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Banned
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How is the TFP community faring, in the job market? It seems time for an update from frustrated job seekers, those who have found a new job, and from those who have lost the job they had....
Another quarter of 2008 is nearly over.... unemployment nationally, is averaging above 6 percent for the first time in five years, and there is anecdotal evidence that people are refusing to be "debt slaves", trapped in home "ownership" with "upside down" loans...
Quote:
ABC News: In Foreclosure? Buy a Second Home
By NEAL KARLINSKY and KRISTIN RED-HORSE
LAS VEGAS, Sept. 7, 2008
Just a few weeks ago Jim Eble lived in his dream home in Las Vegas. It now sits empty because he owed the bank more money than the house was worth and the bank was threatening foreclosure.
"It's tough to come back here now," said Eble, looking at his dream house.
But Eble has found an answer to his financial problem: buying a new home. Although it's hard to imagine with one house near foreclosure, his solution is to buy a second house at a bargain price and simply walk away from the old house.
"Buy and bail" is becoming a growing trend in the hardest hit real estate markets.
Eble owes $334,000 on his first house, which is now worth only $219,000 and is still dropping in value. He has an adjustable rate mortgage that has doubled to more than $4,000 a month, more than Eble can afford to pay.
So before the bank forecloses on his first house he is taking advantage of falling real estate prices to buy a new home for $285,000, with a fixed rate mortgage he can afford. Once inside the new home, he can either sell the first property for a huge loss to the bank or walk away completely and let it slip into foreclosure.
This exit strategy only helps homeowners who can afford the down payment on the second home as well as carry both mortgages until they are in their new home.
Like Jim Eble, homeowner Kim Hinske just bought a new home -- for $280,000 -- as a way to get out of an expensive mortgage. .....
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The first quote box (above) displays the opening sentence in an OP of a thread on a forum frequented by mortgage lenders and others in the banking and finance sector....further into that thread, there is this:
Bottom of page 2 post:
Quote:
Implode-Explode Forums :: View topic - CHASE estimates 60% of its borrowers.....
this is the big problem guys, no one or almost no one (60%) of the people are going to sweat, work and hang on to an investment that is 50% of the value they bought at and falling. This is what the government is seeing and it is scaring the h**l out of them. It makes the underwriting guidelines that we have swallowed hook line and sinker (for me 28 years) totally WORTHLESS...........THESE PEOPLE ARE WALKING. 38% OF THE WORLD'S INVESTMENTS ARE MORTGAGE BACKED SECURITIES AND THE COLLATERAL IS FALLING TO 50% OR MORE.....................what other explanation for the horrible losses and numbers we are seeing.
The government is amazed that all the loans were written with THE PREMISE THAT prices were appreciating AND THERE IS ABSOLUTELY NO PENALTY FOR WALKING AWAY, THAT IS THE JOKE OF THIS WHOLE MESS,
that is why the only one coming to the rescue is the government, if you walk on a government loan the IRS will follow you till you die, if you walk on a loan today, hahahaha, 12 months free living, get your act together, save your money and buy the same house for 50% less,
what doesn't anyone understand about that, I am TOTALLY NOT SAYING IT IS RIGHT, JUST THIS IS WHAT IS GOING ON
THAT IS WHY THE BIG BOYS ARE ALL TAKING A 50% HAIRCUT, THAT IS WHY I THINK SUNTRUST (BUILDER LOANS) WACHOVIA AND WELLS AND WAMU AND THE REST ARE GOING TO HAVE TO THROW IN THE TOWEL AND LET THE GOVERNMENT BAIL THEM OUT...............
IT MAKES NO SENSE TO THE PEOPLE IN THE INDUSTRY FOR 30 YEARS, WE HAVE NEVER SEEN THIS BEFORE AND SOOOOOOOO MANY INVESTMENTS ARE TIED TO THESE LOANS AND ALL THE PEOPLE HAVE TO DO TO GET OUT OF THE HASSLE IS WALK AWAY
YOU ADD TO THOSE EASY WALK AWAYS, THE DEATHS, DIVORCES, MEDICAL PROBLEMS AND JOB LOSSES AND WE ARE JUST IN THE 5TH INNING...............KNOW HOW NEGATIVE THIS SOUNDS, BUT COME ON LOOK AT THE REALITY AND IGNORANCE IS NOT BLISS
THIS IS GOING TO SINK THE STOCK MARKET, THE INSURANCE COMPANIES, THE INVESTMENT BANKS, THE BANKS, THE MORTAGE COMPANIES AND YES EVEN JP MORGAN
THIS IS WHY THIS IS THE WORST PROBLEM WE HAVE EVER SEEN AND WHY THE BIG BOYS ARE SCARED AS poo poo ABOUT THE NUMBERS AND WHAT THEY ARE SEEING, IF YOU WILL WALK AWAY FROM HOMES, HOW ARE YOU GOING TO STAY FOR BAD SECONDS OR CREDIT CARDS
UNDERWRITING IS GOING TO BE TURNED ON ITS HEAD, THE 'A' PAPER SMART PEOPLE WILL BE THE FIRST ONES TO NOT SWEAT FOR 5-6 YEARS FOR AN INVESTMENT THAT IS 50% UNDERWATER, UNFORTUNATELY WITH THE RULES IN PLACE NOW, CAN YOU REALLY BLAME THEM?
THAT IS WHY THIS IS NOTHING LIKE THE CRISIS WE HAVE EVER SEEN IN THE PAST
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....and, there is this "problem":
Quote:
Tax assessors boggled by housing dip | ajc.com
Tax assessors boggled by housing dip
By D.L. BENNETT
The Atlanta Journal-Constitution
Published on: 05/12/08
........Wayne Flanagan, a RE/MAX agent who sells bank-owned properties, said in zip codes like 30310 and 30315 values have taken a nosedive faster than public officials can account for.
"There are some price ranges like $20,000-$80,000 where 90 percent of the properties on the market are foreclosures," Flanagan said. "You've got one bank competing against another. It's a spiraling situation, downward."
The agent said when tax values and true values are way apart, it can keep properties from selling and further depress values. Flanagan said he'd had a $95,000 deal on a duplex fall through recently because it was being taxed at $300,000. The buyer didn't want to be saddled with taxes at that level.
"They (government officials) are going to have to take a look at this," Flanagan said. "We are experiencing some of the same problems as Detroit, taxes are so high they drive down value."
Fulton noted the downturn in its 2008 values by marking down about 86,000 properties a total of nearly $364 million. Manning said in a typical year, Fulton tallies about 27,000 sales assessors consider as valid to set tax values. This year he counted only 20,000 due to the increase in distressed sales.
"I am less uncomfortable with values than I've been in a long time," Manning said. "These are unusual times."
Still, the issues aren't confined to Atlanta and Fulton.
Record foreclosure numbers across the region have appraisers in Cobb, Gwinnett, DeKalb and other counties wrestling with similar concerns. They also struggle with where to set the values for homes that don't sell or lots that normally are easy to value but now are tumbling because lenders won't give builders money to build new homes.
Thomas Stump, interim chief appraiser in DeKalb, said the number of "good sales" dropped from 12,400 last year to 8,500 this year. The lower number makes it even harder for the assessors to come up with values, he said.
"We have people in our office who want to sell but can't find a buyer," Stump said. "Still, there are buyers out there. It may take much longer. I don't think you can say a property has no value because it won't sell."
DeKalb reduced the values on about 4,500 parcels in 2008 and expects to drop many more in 2009 if the market slump continues.
"It's just a very strange market," he said. "It's very difficult to determine values."
Calvin Wimberly, a real estate agent who primarily sells bank-owned properties and has two listings under $10,000, said home prices in some areas have tumbled 200 or 300 percent in the past year. He said many suffered from mortgage fraud that artificially inflated values.
Wimberly said he'd recently sold a home in West End that tells the tale of what's happened in some neighborhoods. The home sold in March 2004 for $305,000 and then in August 2004 for $700,000. It tumbled to $122,900 in a sale last year. It sold recently for $51,000.
Those are the kind of numbers that have public officials scratching their heads.
"I had the toughest time trying to convince the bank the price was correct," Wimberly said. "They thought I was out of my mind."
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Quote:
Paul Krugman: The power of deflation - International Herald Tribune
The power of deflation
By Paul Krugman
Published: September 8, 2008
Save the home lenders, save the world? If only it were that simple.....
.....We've come a long way from the days when Alan Greenspan declared a national housing bubble "most unlikely." There was indeed a bubble, and since it popped two years ago home prices have fallen faster than they did during the Great Depression.
Falling home prices, in turn, have led to the much-feared phenomenon of "debt deflation." Yes, deflation: prices are going up at the checkout counter, but the prices of assets, which are what matter for balance sheets, are dropping fast.
As the economist Irving Fisher observed way back in 1933, when highly indebted individuals and businesses get into financial trouble, they usually sell assets and use the proceeds to pay down their debt. What Fisher pointed out, however, was that such selloffs are self-defeating when everyone does it: if everyone tries to sell assets at the same time, the resulting plunge in market prices undermines debtors' financial positions faster than debt can be paid off. So deflation in asset prices can turn into a vicious circle. And one consequence of what he called a "stampede to liquidate" is a severe economic slump.
That's what's happening now, with debt deflation made especially ugly by the fact that key financial players are highly leveraged - their assets were mainly bought with borrowed money. As Paul McCulley of Pimco, the bond investor, put it in a recent essay titled "The Paradox of Deleveraging," lately just about every financial institution has been trying to reduce its leverage - but the plunge in asset values has nonetheless left these institutions with more debt relative to their assets than before.
And the numbers keep getting worse. In July 2007 Ben Bernanke suggested that subprime losses would be less than $100 billion. Well, last month write-downs by banks and other financial institutions passed the $500 billion mark - and the hits keep coming.
Which brings us to Fannie and Freddie. They're the only big financial institutions that haven't joined in the rush to deleverage, which is why they now account for about 70 percent of new mortgage loans. But their financial foundations have been undermined by debt deflation, even though their lending was more responsible than average. (A subprime borrower is basically someone whose credit wasn't good enough to qualify for a Fannie- or Freddie-backed mortgage.)
So Fannie and Freddie had to be rescued - otherwise debt deflation would have gotten much worse. Indeed, their financial troubles have already caused problems for would-be home buyers: mortgage rates are up sharply since earlier this year. With the federal takeover, which removes the pressure on the lenders' balance sheets, we should see mortgage rates drop again - which is definitely good news.
But is it enough? I doubt it. .....
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I am predicting worldwide depression, triggering high unemployment and deflation. My "street cred" is that I correctly predicted the fall of Fannie and Freddie.... I held large "short" positions on both stocks, as well as on Fannie preferred shares, symbol FNA
My "paper trading" gains, on this site today, were more than $650,000:
Since joining that site in April, I have been correct in my trading, more often than all but 54 of the site's 78961 registered members. I wish it was real money!
Last edited by host; 09-08-2008 at 12:22 PM..
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