k which is possible in Oroville

CA? I thought Sacramento area has inflated quite a bit.

[bsrsharma]

SD: Do buyers really care about price history? I would just compare present price with the house to see if it makes sense (compared to other houses). I don’t think I will worry too much about their past pricing strategies; specially in these tumultous times.

[bsrsharma]

why do you prefer lake oswego?

Since you mentioned that 700K figure, LO is a place where you get some nice SFRs. Schools are very good too. (But I don't  live there; we are in Washington county area north of Beaverton).

one more question, should we change our california plates out as quickly as possible?

Not really; I think the law is 30 days or something. We took a few months; no one harassed us.

i keep reading about how everyone in portland and oregon in general hates californians moving in!

That is a lie. Portlanders are very nice sociable folks – even to Californians. Now I can't be so sure of folks in rural areas. They may have some honest fear of all the rich bounty hunters from outside.

[bsrsharma]

Wow! A CEO mentions Great Depression. He must be in terrible pain!

[bsrsharma]

I can't see the Fed allowing the difference between Treasury yields and the FFR to be so large.

Can you please explain why? Let us say it is 5% (a random figure). Whom does it hurt (and who benefits)?

[bsrsharma]

More FED costs to consider…

Shiloh: You shouldn't confuse FED with the Federal government. Those expenses you mentioned have nothing to do with FED. They are mostly borrowings by Congress that increase deficits (national debt). Treasury sells paper to get money from market. FED plays no role in that. Of course, more treasury borrowings increase demand for money causing interest rates to increase. That has an effect on increasing exchange rate of $ as foreigners will invest in $.  But it is a pain for mortgage and credit card borrowers as interest rates increase. High $ also reduces US competitiveness.

[bsrsharma]

bean: I too believe they are hurting themselves severly with their collective self-delusion. It is like the Goebbels/Stalin propaganda machine – they repeat it so many times that they forget it is untrue. This collapse is going to be very destructive to the whole economy – but by hiding the truth, they may prevent early attempts at mitigating the pain. Look at this http://news.yahoo.com/s/csm/20070830/ts_csm/asubprime

The mushroom cloud should be visible by October.

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Subprime loans face big hikes
By Ron Scherer
Thu Aug 30, 4:00 AM ET

Millions of homeowners around the nation are now getting the news in the mail: The interest rate on their home loans is going up, possibly to double-digit levels.

The hardest hit are expected to be people who have less-than-stellar credit and cannot afford to make the new payments. An increase of several hundred dollars a month will force them either to get relief or to default. The prospect of significant and growing losses has already rocked Wall Street and shaken up the broader mortgage markets. And, concerned about the human suffering, policymakers are already searching for ways to help people out.

“The meltdown in the subprime market is the biggest threat to the housing market and the broader economy,” says Mark Zandi, chief economist at Moody’s Economy. com. “It is at the vortex of the problem.”

Over the next several months, banks will be changing the “teaser rates” that homeowners received two years ago.

The peak for resetting loans will be in October, when the rates on some $50 billion worth of mortgages are likely to rise by 2 percentage points or more. This could mean a rise of several hundred dollars a month for many borrowers.

For example, on a $210,000 loan balance (the average subprime amount in 2006), the additional 2.5 percentage point increase on the interest rate adds about $4,560 a year, or about $380 a month, estimates James Kragenbring, senior investment officer at Advantus Capital Management in St. Paul, Minn.

That means the median household would have to devote an extra 9.5 percent of income just to pay the extra interest.

“Given the debt-to-income ratio of the typical subprime borrower at the time they received their loan, it is unclear where the extra cash flow will come from,” says Mr. Kragenbring.

Interest costs rise faster than pay: It probably won’t come from a pay raise, if recent trends continue. Last year, median household income rose 0.7 percent to $48,201, the US Census Bureau reported Tuesday.

“If mortgage payments are rising faster than the 0.7 percent average growth rate, then they are rising faster than incomes and that could create problems,” says Chuck Nelson, of the Census Bureau.

It’s already creating problems in Buffalo, N.Y.

“If the borrower is on Social Security, the most their income is rising is 3 percent a year and the mortgage payments are rising much faster than that,” says Carol Brent, staff attorney of Legal Services for the Elderly.

She says she has clients whose monthly income is $800 a month but whose mortgage payments have now mushroomed to $500 a month. “No one looked at the affordability factor.”

As the interest rates have climbed, the percentage of delinquencies is on the rise. Of the loans made in 2001, nearly 30 percent are now at least 60 days past due. Loans made last year now have nearly a 15 percent delinquency rate, a faster growth rate than any other year (see chart at left). Mr. Kragenbring says the most recent loans in 2007 are not performing much better.

Community groups report that lenders are still making loan offers with unrealistic rates. One group in New York City says it has seen postcards advertising a teaser rate of 1.5 percent. But under that scenario, the borrower is paying less than the full amount of interest owed, which increases his debt. “What they don’t tell you is [that] these very low monthly payments … are rapidly building up debt and then they reset at an unaffordable level,” says Oda Friedheim of the Legal Aid Society in Queens.

After foreclosures, vacant homes: The rising level of delinquencies is leading to a sharp rise in foreclosures. In Buffalo, Ms. Brent says there are now 23,000 vacant homes, many of them emptied by foreclosure procedures. “We are trying to work with the attorneys who are seeing the light because of the number of foreclosures,” says Ms. Brent. “We are working on ways to structure repayment plans so the borrowers are not back in foreclosure in two years.”

The defaults are now taking place much faster than a few years ago, says Sarah Ludwig, executive director of the Neighborhood Economic Development Advocacy Project, which works with community groups in New York City.

“In Queens, the time frame in which people are defaulting has gone from four years to two years,” says Ms. Ludwig. “That means some defaults are taking place right away.”

Refinancing is not a significant option for many borrowers. “What I hear is that there is very little activity in the subprime market, especially where questions of credit quality have grown in rapid proportions,” said David Seiders, chief economist for the National Association of Home Builders, in a press conference on Tuesday.

Kragenbring says the volume of subprime loans now being made is tiny compared with last year. And lenders are finding it tough to find buyers for the new loans in the secondary market. “To me, that makes the subprime market virtually nonexistent,” he says.

Subprime lenders First Franklin, owned by Merrill Lynch, and EquiFirst, owned by Barclays, maintain they are still making loans. However, they refused to comment about where they were receiving funding for the loans. On Tuesday, EquiFirst announced an unspecified number of job cuts.

If the market for subprime debt returns, Kragenbring expects three major changes. First, loans will be for a fixed interest rate, not the adjustable version. “It will help match the time people live in the house and the borrowers will pay less fees,” he says. Second, lenders will require much better documentation of income. Third, borrowers will be borrowing a smaller percentage of the value of their homes.

“It’s clear to me that in the future there will be different loan products and less leverage on the individual property,” Kragenbring adds.

Copyright © 2007 The Christian Science Monitor

[bsrsharma]

What is this? Is it Doomsday already?
————————————————————

AP
Out of the Gate: Wal-Mart Cut to “Sell”
Thursday August 30, 10:25 am ET
Merrill Lynch Downgrades Wal-Mart Stores to “Sell” – Reports

NEW YORK (AP) — Shares of Wal-Mart Stores Inc. fell after the opening bell Thursday after Merrill Lynch reportedly downgraded the world’s largest retailer to “Sell.”
The Dow Jones industrial average component was down 87 cents, or 2 percent, to $43.33 in morning trading.

According to multiple media reports, the brokerage cut its rating on the shares from “Neutral,” citing concerns that profit margins are eroding at its U.S. stores as the economy slows. A Merrill spokeswoman would not confirm the rating change, and said they do not release their equity research to the media.

When it reported second-quarter results earlier this month, Bentonville, Ark.-based Wal-Mart cut its profit forecast for the full year. And when it released sales figures for July, the retailer posted a slim gain but warned that increased discounting is hurting profit margins.

http://biz.yahoo.com/ap/070830/wal_mart_out_of_the_gate.html?.v=1

[bsrsharma]

cindy: I have been looking at PDX market for a year and the best way to describe it is – “It has multiple personality disorder”. Some times prices seem to go up, some times come down with no apparent reason. My best comprehension so far is that there are two kinds of sellers: the motivated ones who really want to sell – they keep their prices realistic. And a large number of opportunistic sellers who want a high price because … well they think so!

There are LOTS of flips that have become flops and provide good buying opportunity when the pain intensifies sufficiently. There is also a LOT of inventory in foreclosure/pre-foreclosure. All evidence points to air hissing out from the balloon. The velocity is a little slower than the California drama.

You can do very well with 700K here. But you may benefit more with some wait. The nicer area for SFRs here is Lake Oswego.

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