June 19, 2013

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Warren Blasts FHFA for Blocking Short Sales

June 10, 2013 By Leave a Comment

Sen. Elizabeth Warren is taking the Federal Housing Finance Agency to task, criticizing the conservator of Fannie Mae and Freddie Mac for opposing short sale deals designed to keep original borrowers in their homes.

In an op-ed published this week in the Dorchester Reporter, a community newspaper based in the Dorchester section of Boston, the Massachusetts Democrat said the FHFA "has blocked the way" to such deals through what is known as an "arm's-length" policy.

Warren highlighted certain short sales where a borrower's family or friends, or local nonprofit organizations, seek to buy an underwater home at fair market value and then arrange for the original homeowner to keep the property either by repurchasing it or paying rent.

"The mortgage company gets the same amount as in a sale to strangers, but the homeowner has a last chance to save the family home. This is a win-win for both sides—more money for the mortgage lender and a family that saves their home," she wrote. "But the FHFA flatly refuses these deals. The agency's so-called 'arm's-length' policy means that it will instead demand that the family be moved out and the home be sold at a lower-priced foreclosure sale."

The agency's reasoning, Warren said, is to prevent "sweetheart insider deals that benefit the homeowners at the expense of Fannie and Freddie."

"But that makes no sense when the house is sold at market value or when people affiliated with the homeowner put in the highest bid to save the home," she said. "In those cases, the identity of the bidder makes no meaningful difference because Fannie and Freddie's bottom line stays the same. And every time a family stays in a home—rather than being pushed into foreclosure—the neighborhood does better and the overall housing market does better—both of which help the value of all the other mortgages that FHFA holds."

She described the plight of a specific Dorchester resident, Ramon Suero, and his family who hit hard times and fell behind on payments.

"The situation was grim, but a non-profit called Boston Community Capital thought the Suero family was a good risk. The group made a cash offer to buy the property at more than its market value for the purpose of selling it back to the family," Warren wrote. "The non-profit recognized that Ramon and Rosanna could eventually make the payments and were hard-working people who simply caught a bad break.

"Following the FHFA's rigid rule, however, Freddie Mac refused the deal. Instead of doing everything it could to help keep residents in their homes, the FHFA bent over backwards to have the Sueros thrown out. This is exactly the opposite of what should be happening."

But in an emailed statement, an FHFA spokesperson said short sale deals can be exposed to elevated risks of fraud.

"Short sales are, by their nature, vulnerable to manipulation and FHFA's policy requiring that they be conducted at 'arm's-length' is in keeping with industry standard and is intended to avoid conflicts of interest and fraud," the spokesperson said. "FHFA has worked very hard to keep families in their homes, as evidenced by the more than 2.3 million loan modifications that have been completed since FHFA took over as conservator of Fannie Mae and Freddie Mac."

The only reason they care about who buys the house is that they want as many homeowners as possible to keep paying on their homes.  We, the underwater homeowners are the last domino to fall and the only ones that didn't get bailed out.  Their plan is for us to hold up the rest of the dominos.  Don't do it.  Get out while you still can. 

CLICK HERE for original article on National Mortgage News

Filed Under: Economy, Featured, Housing

While Much of America Suffers with Stagnation, Washington’s Political Class Is Having a Very Merry Christmas

December 27, 2012 By 1 Comment

This post is reprinted in full.  It is written by Dan Mitchell and published on his site.  It speaks to the Politbureau class that our politicians have created for themselves and the people that work for and support them.  We cannot afford these people anymore.  We have to change the rules and rid ourselves of these parasites.  That is my commentary on the situation.  We would like to hear your comments. 

 

While Much of America Suffers with Stagnation, Washington’s Political Class Is Having a Very Merry Christmas

In large part because of an excessive burden of government, the American economy is suffering European-style stagnation, with even the Washington Post now confessing that growth far below the long-run trend.

This helps explain why job creation has been so dismal in recent years, with more than twenty million Americans out of work, underemployed, or dropped out of the workforce.

But there is one pocket of enormous prosperity in America. It will warm your heart to know that our overlords in Washington are living the life of Riley.

Here are some of the highlights of a remarkable Reuters expose about the fat cats of big government, starting with the huge gap between the insider elite and the poor.

In the town that launched the War on Poverty 48 years ago, the poor are getting poorer despite the government’s help. And the rich are getting richer because of it. The top 5 percent of households in Washington, D.C., made more than $500,000 on average last year, while the bottom 20 percent earned less than $9,500 – a ratio of 54 to 1. That gap is up from 39 to 1 two decades ago. It’s wider than in any of the 50 states and all but two major cities.

One small but important correction in the previous excerpt. As I have noted many times, the “poor are getting poorer” because of “the government’s help.”

The article then explains that a lot of the redistribution in Washington is from taxpayers to a pampered elite.

…in the years since President Lyndon Johnson took aim at poverty in his first State of the Union address, there has been an increasingly strong crosscurrent: The government is redistributing wealth up, too – especially in the nation’s capital. …Two decades of record federal spending and expanding regulation have fostered a growing upper class of federal contractors, lobbyists and lawyers in the District of Columbia area. …Direct spending by the federal government accounts for 40 percent of the area’s $425 billion-a-year economy. …Roughly 15 cents of every dollar from the entire federal procurement budget stays in or around the government’s hometown, said Stephen S. Fuller, director of the Center for Regional Analysis at George Mason University. Last year, that was about $80 billion out of $536 billion in procurement spending, he said. The 15 percent share is far greater than the region’s 2 percent portion of the U.S. population. “We’re seeing an enormous transfer of wealth from taxpayers to the Washington economy,” said Fuller.

And all this spending leads to an elitist class of cronyists, politicians, contractors, bureaucrats, and lobbyists. No wonder the DC area is home to some of the richest counties in America.

But unlike other well-to-do areas, the wealth in DC is rarely accumulated by honest means.

Instead, it’s the result of perverse form of redistribution to big-government insiders. Check out these horrifying details.

Washington-area workers with incomes above $100,000 rose to 22 percent of the workforce, up from 14 percent in 1990, adjusted for inflation, a Reuters analysis of Census data found. …there are 320,000 federal jobs in the Washington area. Within the District of Columbia, 55 percent pay $100,000 or more. …Nearly 13,000 lobbyists registered with the government last year and reported $3.3 billion in fees, or about $260,000 per lobbyist. That’s 22 percent more lobbyists and 37 percent more inflation-adjusted revenue per lobbyist than in 1998… Times are flush for Washington lawyers as well. The number of attorneys in the area has risen 44 percent, twice the national rate, to 41,000 since 1999. Their average income, adjusted for inflation, rose 35 percent to $156,000.

I guess we know who’s having a merry Christmas.

All these rich bureaucrats, lobbyists, politicians, cronyists, and contractors certainly are living the good life, as revealed in a Washington Post story on the “Region’s Rising Wealth.” Here are some sordid excerpts.

…the D.C. region already has a reputation as one of the most affluent in the country. But the area is fast emerging as a home to the truly rich as well. High-end luxury retailers are responding. Brands such as Aston Martin are expanding their operations into the area — betting, for instance, that there will be plenty of customers who can afford the $280,000 sports car James Bond drives in the movies. …Already there are 500 Aston Martin owners in the area with the potential for more.

I’ve already shared an interview with Andrew Ferguson by Reason TV that should make all taxpayers upset. Why should ordinary taxpayers be coerced to subsidize Washington’s high-flying parasite economy?

Redistribution is a bad thing in most circumstances. But when you redistribute from poor to rich, that’s utterly perverse.

Well, thanks to profligacy by Bush and Obama, that’s exactly what’s happened.

The region’s top one percent of households make more than a half million dollars yearly — far more than the national average for the one percent, according to a study of Census data by Sentier Research, an Annapolis-based data analysis firm. And these top earners — many of whom are from dual-income households and benefit from federal contracting — weathered the recession better than their counterparts in some other metropolitan areas and the nation. More are moving beyond comfortable affluence to a much higher standard of living. “What is unique to D.C. is that there has been a change in the complexion of wealth here. There didn’t used to be much of this ultra-high-net-worth business here and now there is,” said Susan Traver, the regional president of BNY Mellon Wealth Management.

But everyone in the rest of America at least can go to sleep tonight with a warm and fuzzy feeling of joy, knowing that our money has created such comfortable lives for the political elite.

Milton Pedraza, the CEO of the Luxury Institute, a research and consulting firm, said that purveyors of luxury goods are drawn to the area because it has…a stable economy bolstered by the federal government. Government contracting, where some local entrepreneurs and business owners amassed their fortunes, has been a key driver of the region’s economy for three decades. A third of the region’s gross regional product still comes from federal spending… “Let’s face it . . . the only place with money during the recession was Washington, D.C.,” Pedraza said.

Perhaps we should make a slight correction in the previous excerpt. After all, shouldn’t it read “America suffered a recession because the only place with money was Washington, DC.”

Let’s wrap this up. A few years ago, I issued this video about overpaid bureaucrats.

But I now realize my mini-documentary only scratches the  surface. Yes, there are too many paper-pushers on the government payroll, and of course they get far too much compensation.

But what about unofficial government workforce of over-paid contractors? And all the lobbyists, consultants, and cronyists that exist only because we have a bloated federal government?

Our nation is being seriously damaged by this corrupt system, and I fear that the outcome will be Argentinian-style decline.

Filed Under: Economy, Featured Tagged With: , , ,

THEY are talking up the housing market. Do you really believe them? Don’t!

December 1, 2012 By Leave a Comment

I am so frustrated by all of the talking up of the housing market.  More people are going to be hurt financially by this intentional deceit by the infamous "They" we have talked about in previous posts.  We got here because we have been lied to throughout this whole housing collape.  There is a lot more pain to come in housing.  Just because you have held out this long does not mean you are going to make it through what it still awaits us no matter what "They" say. 

The piece below is a full reprint of a post by Martin Andelman of Mandelman Matters.  Martin and I have had many discussions about this topic and he puts it very well so I wanted you to see this. 

 

Talking Up the Housing Market? Yada, Yada, Yada… Talk is Cheap

By Martin Andelman

Now I get it… our plan is to try to TALK the housing market up.

Apparently, and I just realized this today, some people think they have figured out that if we just keep talking about how the housing market is recovering… it will respond by recovering.  It’s positively brilliant.  Someone should really let the EU countries know about this strategy because they could really use it, since absolutely nothing else is working in the least.

Hey, you guys in Spain… instead of all that rioting, try saying this over and over again in the newspapers and on television: “El mercado de la vivienda se está recuperando… El mercado de la vivienda se está recuperando!”  That should pretty much handle it.  See, problem solved… glad I could help.

And you guys in Greece, try saying whatever this sounds like: “Η αγορά κατοικίας είναι ανάκτηση.”  And your welcome, by the way.

Okay, look… talk is cheap.  And the strategy of talking about how the housing market is recovering in order to actually make anything recover, although hysterical, is just plain stupid.

On the other hand, since it’s obvious that essentially no one, present company excluded, has the foggiest idea of what to do differently, or is willing to even try doing anything differently, then I suppose talk is all we’ve got.  So, go ahead chatty Cathys… blather on.  Besides, I’ve gotten much better at ignoring you.

 

 

The Scale of the Crisis at the End of 2012

As of the end of this year, we will have lost FIVE MILLION homes to foreclosure… and 10 MILLION MORE American households have faced the prospect of foreclosure since the crisis began during the third quarter of 2006.  Add to those the numbers the 5.3 MILLION NOW in the foreclosure pipeline, meaning they have already received a foreclosure notice or are over 30 days delinquent… and 3.3 MILLION of them are over 90 days delinquent or already in pre-sale inventory.

Then stop to consider that there are only 50 million homes carrying a mortgage in this country… and then do the math.  You shouldn’t need a calculator to know that the answer to any equation comes out CRISIS of historical proportion no matter what the talkers are talking about today.

In addition, it’s interesting that no one wants to talk about the COMPLETED BANK REPOSSESSIONS continuing at the rate of about 50,000 A MONTH, with foreclosure starts at 100,000 A MONTH.

But, the housing market is recovering, the housing market is recovering… well yada, yada, yada and a blah, blah, blah.

 

 

First Time Buyer Demand Falling

One of the only legitimate sources of demand for homes in this country would be that provided by first time buyers.  Think about it… they can’t be underwater because they don’t already own a home.  So, with at least a third of the country’s homeowners underwater and unable to move, our first time buyers are about the only growing demographic we’ve got, since we’re certainly not growing investors in any sort of hurry.

The latest edition of Fannie Mae’s Housing Insights, however, in which Fannie economists examined the data shows that the decline in the homeownership rate over the last four years has been particularly pronounced for young households.

According to Mortgage News Daily on November 15, 2012, “five years after the start of the housing bust American households continue to shift from homeownership to being renters.”  And why this would be any sort of surprise to anyone is beyond me.

The particularly bad news is that homeownership among the younger demographic groups dropped the most in each of the last five years.  In fact, overall homeownership among those between age 25-44 has declined at double the rate of the overall decline.

The only age group that did not seen a decline in homeownership in 2010 and 2011 is the age 75+ group.

But don’t worry, I’m certainly confident that this country’s OCTOGENARIANS (people in their 80s, just to make sure everyone’s with me) are going to save our housing market… so attention all talkers, better get ready to start talking about that.

Why are young people not buying homes like they used to?  Well, gee… let’s see if we can’t figure that out without having to look anything up, shall we?

Well, there’s the issue of student loan debt, which has become such a scam that I may have to devote an entire blog to it in the near future.  And then there’s the need for 20 percent down payments and 760 credit scores… unless we’re talking FHA loans, in which case we’re talking about 20 percent defaults and increasing insurance premiums and tightening underwriting requirements.

Oh, something else… there’s the relatively higher unemployment numbers among the younger demographics, twice as high as the average in many areas.  And then there’s the fact that young people AREN’T STUPID, so one might imagine that since AT LEAST 20 MILLION of them have watched their elders either lose homes or be at risk of losing homes, it might just be that many are in no hurry to repeat the apparent mistakes of the past.

Ya’ think?  Or do the MORONS reading this think we need to conduct a study to figure that out too?

 

 

Being Underwater

Consider the chart from Zillow below to get an idea of how the underwater problem can do nothing but significantly reduce future demand.  Zoom in on it to read it closely, but if you don’t have your glasses, the blue bars are underwater homes by city, and the red bars are delinquent underwater homes by city.

And that’s what Zillow thinks.  Just imagine what the truth of the situation is, because you know it’s not better than Zillow’s.  Just by factoring in the percentage underwater when including real estate sales commissions would take all of those numbers up by 6 percent, right?  Yes, right.

 

Foreclosures to Come

Another factor that makes talkers mute and much of their data moot is how state laws have created markets where foreclosures are delayed and hanging like the Sword of Damocles over their respective markets.

In case you’re a little rusty on your legends from classical Greek culture, Roman philosopher Cicero uses this story to reach the conclusion that virtue is all you need to live a happy life, when he asks the question, “Does not Dionysius seem to have made it sufficiently clear that there can be nothing happy for the person over whom some fear always looms?”

Look at the chart below to see how Nevada’s new law, AB 284, which took effect in October of 2011, has impacted servicers filing Notices of Default.  It’s not a chart showing problems being solved, it’s just a study in kicking the proverbial can down the road.

 

 

As Phillip Gusterson, writing for Seeking Alpha on November 27th, said in his article titled, “Dark Forces Manipulate the Housing Market, “AB284 has dramatically reduced foreclosures in Las Vegas. The result is a lesson in basic economics, with a drop in supply leading to an increase in prices. But what is clear to everyone is that the supply is artificially constrained, and a second lesson in economics could be around the corner: an increase in supply will lead to lower prices.”

He goes on to point out what should be obvious, “AB284 did not remove the need to foreclose on these properties, it just removed the ability to do it, so now one year later we have at least 24,000 units that should have been filed on, but were not because lawmakers in a run up to a general election decided to manipulate the market.”

I don’t agree with everything Mr. Gusterson has to say, but on that point there’s absolutely no chance that he’s even a little bit wrong.  When supply goes down, prices always go up… and the reverse is also true… welcome to Econ 101.

And if that fundamental truth wasn’t enough to cause those thinking that Las Vegas is already at the bottom of the market to pause, Gusterson also points out that, “Las Vegas also has a disproportionate share of ARM mortgages. When interest rates inevitably rise that this will cause a further wave of defaults just as the market shows signs of genuine recovery stimulated by economic growth.”

Notices of Default are increasing steadily over the last few months, however,  which just shows that the banks will ultimately figure out how to foreclose within the current legislative requirements.  As Gusterson’s article opines, “… it does seem logical that the significant market force of 75,000 delinquents will eventually overcome the barriers that politicians throw up to stem the tide.”

He figures that banks will use some combination of “improved administration, short sales, bulk note sales, bulk REO sales, and judicial foreclosures to operate within the post-AB284 environment to work through the foreclosures, and that the post-MERS environment will encourage them to increase the rate of foreclosure.”  

Once again, he is most assuredly correct, but he may be missing one additional factor, which is that the legislature, all too aware of AB 284’s draconian and utterly paralyzing effect on the market, may very well act to weaken the law in order to make it somewhat easier to foreclose in the future.

Lastly, consider that in 2102, according to the Greater Las Vegas Association of Realtors, almost 55 percent of all homes sold in Southern Nevada were bought as ALL CASH deals.  And you don’t have to be any sort of economic expert to realize that we just don’t have anywhere near enough people able to pay cash for homes to create any sort of actual recovery.  (I’m not going to bother sourcing that statement, if you don’t instinctively know it to be the case, you’re an idiot and reading the wrong blog, so scat. I have no time for you.)

 

 

What Is Going Up?

The only segment of any housing market going up is at the bottom of the market, where investors are prone to bid against each other, afraid that they’ll lose out.  It’s the same sort of greedy mentality that takes hold at auctions, where I’ve seen people pay more for things than they would have to if buy them at their retail price.

The simple fact is that the markets aren’t acting rationally, and I’m sure part of it is that some of the talking causes irrational things to happen.  For example, Dr. Housing Bubble, who follows Southern California’s housing market better than anyone, points out that while “home sales are up by 8 percent year-over-year, during the same period, the median home price fell by 3.7 percent.”

That’s just great… as demand goes up, price falls?  Try answering questions on an economics exam that way and you’ll fail the test sure as shootin’.  Again, according to Dr. Housing Bubble…

“If you want to see delusion in action take a look at Zillow’s “make me move” option and you will see it in full force.  Even with mortgage rates at record low prices and very generous products like FHA loans that only require 3.5 percent down, the market seems to be moving lower in mid-tier to upper-tier areas.”

Well, obviously that part of the market needs a stern talking to, wouldn’t you say?  Get to work talkers… I expect to see some yabbering and in a hurry.

 

 

Talk is Cheap

The fact that there are properties at the very bottom that appear to have increased in price by a few points is no indication that housing is recovering.

Remember, the underwater problem is just as it was, so demand can’t increase because half the market can’t move.  And remember that, for the most part, no one is selling their home unless they have to, so the supply is reduced because no one wants to compete with foreclosures and short sales when selling their home into what is already the worst housing market in 70 years.

If people were selling, without demand increasing, then prices would fall even further as the impact of increased supply and competition could produce no other outcome. And there’s just nowhere that demand can come from as long as we’re pretending that our economy and housing market are recovering, and therefore doing NOTHING about ANYTHING.

Our situation related to unemployment in this country is nothing short of horrific… we’ve got at least 5.5 MILLION people out of work for over six months.  In California, the published rate is over 11 percent, and that’s not even a fully loaded number.  And we haven’t created anything but part-time and minimum wage jobs over the last four years, so even if working, EVERYONE is making less.

What’s amazing to me is that we’re not even pressuring our elected officials to do anything.  Other than a few Occupy people camping on lawns until they get arrested, the only thing we’re doing is kvetching on Facebook and pacing through sleepless nights.

Here’s an excerpt from a Rolling Stone article from last June, written by Jeff Tietz…

To aid Santa Barbara’s large homeless population, local activists launched the Safe Parking program and since the Great Recession began, the number of lots and participants in the program has doubled. By 2009, formerly middle-class people like Janis Adkins had begun turning up – teachers and computer repairmen and yoga instructors seeking refuge in the city’s parking­ lots. 

Safe-parking programs in other cities have experienced a similar influx of middle-class exiles, and their numbers are not expected to decrease anytime soon. 

It can take years for unemployed workers from the middle class to burn through their resources – savings, credit, salable belongings, home equity, loans from family and friends. 

Some 5.4 million Americans have been without work for at least six months, and an estimated 750,000 of them are completely broke or heading inexorably toward destitution. In California, where unemployment remains at 11 percent, middle-class refugees like Janis Adkins are only the earliest arrivals. “She’s the tip of the iceberg,” says Nancy Kapp, the coordinator of the Safe Parking program. 

“There are many people out there who haven’t hit bottom yet, but they’re on their way – they’re on their way.”

 

Afraid?  Terrified?  Yeah, well me too. 

It’s happening all around us, most of us see the signs of the cracks widening every day.  But too many of us are still in denial, they don’t want to talk about it, they’d rather just listen to the happy talk crowd who are constantly trying to talk our economy back to health.

My wife noticed that I didn’t bother to vote this year and asked me why.  I replied that for all our president is doing, I would have been okay with leaving the position open for the next four years… you know, just not fill it until someone worth voting for comes along.  But it now occurs to me that President Obama fits in  perfectly with what’s going on.  If talking the economy up will somehow work, then I’ve changed my mind and he’s the perfect guy for that job.  (Hahaha… get it?)

Here’s the real deal, however… while you might be able to get ME up by talking to me, housing isn’t going anywhere but sideways and down no matter what anyone says.  Bet on it.

Mandelman out. 

Filed Under: Banks, Economy, Featured, Housing Tagged With: , , , , , , , , , , , , , , , ,

Public Exposure TV Calls on Our Expert for Updated Advice on the Housing Collapse.

November 24, 2012 By Leave a Comment

This is a video of our Founder, Howard Bono being interviewed on Public Exposure TV.  Howard is a return guest on this show and has become their "Go To Guy" on issues related to the housing collapse. 

 

 

You can talk to the exert about your particular underwater mortgage situation by calling 425-259-2600.  We offer a free 15 minute consultation where you can get your immediate questions answered.  No cost and no obligation.

 

Filed Under: Banks, Economy, Featured, Housing, My Personal Finance Tagged With: , , , , , , , , , , , , , , , , , , , , , ,

HARP, Refis Cannot Cure Negative Equity. Well Duh!

July 24, 2012 By 2 Comments

This article comes from the Mortgage Servicing News.  This is the industry group for mortgage servicers.  Servicers are the ones that collect your mortgage payments and pass the money on to the actual owner of your loan.  Servicers are also the ones that try to modify your loan and will ultimately foreclose on you if you don't pay. 

This group is in trouble and looking for ways to keep us in the dark about the truth of the housing collapse.  They need to keep as many of us paying as they can.  I am posting this article in it's entirety and have highlighted the spots that might interest you.

___________________________________________________________________________________________________________________

Forget refinancing. A new hypothesis suggests targeted modifications would be much more effective in easing the negative equity crisis.

Government-backed or not, broad-scale refinancing is a weak stimulus that does not have the power to cure the negative equity pit ailing millions of underwater borrowers, said housing analyst Edward Pinto during his keynote presentation at the National Mortgage News Best Practices in Loss Mitigation Conference in Dallas.

Instead, the American Enterprise Institute resident fellow—known for his harsh views on government intervention in housing—proposes targeted modifications of GSE loans for severely underwater borrowers who are current.

According to Pinto’s calculations, such measures can reduce Fannie Mae and Freddie Mac’s taxpayer losses by about $10 billion.

So far, “given the underwhelming impact” of the taxpayer-funded stimulus, he said, refinances have become the stimulus of choice even though it is not free because “every dollar going to a borrower is taken from a saver.”

In a nutshell he argues that all refinancing, both the Home Affordable Refinancing Program and refinancing made possible by the low interest rate environment, are not an effective stimulus to improve the economic situation because they are not job-creation vehicles.

“HARP and refinances generally are a weak stimulus because for every dollar saved by a borrower, a dollar is lost by an investor,” Pinto told this publication. “As a result they are not particularly effective in creating additional demand that results in more jobs.”

At the same time the vast majority of HARP loans have a 30-year term, he said. “Therefore they do not address a big problem facing the real estate market—borrowers who are underwater on their loans.” These underwater borrowers “will remain under water for many years.”

“The Federal Reserve continues its efforts to lower interest rates and the administration keeps expanding mortgage refinance programs in an effort to promote more lending,” Pinto said. Pinto estimates that administration efforts to keep rates low have resulted in 14 million residential refis since 2009. Nonetheless the economic recovery “has been the slowest since at least World War II.”

His “modest proposal” targets severely underwater, nondelinquent GSE loans with a combined loan-to-value ratio of 120% or higher.

Such a program, which consists of a constant payment alternative, would apply to loans guaranteed by Fannie and Freddie before they went into conservatorship in September 2008.

The goal would be to retain the same monthly payments these borrowers have been paying for an average of five years and modifying the interest rate on the loan down from an average of 6.1% to today’s low rates of roughly 3.5%. He also suggests loan terms of anywhere from 15 to 17 years.

“This approach is very targeted and much more simple to execute,” he said. It will accomplish “the goal of rapid deleverage as the loan would now pay off in 15 to 18 years, and present little or no moral hazard.”

Pinto sees an advantage to dealing with underwater but current mortgagors because they have shown a consistent behavior to pay and are less likely to default on purpose.

But there is a catch for the GSEs. “Have Fannie and Freddie buy the to-be-modified loans out of the mortgage backed securities’ pools at par,” he said, which will make the intervention fair to the bondholders. His rationale: “These withdrawn loans are in the MBS that benefited from the direct taxpayer bailout of Fannie and Freddie, a bailout that was not legally required.”

He said there is a legal maxim here that reads: “Those that seek equity must do equity.”

Pinto’s equity math follows a basic example. An existing 6% interest rate on a 30-year loan originated in January 2007 with a monthly principal and interest payment of $839 for an original balance of $140,000 and a current balance of $130,000 and a current home value of $100,000 results in a 130% current LTV. (He also assumes there is zero nominal house price change.)

Currently there are two alternatives available.

If nothing is done in five years the LTV would be 117%. If the loan is refinanced through a typical HARP transaction into a 4%, 30-year loan with a $132,000 balance after paying $2,000 in financed fees, the monthly principal and interest payment would be $630 a month and after five years the LTV would be 119%.

Pinto’s constant payment alternative would allow “for borrowers substantially underwater” to modify their loan into a 3.375% interest, 17-year loan with a $130,000 balance and a $838 monthly principal and interest payment that after five years would have an LTV of 99%. Plus, they may only pay near zero fees when they modify their loan.

Another factor that in Pinto’s view needs to be taken into consideration is probability of default.

Quoting findings from “The Case for Accelerated Amortization,” a recent research study by Alan Boyce, Glenn Hubbard, Christopher Mayer and James Witkin, Pinto argued that the efficiency of this approach is evident given the fact that severely underwater GSE loans “have a high probability of default.”

It found GSE loans with LTVs of 125% or higher have an expected default rate of 15.78%.

The study also shows 26% of GSE loans with LTVs higher than 125% that were current as of December 2011, were 30 days or more delinquent as of March 2012—compared to only 11% of loans with LTVs of 100% to 109.99%.

“The taxpayer benefits are substantial,” Pinto concluded.

Using data from the aforementioned study, he quantifies these benefits at roughly $10 billion for average 17-year term modifications and about $11 billion for 15-year modifications.

Filed Under: Economy, Featured, Housing Tagged With: , , , , , , , , , , , , ,

Confidence in Housing Values Falls to Lows for the Year

July 20, 2012 By Leave a Comment

I am a big fan of Rasmussen Reports.  While I have had enough of political polls, I believe Rasmusen does a great job of gaging the trends amongst "Working America".  This is a recent poll about the housing market.  Regardless of what the media, the government, NAR and the MBA want us to believe, the housing market is still a long way from the bottom. 

Here is the full Rasmussen article followed by the wording of the questions:  

Confidence in the short- and long-term housing market among homeowners has fallen to the lowest level of 2012.

A new Rasmussen Reports national telephone survey of Homeowners shows that just 18% expect their home’s value to go up over the next year, down four points from June. Twenty-five percent (25%) expect home values to go down over the next year, while 51% say they will remain about the same. 

Looking further ahead, just 38% of homeowners now believe the value of their home will go up over the next five years, representing a 13-point drop from last month and among the lowest findings in three years of surveying. Fifteen percent (15%) expect values to go down during the next five years. Thirty-six percent (36%) predict that they will remain about the same.

Confidence in home values over the short- and long-term is at the lowest point since late 2011. Still, belief that home values will go up over the next year remains slightly above findings for most of last year. The number of homeowners who expect home values to go up over five years first fell below 40% in April of last year.

Half of Americans (50%) report that the value of their home is worth more than the amount they owe on their mortgage, up slightly from 47% last month. This finding slipped below 50% for the first time in June of last year and has ranged from 44% to 57% ever since. Thirty-nine percent (39%) say their home is not worth more than what they owe, down slightly from last month’s high of 42%.

Want a free daily e-mail update? If it's in the news, it's in our polls

The national survey of 732 Adult Homeowners was conducted on July 18-19, 2012 by Rasmussen Reports. The margin of sampling error is +/- 4 percentage points with a 95% level of confidence. Field work for all Rasmussen

Just six percent (6%) of homeowners report missing or being late on a mortgage payment in the last six months. Thirteen percent (13%) say it’s at least somewhat likely that will happen over the next six months, but only four percent (4%) think it's Very Likely. Both findings have changed little over the past two years.

Men and women share similar views about home values over the next year, but men express more confidence about values five years from now.

Investors are slightly more optimistic about the housing market compared to non-investors. 

Married homeowners are twice as confident as non-married homeowners when it comes to home values in the short- and long-term.

Republican homeowners show more pessimism than Democrats and those not affiliated with either political party about home values over the next year. There is less partisan disagreement when it comes to the housing market in five years.

Separate polling shows that nearly half (44%) of young Americans now say they owe more money than they did last year. Overall, 30% of all Americans say they owe more than they did a year ago.

 

 

National Survey of 732 Adult Homeowners
Conducted July 18-19, 2012

By Rasmussen Reports

 

1* Looking ahead over the next year, is the value of your home likely to go up, go down, or remain about the same?

2* What about over the next five years? Is the value of your home likely to go up, go down, or remain about the same? 

3* Is the value of your home worth more than the amount you owe on your mortgage? 

 

4* Over the last six months, have you missed or been late on a mortgage payment? 

5* Looking ahead, how likely are you to miss or be late with a mortgage payment in the next six months? 

 

You have options for your underwater house, you won't find them through traditional sources.  Find all of your options at www.myownbailout.com

Filed Under: Economy, Housing Tagged With: , , , , , , , , , , , , , , , , , ,

A brilliant reply to a politician begging for money!

June 12, 2012 By Leave a Comment

Another post from Martin Andelman of Mandelman Matters…

Nancy Pelosi sent my reader Amy an email. And Amy replied brilliantly.

 
 

On Jun 9, 2012, at 10:40 AM, Nancy Pelosi wrote:

Amy –

Today is my 25th anniversary in Congress.

I want to take a moment to thank you for your support over the years.

We have made tremendous progress because you have stood with me to ensure that we continue moving America forward.

And now, it’s because of friends and supporters like you that the House Majority is within reach with five months left until Election Day.



On this special anniversary, House Democrats are focused on the 25 seats we need to win the Majority.

Please contribute $3 or more right now to ensure House Democrats have important resources to support strong Democratic candidates and Members facing tough challenges for re-election and hold Republicans accountable for their misguided agenda.

President Obama needs a strong Democratic Majority in Congress and your support will bring us closer to returning the gavel to Democrats who will focus on the people’s interests instead of the special interests.

You are the backbone of our party and we will win in November because of your tireless support and determination.

  Can you chip in today?

Onward to victory,

Nancy

 

###

 

 

So, on Jun 9, 2012, at 12:01 PM, Amy Sheaffer wrote back:

Dear Ms. Pelosi,

Today is my 13th anniversary in my home.  

I have seen no progress in “America moving forward”.  I have lived with the stress of pending foreclosure, postponed home auction dates, underemployment and bankruptcy for the past several years.  

Please take the time to contribute a small portion of your huge salary to:  The Fund to Save Amy’s Home!!

Your donation is greatly appreciated and will contribute to continued shelter for myself and my cat, Mr. Miles!  

Remember that a portion of your donation (or all of it) is tax deductible!

Sincerely,

Amy Sheaffer, MA, LMFT

Filed Under: Economy, Housing Tagged With: , , , , , , , , , , , , , ,

Is the US economy is on the mend? Not according to the payday loan industry.

June 11, 2012 By 2 Comments

The payday loans industry evolved as a result of the crippling global economy and the consequent recessions.  This is because an increasing number of US citizens were being made redundant, facing lower wages and struggling to pay their bills.  In addition to this, more traditional sources of income were harder to come by as the banks were scorned by the recession and therefore less likely to lend personal loans or credit and consequently, third party lending organizations decided to capitalize upon this by offering ‘unbanked or underbanked’ payday loans to these consumers.    The fact that this industry continues to grow approximately 2.5% annually illustrates that the impact of the recession continues to grow and shows no signs of slowing down.

Payday loans are short term loans for a period of between 14 and 31 days, for relatively small amount of money $100 to $400 and incurs an unusually high rate of APR, around 400% to 500%.  Lenders are lenient towards poor credit ratings and often these are overlooked.  The premise behind these loans is that the borrower repays the loan in full, including APR on their next payday as they will have enough funds in their bank account on this date.  The industry is regulated in 37 states and in 13 states it is illegal.    

Payday loans have attracted a lot of negative press because of their high rates of APR and hidden charges such as ‘admin’ or ‘rollover’ fees.  They have been accused of taking advantage of vulnerable citizens that have no other borrowing option.  This sort of press has led to the industry being regulated in different states with a cap on APR charged, a cap on the amount of loan charged and a cap on the amount of loan charged to certain personnel such as US servicemen.

The profile of an average payday loan consumer is unable to obtain credit from banks, has a poor credit rating, has little or no savings due to job loss or low income and needs to access cash for short periods of time.  The most common reasons cited for accessing payday loans is to pay for monthly bills such as mortgage payments and car loans, and other necessities such as food and utility bills.

The US government would have you believe that the economy is stabilizing, house prices are retaining and increasing in value and that the end of the recession is nigh.  Unfortunately, the payday loans industry, which is a good indicator of if people are struggling to make ends meet and are unable to make basic purchases, indicates differently.  Industry revenue is worth $10.1 billion, a rise of 2.5% from 2011 and is predicted to rise another 2.5% by 2013.  Whilst the number of payday stores has declined slightly in since 2007, (due to a restriction on the amount of APR lenders are permitted to charge), there are still 19,700 payday stores, and there are more payday stores than there are McDonald’s restaurants and there are two payday stores for every one Starbucks outlet.  Finally, revenues earned by the top six publicly traded lenders in the US have increased every year from 2007 to 2011.

Whilst the US government would have you believe that their economy is coming out of the other side of the recession, the facts emerging from the payday loans industry indicate a different story.  The number of payday loan customers continues to increase every year, as does the amount of money borrowed through this method of finance.  These customers represent the sections of society who are unable to access credit and debit from banks and are struggling to finance necessities such as household bills and mortgages.  Furthermore, the presence of payday lenders on the high street continues to be more frequent than popular brand names McDonalds and Starbucks, further fueling this trend.  Therefore messages of economic recovery coming from the White House are perhaps, a little optimistic and more of a presidential lobbying exercise.

About The Author:

Laura Susstance is a content writer from the UK, when not writing on a freelance basis or writing guest blog posts, she regularly writes on her own blog: http://www.fastpaydayloansreview.com

This is a guest post from a new friend from "across the pond".  The American people know that things are not getting better.  The people in Europe certainly know it.  Either our politicians can't figure this out or they are lying to us.  Your call…

Filed Under: Economy, Featured Tagged With: , , , , , ,

A budget that cannot be balanced

April 24, 2012 By Leave a Comment

Here is a video that explains why our elected officials cannot balance the federal budget.  It will require wholesale changes that will affect all of us. 

We obviously don't have the adults in the room that can see past getting re-elected or they would have dealt with the issue already.  Any official who seriously takes on this issue gets creamed by the other side. 

Watch this short video and you will see why we are headed off of a cliff financially.  The truth is that "WE ARE GREECE" and Spain and Portugal and Ireland.  Our financial fate will lie in the hands of other coutries.  What are we going to do when China wants the money we borrowed.  Give them San Francisco or Dallas or Atlanta or Detroit.  Sorry, they wouldn't take Detroit. 

 

 

 

Filed Under: Economy, Featured, Preparedness

Bernanke Says U.S. Job Market Weak Despite Gains

March 26, 2012 By Leave a Comment

Here is my two cents on an article published in AOLJobs.com containing more hype about how the economy is getting better.   

FED Chairman Ben Bernanke says the economy is still weak despite three months of increased hiring.  You see, they continue to manipulate the numbers to make things look better than they really are.  Of course the economy is still weak.  It is almost dead.  "They" keep trying to tell us that we are in a recovery and they "adjust" the numbers so that they can use the term recovery when they talk about the economy.  

"Bernanke said the combination of modest economic growth and rapid declines in unemployment is something of a puzzle. Normally, it takes growth of roughly 4 percent annual growth to lower the rate by that much over a year."

There is no puzzle.  Unemployment did not drop to 8.3% as the Obama administrations Bureau of Labor Statistics (BLS) said recently when it released its seasonally adjusted rate.  Gallup has the unemployment rate at 9.1% and they go on to say that the underemployment rate is at 19.1%.  That feels more accurate, doesn't it?

Are you feeling the "recovery" yet?  

If you are unemployed or underemployed, do you have any good prospects to get a job that pays you what you used to make?  Most people would answer that with a resounding no. 

If you own a house, chances are you are underwater.  If you are not underwater, you are closer than you were a year ago.  If you don't believe me, check it out for yourself. 

If this were a real recovery, would your monthly budget be as tight as it is right now?  No way. 

We are not in a recovery, we are in a recession/depression.  That may not be what the politicians are calling it but that is the way it feels for most people.  What did you pay for gas the last time you bought some?   How much has your grocery bill gone up over the past year? 

Recovery?  It's about time they all started telling the truth.  They won't though because they know that if they keep repeating the same lie over and over again, the sheeple will believe it and act accordingly only to destroy themselves financially. 

Don't let them destroy you too.  Pay attention or perish.  You are on your own…

By the way, CLICK HERE to read the full article.   If you look for the story behind the story, you are sure to find it. 

Filed Under: Economy, Featured Tagged With: , , , , , ,
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