Sonoma Housing Bubble

Pulling the cork out of Sonoma's bubbly housing foolishness

Friday, March 30, 2007

First the Binge, Then the Hangover


(Bloomberg) -- "The housing market's woes are beginning to infect the U.S. economy."

'``The uncertainties about the outlook have increased somewhat in recent weeks,'' Bernanke told Congress. ``The correction in the housing market could turn out to be more severe than we currently expect. We could yet see greater spillover from the weakness in housing to employment and consumer spending than has occurred thus far.'''

"Mortgage Lenders Network USA Inc., Ownit Mortgage Solutions LLC, People's Choice Financial Corp. and ResMae Mortgage Corp. have all gone bankrupt in recent months. Lennar Corp., the largest U.S. homebuilder, this week abandoned its 2007 profit goal after fiscal first-quarter earnings plummeted 73 percent. The Federal Bureau of Investigation is checking Beazer Homes USA Inc. for possible mortgage fraud."

"The hangover from that borrowing binge is beginning to hurt."

'``Interest-Only Mortgage Payments and Payment-Option ARMs -- Are They for You?'' asks the U.S. Federal Reserve in a November brochure on its Web site."

"The answer should have been a resounding ``No.'' Instead, cash-strapped Americans embraced loans offering low initial payments, praying that rising house prices would build a refinancing buffer before the monthly rates become unaffordable."

"All four legs of the U.S. housing market are wobbling precariously. The mortgage lenders who funded the boom are going bust or shutting up shop. The homebuilders who slapped together the bricks and mortar are seeing their earnings plummet. The financial alchemy used to repackage home loans into tradable securities is starting to unravel. "

"And the consumers seduced into what the Fed pamphlet calls the ``American dream'' of home ownership are becoming more fearful about the future as real-estate values start to stumble."

"American Nightmare?"

Donde Estas The Funny Money?


"Last year, total bank deposits in Sonoma County grew at the most sluggish pace in five years, according to federal bank regulators."

"Sonoma County banks are battling for deposits like never before, the result of declining personal savings, low population growth and rising competition from investment firms and online banks."

'"It is not a good trend. Deposit growth is really our bread-and-butter. That's how ultimately we need to grow the bank," said Greg Jahn, chief investment officer for Exchange Bank."

'"They're having to work harder at it. People have too many alternatives," said Fred Ptucha, an investment broker at Brookstreet Securities in Santa Rosa who tracks the performance of Sonoma County banks."

"Deposits are a bank's lifeblood. Banks attract money by offering checking accounts and paying interest on savings accounts, certificates of deposits and money market accounts that pay guaranteed rates of return."

"Banks then use the cash to make loans and invest in government securities and other vehicles to boost bank assets. A bank's profitability is in large part dependent on paying less for deposits than it charges for loans."

"To make up for sluggish growth in deposits, banks will borrow from the Federal Home Loan Banks and other sources. But these funds are limited and more expensive than the cost of core deposits."

'"We have tapped that more in the last couple of years," Jahn said. "It kind of fills the void when there's a mismatch between the supply of deposits and demand for loans."'

umm... something tells me the real problem might be making loans to people who can't repay them. It used to be that banks made loans to people who had money in the bank... but in the past five years all you needed was a pulse. Would you want to deposit your money with banks that didn't bother performing to the expectations of their profession?

"The competition for deposits is increasingly intense, particularly with Americans saving at the lowest levels since the Great Depression. For nearly two years, Americans have spent more than they earn, dipping into savings and running up credit cards."


'"It's a very serious problem. Americans simply don't save enough money, and it's getting worse," said George Mancini, president and chief executive officer at Luther Burbank Savings."


"At the same time, competition for deposits has increased in Sonoma County. First Community Bank and Atlantic Pacific Bank, both based in Santa Rosa, have opened up operations in recent years. Today, there are 23 banks in Sonoma County, up from 20 six years ago."As you have new banks coming in, you have more players chasing fewer customers," Nelson said."


"Also hindering deposit growth in Sonoma County is the region's low population growth rate. The county's population has grown by less than 1 percent each of the past five years. Only nine of California's 58 counties had lower growth rates last year."


What? I thought everyone wants to live here? They aren't making any more land, and we don't have enough housing for a growing population? Could the REIC be wrong?


Lion's Share of North Bay Foreclosures in Sonoma County



"Sebastopol Realtor Gene Sloan said he signed up with RealtyTrac about a year ago to receive notifications about the latest foreclosure filings in Sonoma County, home to the lion's share of North Bay foreclosures."

"Mr. Sloan said he believes foreclosures will be a significant source of home sales activity in the coming months. "Many of the properties on the market are in some stage of foreclosure," Mr. Sloan said, referring to Sonoma County. "I would guess maybe 25 percent."'

"RealtyTrac calculates foreclosure filings by combining the number of notices of default, auction notices and repossessions. "

"From 2005 to 2006, foreclosure filings in the North Bay increased 32 percent to 1,328 new filings. Statewide, foreclosures more than doubled during the same period. The increase in North Bay foreclosure filings from January 2006 to this January was about even with the statewide increase."

"There are a number of risks for buyers and agents in buying a home that is in the foreclosure process, especially if the lender is unaware of the sale and its terms."

"Even a sale during the early stages of foreclosure can get messy if the bank has not agreed to give the homeowner additional time to complete the sale."

'"I've heard horror stories of people who closed escrow while their house was being auctioned because the banks didn't know," said Rick Sharga, vice president of marketing for RealtyTrac."

"Santa Rosa lender Michael Madsen points out, negotiating with lenders can be challenging because many of the mortgages currently under default in the North Bay were set up by mortgage brokers and are owned by lenders outside the area. In many cases, those lenders have sold the mortgages to a third party, which can potentially complicate negotiations."

"The sales volume for the North Bay's 25 largest real estate companies declined 21 percent between 2005 and 2006 as the market slowed, according to the BUSINESS JOURNAL'S annual ranking."

"The total number of North Bay units sold in 2006 was down 25 percent from the year before to 15,093 from 20,138. The dollar volume of sales declined from $14.4 billion to $11.4 billion, according to data collected from the brokerages."

Wazzup , No Docs?


Nothing good I'm afraid. it seems now that the horses' ass is disappearing over the fence, they've gone barn door shopping.

With as many as 460,000 California homeowners reportedly at risk of losing homes bought with sub-prime mortgages, a top California business regulator called Monday for a ban on certain risky and controversial lending practices.

At issue for Department of Corporations Commissioner Preston DuFauchard were home loans being issued without lenders fully verifying the prospective buyer's income and employment status. These so-called stated- income loans have contributed to the collapse of the sub-prime mortgage market, he said.

"It's a real fluid situation," said DuFauchard, who has asked Gov. Arnold Schwarzenegger whether the commissioner can require about 8,000 mortgage and commercial loan lenders in the state to fully verify a prospective buyer's income and employment status to ensure that he or she can afford a loan.


Wow! What a novel idea. To actually try and figure out whether or not someone can afford and gigantanormous loan. Responsibility?! What will they think of next?!

Of course that will require some oversite, but surely we have folks in the massive state government to do that.....er, don't we??
Leonard said he would welcome stronger oversight of mortgage bankers' underwriting guidelines by the state.

The Department of Corporations, he said, has only 25 examiners on staff and "and clearly doesn't have the resources to stay on top" of the situation.


Oops! Our bad!


Meanwhile, we've been writing a lot lately about potential bailouts of all the f'ed Borrowers out there. Well, this mornings' LA Times brings a little perspective to that idea.

From the Captain To The Crew....

Put Those Bailout Buckets Away!
It's the old law of the sea. It seems like when push comes to shove the government is planing on letting all those f'ed Flippers go down with their Titanic MacMansions. Glug glug. I would imagine that


Borrowers, don't hold your breath for a bailout.

As mortgage delinquencies soar, many consumer advocates and political leaders are calling on government to help what may ultimately be millions of homeowners facing foreclosure.

But the modest federal and state aid proposals advanced so far suggest that most people struggling with onerous loan payments are unlikely to get government assistance.

The Bush administration has ruled out a blanket program to help homeowners stave off foreclosure, reasoning that it's "not an appropriate role for the federal government," White House spokesman Tony Fratto said.

And at the state level, "there is only a limited amount we can do for people who are affected right now," said Assemblyman Ted Lieu (D-Torrance), chairman of the Assembly Banking Committee.

By one estimate, as many as 460,000 people in California — and 2.4 million nationwide — could lose their homes because they are unable to make payments on high-cost sub-prime loans or to refinance them to more favorable terms.

The threat of a foreclosure wave, and government's limited ability or willingness to respond, could put added pressure on lenders to renegotiate loans that might otherwise end in failure.





And remember all that talk erstwhile presidential candidate Dodd was tossing around about bailing out homeowners, now it seems he's talking about it not so much.


"Dodd has been extremely clear that he is not talking about any kind of bailout," a spokesman for the senator said.

One problem with even suggesting a broad-based rescue plan for homeowners who are underwater is that any bailout of borrowers also would be viewed as a bailout of their lenders — potentially including some lenders that allegedly preyed on home buyers during the housing boom.

The risk lenders now face is that they may have to foreclose on many homes and sell them for much less than the amounts loaned — and eat the difference.




Gee, really? Selling a house for less? It almost sounds like, un-Americun, ya' know? Maybe they're been reading the blogs, maybe they've seen all the pictures of torches and pitchforks and angry non-borrowers refusing to pick up the slack for the Slackers with the no doc loans. Not to mention whos' ass we'd really be covering.



I also was a little curious this morning as to how things were looking close to home. when i went searching for subprime news in the SRPD I came upon this little item..

In 2005, economists were getting nervous as the real estate market reached stratospheric heights.
They worried that values wouldn't continue to rise forever. They warned that when the bubble burst, people who had taken out mortgages in the subprime market would be most at risk of foreclosures.


Guess that musta been happening while I was napping with Michael jackson in my hyperbaric chamber cause I sure as hell don't remember any economists warning anyone....at least in public. Back then it was all "Buy buy buy!!! Don't get priced out!"

That's what I remember.

They further state:
In Sonoma County, 9.7 percent of all subprime loans were 60 days late on payments, compared with 11.8 percent nationwide.

So, this is good????

Who exactly is responsible for all this??? Oh yeah. Those guys.

So, they're worried that anxiety in the financial markets could spill over into the broader economy. Really?


"I want to emphasize that national banks are not dominant players in the subprime market," testified Emory Rushton, senior deputy comptroller in the Treasury Department's Office of the Comptroller of the Currency, which regulates nationally chartered banks.

"Unfortunately, regulatory oversight tends to be less rigorous in precisely those parts of the financial system where subprime practices seem most problematic," said Rushton.

A patchwork of federal and state regulatory agencies holds jurisdiction over financial companies, putting many subprime mortgage lenders outside of stringent regulation, Rushton and other regulators said.

Yet, acknowledged Roger Cole, head of the Federal Reserve's banking supervision division: "Given what we know now, yes, we could have done more sooner."


So let me get this straight, the big national banks sat this sub prime cluster f'k out? Do tell. Then that must be some other Wells Fargo Bank they're tallking about here.

Still a Long Way from the Bottom

“‘There’s a reason why D.R. Horton’s CEO said, ‘07 is going to suck’, Parrish Glover told CNNMoney. ‘We’re not even expecting a recovery in the next 18 months. Even for the next three to five years, we’re not looking at an especially robust market.’”

“On Tuesday, Lennar CEO Stuart Miller told investors on the company’s conference call that some markets were still seeing declines, according to Reuters. That comment and other recent signs probably mean the industry is still a long way from the bottom, said Morningstar analyst Parrish Glover.”

“‘This kind of bull market that’s deflating is something that comes around once every 20 years,’ he said.”

"A Credit Suisse Group unit is charging three subprime mortgage lenders with violating loan obligations and has filed lawsuits totaling over $30 million."

"DLJ Mortgage Capital Inc., a Credit Suisse unit that purchases mortgage loans from lenders, alleges in separate suits that Sunset Direct Lending LLC and Infinity Home Mortgage Co. Inc. breached agreements to repurchase loans they originated."

"DLJ is seeking nearly $24 million in buybacks from Sunset and $3 million from Infinity. The suits allege that the lenders violated agreements to repurchase loans in the event of payment defaults. The suits cite clauses that require repurchases if borrowers are delinquent for 30 days within the first three months of the loan sale."

"DLJ also filed suit against Netbank Inc. alleging failure to provide both funds and information relating to purchased loans. The suit seeks $4 million in damages. The three suits, filed in the U.S. Southern District Court in New York, likely represent a new chapter in the subprime mortgage crisis, where underperforming loans have threatened both lenders and the Wall Street firms that purchased them."

""2006 may prove to be the worst subprime vintage ever," Roelof Slump, a U.S.-based managing director for the ratings agency said, adding that he expects losses of between 6% and 8% in the value of these bonds."

"Slump later told Reuters that problems in the subprime housing market could have an impact on the overall housing sector in the United States. "We do believe that the very same things that are happening in the subprime market are likely to be happening in the Alt-A market, again driven by home prices." he said."

“The long list of participants in the subprime mortgage crisis will not go unscathed in sharing the pain but should work together to find solutions to the problem, a U.S. banking regulatory official said on Wednesday.”

“She said data suggest 52 percent of subprime mortgages are originated by independent mortgage banking companies, 23 percent by banks and thrifts, 13 percent by mortgage banking subsidiaries of bank and thrifts and 12 percent by mortgage banking units of bank and thrift holding companies.”

“The pain starts with borrowers and then mortgage brokers and bankers to brokerage firms, parties involved in securitizing mortgages, domestic and foreign investors, and insurance companies, she said.”

“‘I believe there is more than enough blame to go around,’ Sara Kelsey, general counsel of the Federal Deposit Insurance Corporation, said.”

“David Lereah (Chief Wind in his pants Economist for the National Ass of Realtors)warned against overreaction to the situation. ‘Tougher lending standards imposed by the marketplace and the regulators are necessary, but we need to be mindful of overcorrection. Responsible lending practices are what the doctor ordered, not practices that cause a credit crunch,’ Lereah said.”

Effed Builder in Sonoma?

(from Craig's list)

New Homes Town of Sonoma

Are you getting ready to purchase a home? Think about buying a new home as there are new homes being built in the town of Sonoma. Please contact me if you would like to get more info about the new homes and home buying programs in Sonoma.

Thursday, March 29, 2007

Subpoenas, Crazy Talk, & Vanishing Offers


In case you haven't seen this graphic over at Marinite's place... (ps. Thanks Reskeptic)

In other news

"Beazer Homes USA Inc. on Thursday said it has received a grand jury subpoena from the U.S. Justice Department for documents related to the company's mortgage origination business."

"Earlier this week, a representative at the FBI office in Charlotte said the agency was "conducting a potential fraud investigation" into Beazer, which builds houses for many first-time buyers."

'"We believe many buyers entered into aggressive mortgages due to the stretched affordability in many markets, but we think it may be difficult to prove fraud," Bank of America Securities analyst Daniel Oppenheim wrote in a note."

"According to an article earlier this week by BusinessWeek, the probe into Beazer stems from a series of articles that appeared in the Charlotte Observer earlier this month. Those stories described questionable lending practices and high foreclosure rates among some Beazer customers."

"Home builders with large mortgage businesses, such as Centex Corp. and high exposure to entry-level buyers, are most at risk for spillover from allegations of aggressive lending at Beazer, Oppenheim said."


On a more local note:

"Now that sales volumes are down, re-fi fever has cooled and some markets have softened, mortgage brokers and even lenders try to set their target value in advance of hiring their appraiser." 'Real estate will have to go back to 2000 levels. And a lot of people who just bought a home will find that instead of having an asset, they have a liability.'"

"'Internet-based mortgage companies call all the time,' says Curt Thor, a Marin appraiser for more than 20 years. 'They're fishing for appraisers. They tell me what the number is and ask me if I can match it.'"

Rubberstamp appraisers in God's country? Say it isn't so! (ps. thanks marinite!)


And this... said like it's a good thing? (found on Craig's list Sonoma)

Buy in the Neighborhood that Realtors do!

Date: 2007-03-20, 11:49AM

Realtors know where the appreciation is. More than 15 properties in this neighborhood are owned by local Realtors. That is because they know that this neighborhood, equidistant to the Plaza as much more expensive "East Side" homes, is going to increase in value probably more than any other within a mile of the Plaza.


We will likely be seeing many more of these kind of posts too... hold on tight... (also found on Craig's list Sonoma)

back on market offer not qualified

Date: 2007-03-18, 4:50PM

beutiful 3 bd 21/2 bath all the bells and whistles must see low maintanace yard beutiful solid marbal fountain this is nice naighborhood and guest unit or office

(ps. yes, this is the same guy we have featured here before) ;-)

Wednesday, March 28, 2007

Searching for Answers


Some fun information regarding searches that brought readers to Sonoma Housing Bubble.


1. Search Engine: google.com
Search Words: what can i do if i'm a victim of subprime lender fraud

2. Search Engine: google.com
Search Words: countrywide loss mitigation

3. Search Engine: google.com
Search Words: fake bank statements for loans


4. Domain Name: wellsfargo.com
IP Address: xxx.xxx.xx.# (WELLS FARGO BANK)
ISP: WELLS FARGO BANK
Referring URL:
http://www.google.co...ightmare
Search Engine: google.com
Search Words: option arm nightmare countrywide
Visit Entry Page
http://sonomahousing...ed-for-disaster.html

5. IP Address: xxx.xx.x.# (Branch Banking and Trust)
Search Engine: google.com
Search Words: the mortgage crunch is spreading,

6. Search Engine: google.com
Search Words: what happens when a mortgage comes goes belly up

7. Search Engine: google.com
Search Words: how does remodeling affect your tax assessment in sonoma county


8. IP Address: xx.xxx.xx.# (MARCUS MILLICHAP REAL ESTATE)
Referring URL
http://www.google.com/search?hl=en&q=rent
Search Engine: google.com
Search Words: rent control solano sonoma county 2006 2005

9. Domain Name: cdc.gov (United States Government)
IP Address: xxx.xxx.x.# (The United States Centers For Disease Control)
ISP: The United States Centers For Disease Control
Referring URL: http://blogsearch.go...
Search Engine: blogsearch.google.com
Search Words: coldwell banker foreclosures

10. Referring URL
http://www.google.co.uk/search?hl=en&q=housing
Search Engine: google.co.uk
Search Words: housing ass jobs


11. Domain Name: fdic.gov ? (United States Government)
IP Address: xxx.xx.xx.# (Resolution Trust Corporation)
ISP: Resolution Trust Corporation
Search Engine: google.com
Search Words: recent trends in sonoma county housing market

12. Domain Name: nyc.gov ? (United States Government)
IP Address: xxx.xx.x.# (City of New York)
ISP: City of New York
Search Engine: google.com
Search Words: "weakening demand for housing"

13. Domain Name: COUNTRYWIDE HOME LOANS
IP Address: xxx.xxx.xx.# (COUNTRYWIDE HOME LOANS)
ISP: COUNTRYWIDE HOME LOANS
Search Engine: google.com
Search Words: countrywide foreclosures

Monday, March 26, 2007

Let The Heartrending Tales Begin...


I saw a headline on Yahoo news this afternoon about families losing their homes in the sub-prime crash

It's the old story of people with 4 bedroom houses living on Ramen with no furniture. Back in the day the idea of buying a large house that one can't afford to "live" in would seem insane. Not in todays news where stories of that sort are common.

Here's the living room, still covered in the worn blue shag Angela Sneary always intended to replace with the sheen of hardwood. And downstairs, through a curtain of plastic beads, is the basement where husband Tim was going to knock out a wall and put in a foosball table.

Step this way and the Snearys point out the places where they never could find the cash to hang a ceiling fan, install a hot tub, replace the siding ... a long list of abandoned ambitions that seem almost too big to squeeze into the modest four-bedroom tri-level.

Owning a home is all about finding humor in unfinished projects. But in the house set back from a bend at 11030 Eudora Circle, the Snearys never had the luxury.

They ran out of money first. Then, they ran out of time. Soon, they'll almost certainly be out of a home.


The story continues with the usual Fb'er explanations,

The experience of families like the Snearys show how the squeeze created by questionable lending can quickly be compounded by family economic crises, a lack of planning and knowledge, and the rapid shifts in a real estate market that once seemed unstoppable.

"You were set up to fail," one real estate agent told them.

It's a sobering thought for anybody who shares the American dream. After all, it hits so close to home.


But then the story departs from the purely business details, and wanders into TMI territory:



Tim first met Angela when he was just 5. She was hours old.

Their fathers were best friends, "two old hippies who partied together." On an afternoon 33 years ago, they celebrated Angela's arrival. Tim stared at the tiny infant a nurse held up to the maternity ward window and waved.

Sixteen years later, Angela's dad died. Tim, just out of the Navy, went to pay his respects. He offered his arms to Angela - and never let go.


Enter the Villian:

The couple set out to look at homes in Thornton, a fast-expanding, mostly working-class suburb 20 minutes outside Denver.

They loved the second house the agent showed them, tucked in a 1970s subdivision with streets curled around each other like a ball of yarn. It was painted glowing pink with a big shade tree out front. The kitchen drawer-pulls were shaped like tiny forks and spoons. It had spacious bedrooms for all three kids, plenty of space for three dogs and six cats.

Tim "walked in here and said this is perfect," Angela recalls.

It cost $204,000. "We thought we were getting a deal," Tim says.

The agent said he'd find them a mortgage, no money down. The Snearys say they never thought to shop around.

More than two years and 100-plus homes later, agent Kent Widmar says he has no memory of the couple or the deal. But he knows his customers - and subprime loans are the only loans most can get.

"I kind of work the bottom of the market, the tough deals, the people that can't get credit anywhere," Widmar says. "You're dealing with people where nobody else (other lenders) is even going to talk to them ... It's not like you have a whole lot of choices."

The Snearys say they expected to borrow at a fixed rate of 6.5 percent. That would put monthly payments at about $1,290, a little more than rent.

But at the closing in August, all the numbers were higher. The Snearys were offered two loans, both from a Texas subprime lender, Sebring Capital Partners. The first, for 90 percent of the purchase price, was at 8.31 percent, set to adjust after two years. The second, for the remainder, was at 13.69 percent.

The house would cost $1,623.80 a month to start - and it was almost certain to rise.

Looking back, Tim wishes they'd asked more questions or considered walking out. But everything was in boxes, and they'd given notice. So they eyed each other nervously, and agreed to work more hours. Then, they signed the papers.


The story goes on in excruciating and heartbreaking detail, and I don't mean that callously. It is a sad story. I come from Blue-collar people. I know how hard it can be. These stories are painful and one would have to be made of granite to read them and not feel something. There are also a lot of them.

I'm sure we are going to be innundated with these stories all through this year, and most likely it will seep into Election year and campaign promises. All of these stories are going to be tied to the idea of a "Bailout". A Bailout that all the rest of us will be paying for many years hence .

There are a lot of people out there that could tell similar stories that have nothing to do with careless borrowing, but more to do with death, serious illness, acts of crazy nature, jobs being shipped overseas, corrupt corporate practices, or renegging on pensions and benefits. No one has mentioned a Bailout of any sorts for them. There it's "tough luck buddy, dog-eat-dog, pull yourself up by the bootstraps", etc, etc, etc. Get Over It.

I was talking to Athena on the phone the other day, both of us preparing our torches and pitchforks for protest and i was wondering how other people besides those who blog on housing might feel about this when i saw this item on a political blog that belongs to John Aravosis with this headline

Why should I feel bad that you gambled on a mortgage and lost?
by John Aravosis (DC) · 3/26/2007 07:02:00 PM ET



I can deal with someone who was cheated by their mortgage broker, banker, or whomever. Someone who was literally lied to about how much their mortgage was going to cost them now, in two years, in five years, in ten years. But what I can't deal with are all of these heart-tugging news broadcast and Joe and Suzie who simply wanted the American dream for their children, so they risked their entire family's livelihood on a gamble that they could sell a house they couldn't afford before the "real" mortgage rate kicked in. Sorry, Charlie, but those people knew what they were doing. They gambled. They lost. I had the same choice they did, and I said "no," things were simply too expensive. So now they get a bail out and I get nothing because they wanted money for nothing? I don't think so. Again, if they were affirmatively lied to, then they deserve redress. But if they were idiots willing to risk it all for some easy money, then we do them no favors by bailing them out.


There are comments from his readers that follow that post, extremely interesting reading.

Tuesday, March 20, 2007

When Your Ride Costs More Than Your Crib


What's a F'ed Borrower to do? That seems to be the situation that's happening in the state of Michigan where residents are now finding that it costs more to drive around than it does to stay at home, and they haven't even figured in the cost of gas vs heating oil.

Even though Detroit never suffered from the huge RE run-ups that the rest of the country did, it spared them the pain, as the city has lost more than 50% of its' population in the last 30 years.
With bidding stalled on some of the least desirable residences in Detroit's collapsing housing market, even the fast-talking auctioneer was feeling the stress.

"Folks, the ground underneath the house goes with it. You do know that, right?" he offered.

After selling house after house in the Motor City for less than the $29,000 it costs to buy the average new car, the auctioneer tried a new line: "The lumber in the house is worth more than that!"

As Detroit reels from job losses in the U.S. auto industry, the depressed city has emerged as a boomtown in one area: foreclosed property.

It also stands as a case study in the economic pain from a housing bust as analysts consider whether a developing crisis in mortgages to high-risk borrowers will trigger a slowdown in the broader U.S. economy.

The rising cost of mortgage financing for Detroit borrowers with weak credit has added to the downdraft from a slumping local economy to send home values plunging faster than many investors anticipated a few months ago.

At a weekend sale of about 300 Detroit-area houses by Texas-based auction firm Hudson & Marshall, the mood was marked more by fear than greed.


Wow! When Fear trumps Greed, that's news any day.

Now Detroit is a long ways away from our little Valley here, but we're all impacted by the same economy . The same boom or loss in jobs sends rippples right over the Rockies and no one is immune. One can blame the RE disaster in MoTown on job loss, the collapse of the American automotive industry, but one very telling statement was this:

But investors, including some from out of state, proved far more cautious at Sunday's auction.

In the most spirited bidding of the day, a sprawling, four-bedroom mansion from Detroit's boom days with an ornate stone entrance fetched just $135,000.

Dave Webb, principal at Hudson & Marshall, said Michigan had become a "heavy volume" market for his auction firm in recent years, although bigger-money deals were waiting in California, a market he said was ready for the first such auctions of repossessed property in years.

"These people that are buying have got to look at holding on for five to seven years," he said. "The key is holding power."


So this guy is looking forward to coming west to Cali? We're getting ready for an all you can eat RE smorgey here. Detroit is just an appetizer. A veritible garnish on the investment plate.



Now, as to what's happening in the Spy Vs Spy world of subprime lenders, get ready for another implosion. Remember all those Ameriquestads back in the good ol' days of say 5 minutes ago? Ameriquest, one of the biggest subprime lenders and arch-rival of New Century just got a great big Ka-Pow right in the snoot.


The parent of Ameriquest Mortgage Co., once the biggest provider of home loans to Americans with checkered credit, fired a large number of its workers Thursday and closed six operations centers around the country in a bid to survive the shakeout in sub-prime lending.

Two years ago, Orange-based Ameriquest was at the top of the game — sponsoring the Rolling Stones on tour and the halftime show at Super Bowl XXXIX. Its founder, Los Angeles billionaire Roland Arnall, was a major political donor who was later named U.S. ambassador to the Netherlands.


Does this mean the guy has to come home from Amsterdam? Since they're closing loan centers, they're going to be tightening the old belt buckle personnelwise.

Ameriquest Vice Chairman Adam Bass declined to say how many employees were dismissed, saying only that it was a "significant number" of the company's 6,000 employees. At its peak, the privately held company employed 15,000 people across the country.

"It was a tough day," Bass said. "Our employees are really good people."

The company told workers not to talk to outsiders. One supervisor, who asked not to be named because he was not authorized to speak, said 3,000 people would get pink slips, with more layoffs to come. The supervisor also said salaries of remaining employees had been frozen and bonuses cut in half.


And finally, just to show that "the world is a circle" and we all land someplace on the Great Housing Mandala, It seems that people caught with soap scum from the bubble all over their mitts, here in Sonoma (and Cali in general) aren't buying the cars they normally would have. Who pays the price for that? The folks in Detroit.

California and Florida alone - usually the No. 1 and No. 2 automotive markets in the United States - are experiencing such weak housing markets that they are largely responsible for that decline, as well as the nation's overall 2.4 percent decrease in auto sales, said Art Spinella, president of CNW Marketing Research in Bandon, Ore.

"The housing market and especially home values are behind much of the auto industry's stumbling," Spinella said.


And if one didn't understand it before,
Edward Leamer, a professor of management, economics and statistics and the director of the Anderson Forecast at UCLA, said there are many parallels between the housing and automotive markets and their current suffering.

Low interest rates set by the Federal Reserve in recent years encouraged aggressive lending practices in both industries to entice consumers to make purchases sooner than they should have, he said.

That environment also allowed more leniencies for customers with risky credit profiles.

But now homes aren't appreciating enough to cover the risk for some of those customers, and auto owners are often underwater on their loans.

Consequently, there aren't as many buyers for homes or autos these days.


I'll make it even easier, after all The Lion King said it best.
Some say eat or be eaten
Some say live and let live
But all are agreed as they join the stampede
You should never take more than you give
(more song)

Some of us fall by the wayside
And some of us soar to the stars
And some of us sail through our troubles
And some have to live with the scars

Saturday, March 17, 2007

No EFFING Bail Outs for FBs or Loser Lenders!!!!!



There is NO way I will go away quietly if one red cent of my money is used to bail out the stupid and incompetent that created this mess.

Might be a good idea to start writing your congresspeeps and representatives, because something crooked this way comes!

Andy Sobel (This Stupid guy again!!!) is selling his San Diego condo for $60,000 less than he owes on his mortgage. He’s six months behind on his payments, but it’s all he can do to avoid foreclosure. He’s also writing to Rep. Barney Frank, chairman of the House Financial Services Committee.”

“‘Please don’t let this happen to anyone else,’ Sobel says he’s writing, and will explain how he was ‘duped’ into buying his first home in 2004 with an adjustable-rate mortgage designed for him to pay only the interest each month, no principal.”

“‘I know there are a lot of people like me, families — this ruins some people,’ Sobel says. ‘If there is going to be any kind of bailout, we should be part of it.’”

“‘I have two public policy goals,’ said Senator Christopher Dodd, who is a presidential candidate. ‘One is to make sure that what’s been going on stops. That is the easier of the two issues to address. And the second is what can we do to keep people in these homes. What if anything can be done to prevent flooding the market with these delinquencies.’”

“‘I’m not averse to legislating on it,’ Mr. Dodd said. ‘My preference is to see whether it could be better managed by the regulators knowing that legislation can be so difficult to get through.’”

Tom Zimmerman, an analyst with the international investment company UBS who tracks the mortgage industry, said that lenders had not done adequate underwriting, that is, determining the risk of particular loans. ‘What was bad underwriting in ‘04 and ‘05, became atrocious in early ‘06,’ he said.”

“‘It was all about return, yield spread and profits,’ said Robert Simpson, president of Investors Mortgage Asset Recovery, which helps mortgage companies recover money lost to fraudulent borrowers. ‘Let’s be clear that what we’ve done is bury people in debt.’”

"Investors in mortgage loans, including investment banks, pension funds, and international bondholders, jumped into risky subprime mortgages because they were paid for that risk, getting higher interest rates than they would have received for investing in, say, Treasury bonds.”

“The reason that the risky mortgages paid more, of course, was that there was a very real possibility that lots of borrowers would default.”

“If the government, or its proxy, now steps in and purchases those mortgages, or otherwise systematically bails out borrowers, it will create a hazard for the future. The next generation of mortgage lenders won’t take the high risk of subprime home loans seriously, because they’ll expect that, in the event of another crisis, the government will step in and bail them out again.”

FB's, Loser Lenders and Shyster Real Estate agents... you made your bed! Now you lay in it!

"our lawmakers should not forget to call human nature to account. In 1886, 40 years before the birth of former Fed chief Alan Greenspan, the Great Plains was the scene of a terrific real-estate boom, financed by the most reckless kind of lending. There was no Fed, and there were no rating agencies, just lenders and borrowers taking leave of their senses. They returned to them, eventually. They always do.”'

Stupid Happens!!!


New sample of someone sipping from the Stupid cup...

Irene Pena is buying her first home, a three-bedroom house in San Pablo priced at about $500,000. She was scheduled to get the keys to her house this week, but instead she learned 10 days ago that her loan had fallen through because the lender changed its criteria.”

“Pena’s seeking 100 percent financing using a combination of a first and second mortgage, and applied for the loans using a ’stated income’ process, because she cannot document her full income using pay stubs or W2 forms.”

“Her real estate agent, Gema Smith in San Jose, said Pena’s credit score is very good, but the lender denied the loan at the last minute because Pena works for a janitorial service and cleans houses as a side job. Smith said lenders are suddenly balking at making loans to workers who can’t easily document their income, even when they have good credit scores. Two other adults in her household will be contributing to the mortgage, but they lack income documents, too.”

“‘I feel like I was discriminated against,’ said Pena.”

Example of Idiot with a doctorate in education below. (stolen shamelessly from Ben's place)

Unbelievable that someone with a doctorate in education probably spent more time researching the digital camera and flat screen tv he bought than he did when showing up to the housing bubble with a bucket of money and a big box of stupid.

“Unlike many borrowers who took out subprime loans, Andy Sobel had good credit, a decent job and modest savings, but he needed to stretch to buy a home in the white-hot San Diego housing market in 2004.”

“Three years later, Sobel has lost his home and his savings, and he faces a big tax bill as a consequence of a failed subprime mortgage held by Countrywide Financial Corp. he says he should never have been written.”

“He knew payments on the loan could rise, but was told he could refinance. His broker advised him to take out a negative amortization loan that would add $300 each month to his principal and ‘ride it out for a few years’ until the market recovered.”

“‘I said, ‘Are you crazy?’ I started really worrying,’ he said.”

“For Sobel, the banks began foreclosure proceedings in December. Both lenders have agreed to allow Sobel to sell the condo at a loss of $60,000, on which he has to pay taxes.”

“‘You never think that this could happen to you. You feel like an idiot,’ said Sobel, who has a doctorate in education. ‘You fall down and they stab you.’”

Friday, March 16, 2007

Lazy Ass Reporting IV

What does the reporter over at the Press Democrat have for us today? Let me give you a hint...
"Sonoma County home prices dipped again in February, yet there are signs that prices may be leveling off."

"Hidden within the numbers is evidence that the county's housing market is slowly lurching into balance with the spring home buying season approaching."

"The market is very different than it was three months ago," said Suzanne O'Brien, an agent with Prudential California Realty in Santa Rosa. "I think the buyers are ready to make an offer on good value. Three months ago, they were just real gun-shy. I think there's been enough shakeout in overpriced listings."

"Overall, prices have dropped 11 percent since the market peaked in August 2005.In January, the median resale price in the county was $545,000, down from December's $570,000."

And the lender meltdown hasn't even begun to spin our heads around yet. Stay tuned... these prices are nothing but drops in a bucket.

"The February median resale price was $550,000, down 1.1 percent from a year ago, according to the monthly Press Democrat sales report. The eighth consecutive price decline extended the county's longest housing slump in 14 years."

Schadenfreude- those that played are just now able to see the tip of the iceberg dead ahead. The REIC is only rearranging the deck chairs and handing out sheet music to the band on their doomed titanic of an industry. Buh-bye easy money loser lender, realtwhore buttholes! Good riddance!

"Sales continued to fall, down 12.2 percent from a year ago. Inventory levels remain high, with a six-month supply of homes on the market."

Sonoma County Sales: 252
MLS Listings: 3160


Supply of Homes on the Market: 12.53 months supply
(listings divided by sales- really lazy ass reporters, it is not that hard. give it a try next time before taking a dump and printing it in the paper.)

"This is what we mean by a market flattening out in terms of price appreciation. Given the normal month-to-month wobbling of the median, prices just couldn't look much flatter than this," said Marshall Prentice, DataQuick president.

"To some extent, today's market is the result of buyers and sellers locking horns, refusing to give in to the other side's idea of what a house is worth."

"You're trying to price your property based on what the competition is going to be," said Karl Bundesen, owner of Century 21 Bundesen Realty in Petaluma. "I don't see new listings chasing the market down right now. It's pretty flat."

"While homes that were put on the market last year continue to languish, new listings are beginning to sell faster, local brokers say. The newest sellers have come to grips with the housing slump and are pricing their homes in line with current conditions, a step that reduces the chance they will be forced to cut prices later."

Sonoma County Sales: 252
Sonoma County MLS listings: 3160
Months Supply Getting Old on the Market: 12.53

"When Jim Rohde puts his Santa Rosa home on the market next week, he will ask $899,000, comparable to similar houses on the market in his section of the upscale Fountaingrove area."

"I wanted to make sure that I was at the right spot. That reflects reality out there," said the former computer software company owner.

"Open houses are full of people looking for homes right now. They're starting to write offers. They're not waiting anymore," Bundesen said.

"A year ago, Rohde couldn't sell the home for $989,000 and pulled it off the market after six months without an offer. Now he hopes to sell within a month."I really am optimistic," he said."

"The wide gap between new listings and sales narrowed for the seventh straight month, a sign that buyers are gradually chipping away at the supply of homes on the market."

Sonoma County Sales: 252
Sonoma County MLS listings: 3160
Months Supply of houses languishing: 12.53

"Prices fell in five of the nine Bay Area counties in February, with Sonoma County experiencing the second-largest decline, behind Contra Costa County."

"Sonoma County has been one of the Bay Area's weakest housing markets since the housing slump began in fall 2005. A primary reason is the sizable gap between incomes and prices, which makes homes less affordable."

Facts at a Glance
* The median price of a home is still unaffordable for more than half of Sonoma County families.

* The minimum family income needed to purchase a medianpriced home in Sonoma County is $133,311, based on an average effective mortgage interest rate of 6.33 percent and assuming a 20 percent downpayment.

* The approximate median family income in Sonoma County in 2005 was $58,330.

* In December 2005, only seven percent of households in Sonoma County could afford the median-priced home.

* Sonoma County is the second least affordable county in the state, trailing only Santa Barbara.

* Moody’s Economy.com also estimates that the median income-earning household could only afford to buy a house priced at 46% of the median sales price in the second quarter of 2006.

* Percentage of Sonoma County home buyers choosing some form of I/O, Negative amortizing and adjustable-rate mortgages (this includes subprime, Alt-A & Prime)

2003 - 36.8%
2004 - 59.4%
2005 - 69%

Ok, All You Kids, Party's Over ! Get Offa My Lawn!!



Greenspan sounds like somebody's dad, chasing everybody out of the driveway after a Prom party. A Prom party that he supplied the keg for. Now he's gonna let them all drive themselves home and if anything happens , hey, it's not his fault, it's the prices not the loans!!.

Greenspan said the housing downturn appeared to stem more from the recent stagnation in housing prices after years of appreciation than from a decline in mortgage quality but said he was not downplaying problems in so-called subprime loans.

Here's a little advice from Mr. G just three short years ago.

Greenspan recommended that the home-owning public take a good hard look at switching from fixed-rate mortgages, under whose terms payments stay the same no matter what interest rates do, to adjustable rate mortgages (ARMs), where payments fluctuate along with interest rates--which, right now, makes close to zero sense

And oh why oh why did Mr. G have this to say??

It is tempting to ask what stake the chairman might have in trying to convince millions of people to do something so contrary to their own interest. One theory floated by Fed-watchers is that the chairman is trying to help out his classic institutional constituency, the big banks, which hold trillions of dollars in fixed-rate mortgage paper. There may be something to that theory, but there is almost certainly a deeper and more important motive behind this curious advice. Quite simply, Greenspan is trying to keep a wobbly and fragile recovery alive--and using mortgage refinancing to do it.




Sometimes it's enlightening to jump in the Wayback Machine and take a look in the rearview mirror. There's a lot of interesting looking roadkill back there in the tailights. Like this story from the WaPo just a short year ago.

Beverly Wilmore is bracing for the tuition bills about to start rolling in after her 19-year-old daughter starts at Towson University this week. But she's not too worried -- she figures she and her husband can borrow against their four-bedroom Gaithersburg home, which has appreciated from $250,000 when they bought it in 2000 to about $400,000 now.

And as the home's value rose, two years ago the Wilmores refinanced their mortgage, cutting their monthly home-loan payments by hundreds of dollars, she recalled.

Like many families who caught the housing boom, the Wilmores now have more debt than before they bought their home, but they also are wealthier. "I'm thankful for the low interest rate," said Wilmore, 42, a special-education teacher.

The Wilmores are among the millions of Americans who have prospered during Alan Greenspan's 18 years as chairman of the Federal Reserve. They lived through nearly two decades of generally stable economic growth with low inflation, low unemployment and modest interest rates. Under Greenspan's watch, the economy thrived despite stock market crashes, international financial crises, terrorist attacks, wars and other shocks. No wonder, as Greenspan prepares to retire next week, economists have lauded him as the greatest central banker ever.


I wonder if the Wilmores still feel that way? Hopefully, they didn't get into too much trouble. Greenspan wasn't too worried back then though, even if other economists had some questions.

Greenspan didn't define "excess," but economists see troubling possibilities: A sudden reversal in housing prices could trigger a recession if consumers cut back on spending and households have trouble paying their mortgages. The trade gap could swell to a point that forces a sharp fall in the dollar and surge in interest rates, also causing a recession.

Even without a crisis, the debt load will weigh on the economy simply because of the interest to be paid on it, which leaves less money to spend on other things and prevents living standards from rising as fast as they would otherwise, some analysts believe.


So what does Mr. G. have to say for himself today? Just a couple of paragraphs back he was saying it was housing price inflation that was responsible for all the trouble and not those nutso loans he was telling everyone to get. NOW, I see this Think he's worried yet?

Even though he didn't mention the "R" word Thursday, Greenspan's predictions were unsettling.

On housing, he said "if prices go down from here, I think we're going to have problems that could spill over to other areas." Specifically, he was referring to the subprime mortgage market further affecting other segments of the market and economy.

On Thursday, subprime mortgage problems continued to plague lenders. H&R Block said its third-quarter loss, which was reported Feb. 22, at $44.7 million, had grown to $60.3 million due to a sharp decline in the value of its mortgage business.

Greenspan said he found it "remarkable" that consumer spending has not gone down along with home values, considering how much consumers borrowed in home equity in recent years. "I'm puzzled," he said.


He's puzzled?? Wonder how he feels about a Federal Bailout of everyone who listened to him, or maybe a Class Action Lawsuit over his advice......or maybe that's why shares in the Subprime Lenders, (the ones who aren't being subpoenaed) rose today.. Maybe they know something we don't. Maybe they know that Federal Help is on the way.

Thursday, March 15, 2007

Pixie Dust Sprinkled on Sonoma County...

...While Subprime Meltsdown.

The Press Democrat and Index Tribune are only noteworthy for the fact that when you have finished reading either or both you are actually DUMBER than when you started.

This is how the local press has covered the Subprime meltdown (the first domino to fall in the biggest margin call in history)

Notice the local information is either absent entirely or dipped in sugar hoping to hide the taste of the $hit they are trying to pass off as news. They are mostly borrowing their parent company's news feeds and AP reports hmmm... why the Lazy Ass Reporting?

Subprime Suspect: (apparently not written by anyone? as no reporter is credited)

"In 2005, economists were getting nervous as the real estate market reached stratospheric heights."

"They worried that values wouldn't continue to rise forever. They warned that when the bubble burst, people who had taken out mortgages in the subprime market would be most at risk of foreclosures.Unfortunately, sometimes economists are right.A survey released Tuesday found that home foreclosures are at an all-time high with 0.54 percent of mortgages entering foreclosure in the last quarter of 2006. For subprime borrowers, the foreclosure rate is 4.35 percent."

"In Sonoma County, 9.7 percent of all subprime loans were 60 days late on payments, compared with 11.8 percent nationwide."
Now didn't anyone tell them that trying to polish a turd would only result in becoming one with the stink and filth?

"Locally, lenders are responding by tightening requirements. This means people with poor credit history will find it more difficult to buy a home, even at the lower prices."



Bwahahahahahahahahahaha!!!! OMG! Holy Fecal Matter! bwahahahahaha!!! Now they have Fiated lower prices into being? Not yet, baby. Those lower prices are still WAY beyond the reach of most of the Loan Owners in Sonoma County. Only 7% of households... read that... HOUSEHOLDs could afford a median priced home. 70% took out toxic loans in 2005 alone. My bet is that 99% of that 70% cannot afford the loan they own.

Let me give you an example of what this is going to look like: (just delete "New Century" and insert the name of a local realtwhore agency or mortgage lender)

I’m a successful manager at New Century who just bought an expensive new house 8 months ago. The builder in my subdivision just lowered base prices by $80k, making me instantly upside-down on my 80/20.

I want to move back to my home state to cut costs but my savings has taken a hit over the last six months. I don’t have enough cash to sell at this time. To continue paying the mortgage I’ll need a job with high income…whether that’s in the mortgage biz or not. Sux because I’ve been with the company 8 years. I’m in a fine mess and any advice you all can give would be great.

by mtgdude007 March 15, 2007
BROKERUNIVERSE.COM

The supbrime and Alt-A meltdown hasn't even begun to hit Sonoma County yet. The prices will fall. But you haven't seen nothin' yet. There are thousands of Realtors and brokers with no work right now, no income, and lots of investment properties.

It does not matter if you have perfect credit. The problem is that your salary does not cover the real mortgage payment you own.This margin call will slap the $hit eatin' grins off the REIC in Sonoma County, and hopefully the local press will get slapped silly too.

Gobbledygook (also no reporter credited)

"The Federal Reserve and the financial markets don't see eye to eye on liquidity. The Fed says it isn't scarce, but investors don't entirely agree."

"There are many facets to liquidity, making it difficult to define. On the most basic level, it refers to the growth rate of money supply or the availability of credit. It also means being able to trade one asset for another to help minimize a loss in value."

"A major source of liquidity has been financial innovation, in areas such as the mortgage and derivatives markets. That has greatly increased the ability to conduct financial transactions, according to Wachovia Securities senior economist Mark Vitner."

translation... Greenspan fired up the printing press and money began emerging from every orafice of our nation's lending institutions. Joe6Pak could fog a mirror and therefore get a million dollar mortgage. Frito-Lay drivers, Gardners, Barbers, the UPS guy all were living large like they shat Ben Franklins thanks to all the dope money firehosed into the economy packaged as Howmuchamonth Mortgage products.

So Financial Innovation: = Toxic Mortgages for anyone who could prove only that they had a pulse.

Ability to conduct financial transations: = No regulation forcing lenders to verify ability to repay from borrowers.

Really? This has to be regulated? The professionals, and I use this term loosely, need actual regulation to tell them to verify a borrower's ability to repay a loan?

"But when there is too much liquidity for too long, "people tend to do some very foolish things," he said, such as loaning money to individuals with spotty credit histories to buy homes more costly than their limited income would deem to be prudent."

ah yes... very foolish indeed.

"Renewed calls from central banks and financial regulators for tightened lending standards are finally starting to take hold, which many market-watchers point to as one of the drivers of the recent pullback in stocks after months of record-setting gains."

"the volume of subprime loans to individuals with shaky credit is likely to decline at least 30 percent this year, analysts forecast. That means a big slowdown in the economic effects of the $600 billion in new obligations created last year, according to Merrill Lynch."

"For now, liquidity isn't totally dried up, but it certainly isn't as plentiful as it was not too long ago. "

Good heavens. Whoever wrote this Pressdemocrat piece of $hit actually ended the article with that line. WTF?

Here is what the PD Ripped from the L.A. Times

"A record number of homeowners entered foreclosure at the end of last year and more are making late mortgage payments, especially those with high-risk, subprime and government-financed loans, according to a quarterly survey released Tuesday by the Mortgage Bankers Association. "

"New Century Financial Corp. on Tuesday said it was under investigation by federal securities regulators as the New York Stock Exchange suspended the Irvine-based company from its stock listings. In San Diego, Accredited Home Lenders Holding Co. said it was laying off workers and looking at "strategic options" as its financial woes worsened."

"The national survey showed that 4.95 percent of average mortgage loans had late payments, compared with 4.67 percent the previous quarter and 4.7 percent a year before. It was the worst showing since spring 2003."

"The fraction of mortgages entering foreclosure during the fourth quarter of 2006 climbed to 0.54 percent, the highest since the association started reporting in 1972. The previous high of 0.50 percent occurred in the second quarter of 2002 as the country was recovering from a recession."

"The survey covered about 80 percent of the mortgage market, more than 43.5 million loans, including 33.3 million prime loans, 6 million subprime loans and 4 million government loans."

This is the $hitpile passed off as local reporting:

"The storm that is battering high-risk mortgage lenders is being felt in Sonoma County, where lenders are tightening standards for loans that almost 1 in 10 buyers needed to purchase a home."

"In another blow to the county's housing market, families with poor credit or those who can't afford down payments will find buying a home more difficult than just a month or two ago, when these so-called subprime loans were still widely available. That could reduce demand for homes in a market that has been slumping."

Um... but there was no bubble here. Common knowledge that up to the last month or so the market was being supported by families with poor credit and no downpayment, but why should that be a problem? Crap- if these people would just pay their bills on time then the party could continue huh? Is this the thinking behind this kind of fecal matter that goes unquestioned by the idiots that make up the true believers of the Real Estate Only Goes Up religion?

'"You're seeing a lot of the banks now that were offering 100 percent financing reducing that to 95 percent. Some banks have just ceased underwriting those loans," said Roger Farah, Santa Rosa branch manager for Mission Hills Mortgage Bankers."

"John Klein, branch manager at Charter Funding in Santa Rosa, has turned away more than a handful of home buyers the past month or two because they no longer qualify for loans under the tighter underwriting standards."They really can't afford what's out there," he said."

"The crisis in the subprime mortgage sector grew Tuesday as the Mortgage Bankers Association reported that more homeowners are defaulting on their loans."

"Sonoma County, however, may be able to weather the storm better than most other regions in California, according to data issued Tuesday by First American LoanPerformance, a San Francisco mortgage tracking firm. Only 7.9 percent of the county's home loans are subprime mortgages, well below the national average of 14.7 percent, First American LoanPerformance reported."

FICO scores aren't worth diddly if you can't cover the bills when your payment resets.

Hope you are ready to put your money where your mouth is, because I am going to save this trash quote and trot it out and ride it all across this county when Sonoma County really hits the crapper.

"Subprime loans traditionally have been issued to buyers with spotty credit or erratic incomes. Banks expanded their use by relaxing qualifying standards, such as allowing buyers to state their income without providing detailed documentation. The loans grew in popularity in Sonoma County among buyers who had to stretch financially to buy homes as prices soared during the first half of the decade."

Tom Stone,

tell them what the percentage rate is on Alt-A in the county. That comes next folks. Alt-A is already circling the bowl and while 7.9% of our 70% with toxic loan products may have been Subprime, the rest were still toxic waste loans packaged as affordability products to people with Fair credit and Good credit who COULDN'T AFFORD THE HOUSES THEY WERE BUYING!!!! Subprime is merely the first domino to fall. The Alt-A's and Primes will not be left unscathed and they will become those who need the subprime market that will no longer exist for them.

"Once in a house, homeowners count on rising values to generate the equity necessary to refinance into a longer-term loan with a lower interest rate."

oops! Looks like the funny money dance doesn't always work and turns out you do have to have a job that pays you enough to pay off your debts after all! Who could have imagined that? Doesn't Tinkerbell live here? Why in the world should a borrower have to pay out of their own pocket for the money they borrowed for a house. Doesn't the house pay for itself?

"Foreclosure activity has been soaring here and across the nation as more homeowners in financial difficulty face losing homes. The number of default notices lenders sent to Sonoma County homeowners more than doubled in the fourth quarter of 2006, compared with the same period in 2005, and was the highest in nearly a decade, according to DataQuick Information Systems."

"The loss of buyers relying on subprime loans could be offset by resurgent buyer activity in response to falling prices, said Sandy Geary, broker and owner of Re/Max North Bay Realty in Rohnert Park."

Sandy Geary is the new winner of the HUA Award.

""It's a little tighter. We have had lenders be a little more picky on their documentation. I have had deals where the deals took a little longer," she said. "But I think people are going to be very surprised at what's going to be going on in the next few months. Anything that is priced right is selling in a reasonable amount of time and sometimes with multiple offers."'

"With more lenders facing greater losses, Wall Street investors are pulling back from purchasing mortgage-backed securities. One result is more stringent lending standards."I can't tell you how many lenders we've gotten letters from in the past week," said John Klein."

"What had been a gradual tightening accelerated the past month or so. Lenders had been demanding higher minimum credit scores. The latest move has been eliminating 100 percent loan financing."

'"They feel it's going to slow down the amount of delinquencies," Roger Farah said. "If it's harder to find lenders that are willing to accept those loans, then it is more difficult to help those buyers. I think it's going to have an impact on the market."'

Savings And Loan Redux???



I figured it would just be a matter of time but who would have thought that it would have happened so soon. I guess it took the articles about the bubble finally popping and the massive default rate of the sub-prime borrowers to get their attention, but it looks like "help" is on the way.

U.S. lawmakers will have to consider providing aid to about 2.2 million subprime mortgage borrowers who are at risk of defaulting and losing their homes, Senate Banking Committee Chairman Christopher Dodd said today.

``The impact of losing 2.2 million homes I suspect will be in a lot of areas of our cities and towns that are already pretty hard hit, so we clearly want to look at that and legislate,'' Dodd, a Democrat from Connecticut, told reporters in Washington after a speech to the National League of Cities.

Foreclosures involving homeowners who took out subprime loans from 1998 until 2006 could cost $164 billion, Dodd said, citing a December study by the Center for Responsible Lending in Durham, North Carolina. The government needs to provide at-risk homeowners ``forbearance or something like that to give them a chance to work through and get a new financial instrument here that they can manage financially better,'' Dodd said


They're talking about an infusion of 164 billlllllllllllion dollars, when what is really needed are about 164 billion !Q points. To put these numbers in perspective the cost of the Iraq war so far is something like 173 billion dollars. Ok? Ok.

Ok, now what about those people who've been prudent, and sat the bubble out and kept their crdit card holder zipped? That is the question.

Federal aid ``would come at a cost,'' said Douglas Duncan, chief economist at the Mortgage Bankers Association. ``It has to be paid for and the question is would the 34 percent of homeowners who have no mortgage be willing to pay taxes to support the bailout of people who traditionally have not managed credit well?''

It's interesting that many people who have been careful, get into financial trouble because, of illness, death, divorce and job loss. Things that happen beyond their control. One can be wiped out in a flash by the discovery of a few errant cells. What do we do to help them. Nothing. Tough luck. There is no program for them. They lose. Now there might be one for fraud and stupidity?

I am far from being a hardass. But I am truly flummoxed here. Should someone be saved because they didn't read the paperwork or do the math on the most expensive purchase most people ever make. Or because they lied on their documents, or their RE agent or mortgage broker did. Already I've seen ads online for class action suits against banks and lending institutions. The appeal is always, "Have you got a loan that you don't understand? Is your martgage going up up and up? We can get you all your money back." I think a lot of people are going to be watching what happens with this case

Helllloooooooo!! If you have a document you don't understand that is going to be taking a chunk out of your butt for the next 30 years, DON'T SIGN IT, get someone to explain it to you! Or am I making too much sense.

Wednesday, March 14, 2007

Too Much Of A Bad Thing....










An oversupply and an underdemand in housing , or what's that trickling down my leg??? Remember when all the cool kids were buying houses? Everybody was doing it. Of course there were those of us who "just said no!" Nobody listened. there was no "Very Special Episode" of House Hunters on HGTV for us. We were renters, losers, we actually put our money in Banks rather than granite counter tops. All of our houseowning friends said we were gonna get an economic wedgie and we'd better get ourselves a mortgage PDQ . House builders kept putting the houses up , and then they started super-sizing them. Some people couldn't just stop at one. If one could make money off of one house, how much more money could one make if one bought two or three or more? The lenders made it easy. Of course they did. Enablers.Go out on any street corner, the first vial is always free. But now the tipping point has come

NEW YORK (CNNMoney.com) -- Subprime lenders are already getting crushed, but the impact rising mortgage delinquencies will have on home prices overall is still an open question.

At a minimum, it means financing is drying up for those with less-than-perfect credit and that spells fewer home buyers.

And foreclosed properties will add supply to a housing market that already has too much.

"It's going to be a really big deal," says Dean Baker, co-director of the Center for Economic and Policy Research.


The PTB have finally roused themselves and smelled the Sanka. They're calling it Scarey Math and you can bet that it's a class that all those RE folks and Eager Flippers out there would like to cut.

Mark Zandi, chief economist for Moody's Economy.com, is also concerned. "I think the subprime problems will take housing activity to a whole other level," he says.

Zandi is projecting a doubling of subprime defaults this year to 800,000. "Those homes will go on the market at a discount and will weigh on the market," he says. He also believes that 500,000 fewer Americans will be able to obtain financing because of the tighter standards.


Ok, so nobody can afford to buy a house and nobody can qualify under the new stringent loan standards , so where is everybody supposed to go??? Rentals! Ergo, higher demand and higher rents. At least that's what the nice man down at the RE office has been telling me. They're not making anymore land so better get onboard before it's too late. Well, they may not have been making anymore land but they have been building a whole s---load of Condos, and Flipper Palaces .










Check out the Market Oracle for a peek at where the rental market's going. Just a tasty taste. Just for you:

the bulls argue that traditional apartment construction has been weak. And to a certain extent, they're right — companies haven't been building all that many 200-unit or 300-unit rental complexes.

But here's the problem with that argument: Too many homes, townhomes, and condominiums WERE built — and sold to buyers as investments. In other words, they were sold to people who were going to turn around and rent them out anyway!


And even more homes were bought as “flips” — houses that would be quickly fixed up and resold. Heck, some buyers never even thought they'd have to go through the fix-up stage … they figured they'd be able to sell for higher prices with no additional work whatsoever.

Unfortunately, the housing market plunge has turned many of these flippers into unintentional landlords. They can't sell, and they can't afford to pay mortgages, insurance, and taxes while their houses sit there empty, either. So they're trying to rent their properties to staunch the cash flow bleeding.

In other words, while the construction of traditional apartment complexes may have lagged during the boom, plenty of town homes, condos, and single-family homes were churned out along the way. The result: Hundreds of thousands of those units are now sitting empty!

The U.S. Census Bureau says 2.7% of the country's homes were vacant in the fourth quarter of 2006 — the highest percentage in U.S. history!


For those who do not chose to buy. Yet. Or ever. It appears that there will be no shortage of housing options available. Why settle for an apartment when one can have a lovely view condo, or townhome, or a flipper palace. After all most of the people trying to find tenants for these places in a "loose market" as they call it, were actually only tenants themselves who couldn't make the rent.

Tuesday, March 13, 2007

What Happens When The Mortgage Lender Goes Belly Up ???....


This happens is what happens,

Subprime mortgage lender New Century Financial Corp.'s problems deepened Tuesday as the New York Stock Exchange took steps to delist its shares and the company disclosed that the Securities and Exchange Commission was conducting a preliminary inquiry into the accounting errors that inflated the value of its loan portfolio.
The company disclosed earlier this month that a federal prosecutor in California is conducting a criminal investigation into its accounting errors and trading in its securities.


most likely followed shortly by jail.

This was the most quotable statement in my opinion
Last month, New Century said it lost track of how frequently these borrowers missed payments on their mortgages. Because New Century's books didn't reflect how often borrowers defaulted and how likely borrowers were to default in the future, the value of the company's loan portfolio was overstated.

And I guess that the borrowers defaults weren't the only thing they were ignoring :
- A board member at battered subprime lender New Century Financial Corp. (NEWC.PK: Quote, Profile, Research) last month sold $2.75 million worth of stock amid a 36 percent plunge in the company's share price, U.S. regulatory filings show.

The director, Michael Sachs, said he was not aware the shares were being sold until after the February 8 transaction was completed, according to a filing with the Securities and Exchange Commission. Since then, lenders have stopped providing funding to New Century, pushing the company toward bankruptcy.


Read all about it here

Say what!!!! They LOST TRACK of how many people defaulted and were late and that one of the Directors was bailing away from that garbage scow as fast as he could. And of course for all those that thought mortgages were a great investment.

New Century's stock has plummeted 96.8 percent since a 52-week high of $51.97 last May. The stock traded last at $1.66.

Dang!

And new Century is not the only one. This whole thing may make Enron look like light fingers in the collection plate before all this is out , as the Big Banks go from chummy with borrowers and RE people to chum. I just love the way Forbes talks.

As the sharks circled beleaguered subprime lender New Century Financial Monday, speculation also swirled about which investment banks held the most exposure to the sector.

Wall Street has enthusiastically financed mortgage lenders over the latest real estate boom cycle, providing loans for companies such as New Century (nyse: NEW - news - people ) to fund new mortgages that the investment firms could buy up, package into bundles of securities and sell to yield-hungry investors. More than $1 trillion of these mortgage-backed securities were sold in the U.S. alone last year.


Read the article for the list of who's got their junk hangin' out.
It's beginning to look like a game of who's going to be left holding the fussy end of the lollipop .

So now they're getting it.
Late mortgage payments are up up up, in fact to a 3 1/2 year high according to this article

The Mortgage Bankers Association, in its quarterly snapshot of the mortgage market released Tuesday, reported that the percentage of payments that were 30 or more days past due for all loans tracked jumped to 4.95 percent in the October-to-December quarter.

That marked a sharp rise from the third-quarter's delinquency rate of 4.67 percent and was the worst showing since the spring of 2003, when the late-payment rate climbed to 4.97 percent.

The association's survey covers 43.5 million loans.

The latest snapshot of the mortgage market comes amid mounting concern on Wall Street about troubles facing subprime lenders who make loans to people with poor credit.


Sonoma Housing Bubble's been like a voice crying in the wilderness. We've had everything but the sandals and goatskin cape, but who noticed??? Certainly not the Out Of Town Investor who's building the spec house up the road from us, with a sweeping view of the valley. This sucker bought the lot recently. A private little chat with a certain birdy who knows whatof they speak says that the final construction cost will come in at upwards of 1 milllllllllliion dollars. If the investor is lucky, and seeing that they're putting their spec house up this year I wouldn't go to Vegas with them.
And then there's the other guy who's got his place around the corner up for over 2 mill, wonder how he's doing??

This is going to be a very interesting summer season housing wise. There are about 5 houses for sale alone on the street where the spec house is going up. One has been for sale for close to a year. I don't think prices will be going up. As to the spec house being built; it stands on the edge of a cliff ...in more ways than one.

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