How much worse will it (the real estate foreclosure crisis) get? Plenty

[ThePythonicCow]

Re: How much worse will it (the real estate foreclosure crisis) get? Plenty

This is probably a dumb question, but why would State AG's be concerned about tax revenue? They aren't responsible for State budgets.

I suspect that Chomsky was a bit too focused in his cynicism when he concluded that "the reason" was state property tax revenue.

The individual states of the U.S. have been natural enemies of the money center banks for over two centuries now, just as a strong Federal government and central bank have been allies of those same money center banks. This conflict goes back at least to the days of Alexander Hamilton.

[ThePythonicCow]

Re: How much worse will it (the real estate foreclosure crisis) get? Plenty

One thing to watch for: the U.S. government and Federal Reserve could use this "crisis" to justify bailing out Mortgage Backed Securities (held by so many TBTF banks and major pension funds, oh dear!). This would increase the U.S. debt by a few more Trillion dollars (everything seems to lead that way) and would seal in the setting concrete of history one of the largest frauds in human history.

Another thing to watch out for is the following. On Christmas Eve of 2009 the Obama administration quietly slipped out an announcement entitled “Treasury Issues Update of Support For Housing Programs”. It promised unlimited financial assistance to Fannie Mae and Freddie Mac.

That guarantee will be called, as a result of this mortgage crisis, resulting in another couple Trillion, give or take, in U.S. government debt. You can take that to the bank!

The one, compelling, blindingly obvious, theme to the events of the last two plus years is the increase in U.S. debt, acknowledged and contingent, all at ultra-low, variable (short term, frequently refinanced) rates.

There's going to be hell to pay when the transformation of all that contingent (bankrupt states, FDIC, GSE, ...) debt to actual Treasury debt is completed and then those rates increase and the maturity of the debt extends.

[Thailandnotes]

Re: How much worse will it (the real estate foreclosure crisis) get? Plenty

http://www.nytimes.com/2010/10/31/op...ewanted=2&_r=1


“The banks and other players in the securitization industry now seem to be looking to Congress to snap its fingers to make the whole problem go away, preferably with a law that relieves them of liability for their bad behavior. But any such legislative fiat would bulldoze regions of state laws on real estate and trusts, not to mention the Uniform Commercial Code. A challenge on constitutional grounds would be inevitable.

“Asking for Congress’s help would also require the banks to tacitly admit that they routinely broke their own contracts and made misrepresentations to investors in their Securities and Exchange Commission filings. Would Congress dare shield them from well-deserved litigation when the banks themselves use every minor customer deviation from incomprehensible contracts as an excuse to charge a fee?

“There are alternatives. One measure that both homeowners and investors in mortgage-backed securities would probably support is a process for major principal modifications for viable borrowers; that is, to forgive a portion of their debt and lower their monthly payments. This could come about through either coordinated state action or a state-federal effort.

“The large banks, no doubt, would resist; they would be forced to write down the mortgage exposures they carry on their books, which some banking experts contend would force them back into the Troubled Asset Relief Program. However, allowing significant principal modifications would stem the flood of foreclosures and reduce uncertainty about the housing market and mortgage securities, giving the authorities time to devise approaches to the messy problems of clouded titles and faulty loan conveyance.

“The people who so carefully designed the mortgage securitization process unwittingly devised a costly trap for people who ran roughshod over their handiwork. The trap has closed — and unless the mortgage finance industry agrees to a sensible way out of it, the entire economy will be the victim.”

[Chomsky]

Re: How much worse will it (the real estate foreclosure crisis) get? Plenty

This is probably a dumb question, but why would State AG's be concerned about tax revenue? They aren't responsible for State budgets.

The AGs don't work for their states, consult with their Governors, etc.? Cow's right, focused cynicism, but please. The exact same dynamic played out during the Great Depression, where states essentially told people to stop paying their mortgages and pay their property taxes instead.

[don]

Re: How much worse will it (the real estate foreclosure crisis) get? Plenty

And then there's the Accidental Landlords ....


Back in 2007 we started reporting about “accidental landlords”. These pretty much fell into two groups: Would be flippers who couldn’t sell, and homeowners who didn’t like the market and thought they’d wait and sell when the market improved.
It’s been more than three years, and prices have fallen in most areas. I suspect there are a lot of those folks who started renting out properties in 2007 that are now wishing they bit the bullet and sold. The ranks of “accidental landlords” continue to grow though, and now there’s another reason to look for a renter- staving off foreclosure. According to Jan Page, a broker from Hendersonville, TN:

“We have more rentals than we’ve ever had — people who can’t sell their homes. They don’t want to be a landlord, but they are,” said Page. “Rentals are so much more common. It’s a way to keep your house and pay your mortgage, especially for people who’ve lost their jobs.”
Homeowners unexpectedly become landlords in a variety of ways, she said. Some, like Khoury and her husband, find themselves with an unsold property in a place they are moving away from. One of Page’s clients built a new house, then couldn’t sell the old one. Other homeowners see turning their house into a rental as a way to pay their mortgage and avoid foreclosure. They find a cheaper place to live and plan to move back when times get better.

Those that are now reluctantly becoming landlords need to remember when making their plans what landlords should have considered in 2007- better might not come any time soon.


http://housingdoom.com/2010/11/01/ev...tal-landlords/

[flintlock]

Re: How much worse will it (the real estate foreclosure crisis) get? Plenty

A few years ago a neighbor across the street died of a sudden heart attack at age 46. He was a financial planner and left his wife with plenty of life insurance. A year later she moved off to live somewhere else and left her house for sale , just about the time the housing bubble was popping. She had it way overpriced, refusing to accept reality. I tried to explain to her that waiting would only cost her money and that the market was not likely to come back any time soon. Well it sat empty for over a year before she decided to rent it out. She kept saying she was "not going to give it away" at the prevailing market prices. About another year later and she decided to put it back on the market. No takers of course. This is in a neighborhood where homes still sell quite quickly if reasonably priced. I figure she is down at least $50k by trying to hold out for that extra $15k she wanted. Well at least she didn't "give it away".

Ironically in the end she may end up giving it away. She owner financed it to the tenants with no down payment, no job, and bad credit.