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November 11, 2006 at 10:23 PM in reply to: UBS Building & Building Products CEO conference (good stuff) #39793
powayseller
ParticipantTHere is no way this will become widespread. Most mortgages are held by the GSEs and MBS investors. No way will Fannie Mae shareholders or MBS investors give away parts of homes. It would be cleaner for the bank to extend the payment terms, or to change the late payment into a balloon payment.
ParticipantAt least he’s now admitting it is slowing. But he and Thornbug think there’ll be no recession. We have low unemployment, so we can’t have a recession. By Q1 07, unemployment will be rising. Besides, if we keep replacing higher paying manufacturing and construction jobs with lower paying restaurant and retail jobs, we will have rising foreclosures and a recession anyway.
Within 6 months, nobody will care what Gin or Thornburg have to say. After all, if they are wrong in missing the biggest recession in 70 years, why should anyone bother to listen to anything they have to say?
ParticipantIONEGARM, I also wish the http text was automatically encoded. I don’t understand the limitations of different forum software though. Rich uses Dupral for the forum management, so perhaps it just can’t do that.
November 11, 2006 at 3:22 PM in reply to: Company Offering Pre Negotiated Short Sales (WholeSale) #39774ParticipantCan you give some examples of loan modification?
Why would the lender sell at 75% LTV? Isn’t 95% LTV still a good deal? Are you using today’s appraised value, or the principal amount?
Why did you move from auction to direct deals with investors? I think the auction process is not well received, as investors have lost interest in real estate at current prices, and the people who are still trying to buy don’t have the cash to do so. My realtor friend said she stopped subscribing to foreclosure lists because her clients need loans and they want to be able to inspect the house prior to purchase, both conditions which will not be met for auctions.
You are smart to be early, in the ground floor of this business. Short sales and foreclosures are going to be astronomical, so you are smart to build your name in the early stages of this. You’ve got a 5 – 7 year run for your business. Within 2 years, there will be foreclosure and short sale seminars, and you will have many competitors. But hopefully you will have staked out a position and your market share will keep growing.
ParticipantWhat percentage of Calgary’s population got a wage increase, and by how much? If only a small percentage of people/companies are benefitting from the oil boom, then that would support a few big and expensive homes. It shouldn’t make existing home prices jump that much. Did rents and per capita income rise the same percentage as housing? If not, it’s a bubble.
The interview I listened to the other day, which featured Shiller and Robert Campbell, was hosted by a Canadian radio station. I remember they talked about a bubble in Vancouver, but I don’t remember the other cities.
ParticipantI thank sdrealtor for bringing this story to our attention. We’ve talked before about lender reaction to massive loan defafults, and I am interested in early stories of how they will deal with it.
ParticipantI agree about the hearsay comment… it might be happening, but I’ve never heard about, so I remain skeptical until we get the names of the lenders and some specifics, esp. in regard to foreclosure laws and employment and sales in that area. I could see that tough foreclosure laws favoring borrowers, or very low sales, or high unemployment, or distressed areas may do this, but then again, maybe it’s just some guy talking….
November 10, 2006 at 2:18 PM in reply to: Company Offering Pre Negotiated Short Sales (WholeSale) #39726ParticipantCan you tell us more about trends in foreclosure, the % discount off prices, whether these are financed or cash-only, etc.? Although I am waiting until prices start climbing back up before I buy, I am curious how fast this is unraveling?
What do you make of another thread where sdrealtor noted a bank back East was letting a defaulting borrower keep his house, by rewriting the loan amount to today’s housing market value? Why don’t your lenders do that, instead of foreclosing on the borrower?
ParticipantSo you think a bank’s losses would be less if they forgive the debt, than if they foreclose and resell the house? The town must be horribly distressed, if the lender figures they lose less money by forgiving $200K than by selling the house. Maybe they are doing this in very distressed areas, where foreclosures are soaring and buyers are so scarce, the bank knows it cannot find another buyer. But with so many buyers still in San Diego, thousands every month, I can see why banks here have not done this yet.
I am curious about the reasons this bank back east chose this course. What is the difference in that state vs. ours in regard to foreclosure laws, sales level, and so on? I’m also wondering why bank debt foregiveness did not become widespread, or used at all, in our last real estate downturn.
I think the borrower’s obligation to pay taxes on $200K could be almost as bad as making the mortgage payment on that amount. At a 28% federal tax rate, the borrower is looking at owing Uncle Sam $56K this year.
This housing bubble won’t be saved by one lender forgiving a little debt on a couple borrowers. We would need Washington Mutual to forgive $1 billion of unpaid interest income, and MBS holders to forgive trillions in loans. Very doubtful.
This housing bubble is already doomed by the new lending guidelines.It’s an interesting story, nonetheless.
ParticipantMore from Hampton’s article, “Surely, if the dollar was losing its value, the Middle East would want to see a higher dollar oil price, to maintain the spending power of those dollars. ”
Do you think that the dollar’s 33% drop in the last few yaers caused the rise in oil prices during that time?
It may not have a 1-1 correlation, since oil is affected by traders and geopolitical risk, and the Katrina hurricane, but in general, when the dollar continues falling, oil producing nations will raise their prices so they don’t lose purchasing power, and our recession will be exacerbated.
I think someone ought to start a new thread about possible diversification techniques. Those of us on piggington, who are aware of the looming problem, have no excuse to be caught blindsided. At least we should have some discussion, and then it is up to each of us whether we profit or lose from this transition.
In related news, the european yield curve briefly inverted yesterday by one basis point, and the UK and US yield curves are fully inverted. Japan’s manufacturing and capital spending orders are down. The recession is starting to rear its head in other places.
ParticipantOn Brad Setser’s blog, (colleague of Roubini) I read yesterday that PBoC chief Zhou told Reuters that
““All central banks are trying to diversify,” he told Reuters on the sidelines of a European Central Bank conference in Frankfurt. “We have had a very clear diversification plan for several years.”In the blog comment section, Michael Hampton notes that Zhou’s comment came on the heels of his Financial Sense article about the plans of Chinese bankers. He believes they have a plan to replace the US consumer (who is dwindling anyway due to the busting housing market) with African and Asian consumers.
China’s leaders are very educated, often engineers, and they are in power for more than 4 years, so they are not limited by short term results. They are well aware of the declining US consumer, and have plans to deal with it.
Hampton points out that the US blockage of the UNOCAAL deal almost caused a retaliatory move, but it was a wake-up call that to the Chinese, that their dollar holdings had limited use, and could not be used to buy assets. I also believe that, along with the Dubai ports deal block, was very bad for the long term dollar.
The plan is to get closer to Africa, trading investment in Africa with natural resources, keep close energy trading ties with Iran, and to appreciate the most powerful new consumer: the Chinese consumer, who is gaining 20% – 30% annually in spending power. “Their spending, together with that from African countries, and a still-rising number of customers in the Middle East and India, would allow China to keep growing, even as it lost a big share of exports to America.”
“the time had come to start selling those excess dollar reserves, and reinvesting the money in commodities, something China could use. And the time to do it was before others countries and speculative players like hedge funds caught on and started buying, and pushed the price up. The recent drop in oil, and other commodities, engineered as a prelude to the US elections, had provided a wonderful buying opportunity. Now was the time to strike.”
Then, right after Hampton published this article, Zhou made the Reuters comment. This is a wake-up call.
Participantsdrealtor, the government does not own our children, and neither do we. People are not possessions.
Why do you say I am “ignorant” in describing the consequences of not making your mortgage or tax payments?
Participantqcomer, I have no clue. We should post this question on Roubini’s blog.
ParticipantFrom that same article: “Recent data from the Bank for International Settlements suggest the pace of diversification away from the dollar has been gradual, partly because dollar deposits by Organization of the Petroleum Exporting Countries have offset decreases from other countries, he said.”
So the diversification has started. Also, I expect to see less Tbill buying from UK. Lower gas prices means fewer dollars going to OPEC –> fewer dollars for them to invest in Treasuries (OPEC money flows through UK in Fed Flow of Funds report, so we should see a decrease in UK buying of Treasuries since last month) –> less demand for Treasuries and $ US -> higher interest rates and lower value of US $. So higher oil prices would make the US $ climb, and that is exactly what happened in the last 2 years. Does anyone have any insight on this?
FSD, the dollar’s value is tied to its fundamentals, namely supply and demand. If the Fed stops printing money and pays off some of the deficit, and we reduce our consumption and produce more and import less, then the dollar will gain value. At least that is my simplistic understanding. So we cannot return to any mean as long as we keep violating the fundamentals underpinning a strong dollar.
So I need to open a full service brokerage account to buy euro bonds? That is what I will do. Thanks for the info.
I can’t believe I was stupid enough to lose 33% of my money in the last few years, because I believed in the “full faith and credit” of the US government. I sure was fooled into thinking the dollar was a strong reserve currency. I’m seeing the light, and it’s not too late to act.
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