The 12 steps to Financial Armageddon.

I saw a pale horse and upon it a pale rider.
The name of the horse was Pestilence.
The name of the rider was Death..

1. PermaRenter Says:
   February 22nd, 2008 at 8:35 pm

   Step 1 is the worst housing recession in US history. House prices will, he says, fall by 20 to 30 per cent from their peak, which would wipe out between $4,000bn and $6,000bn in household wealth. Ten million households will end up with negative equity and so with a huge incentive to put the house keys in the post and depart for greener fields. Many more home-builders will be bankrupted.

   Step 2 would be further losses, beyond the $250bn-$300bn now estimated, for subprime mortgages. About 60 per cent of all mortgage origination between 2005 and 2007 had “reckless or toxic features”, argues Prof Roubini. Goldman Sachs estimates mortgage losses at $400bn. But if home prices fell by more than 20 per cent, losses would be bigger. That would further impair the banks’ ability to offer credit.

   Step 3 would be big losses on unsecured consumer debt: credit cards, auto loans, student loans and so forth. The “credit crunch” would then spread from mortgages to a wide range of consumer credit.

   Step 4 would be the downgrading of the monoline insurers, which do not deserve the AAA rating on which their business depends. A further $150bn writedown of asset-backed securities would then ensue.

   Step 5 would be the meltdown of the commercial property market, while step six would be bankruptcy of a large regional or national bank.

   Step 7 would be big losses on reckless leveraged buy-outs. Hundreds of billions of dollars of such loans are now stuck on the balance sheets of financial institutions.

   Step 8 would be a wave of corporate defaults. On average, US companies are in decent shape, but a “fat tail” of companies has low profitability and heavy debt. Such defaults would spread losses in “credit default swaps”, which insure such debt. The losses could be $250bn. Some insurers might go bankrupt.

   Step 9 would be a meltdown in the “shadow financial system”. Dealing with the distress of hedge funds, special investment vehicles and so forth will be made more difficult by the fact that they have no direct access to lending from central banks.

   Step 10 would be a further collapse in stock prices. Failures of hedge funds, margin calls and shorting could lead to cascading falls in prices.

   Step 11 would be a drying-up of liquidity in a range of financial markets, including interbank and money markets. Behind this would be a jump in concerns about solvency.

   Step 12 would be “a vicious circle of losses, capital reduction, credit contraction, forced liquidation and fire sales of assets at below fundamental prices”.

Bailout in the Sand (HousingFEAR original poem)

A HousingFEAR Original Poem.

Bailout in the Sand

One night a banker had a dream.
He dreamed he was walking along
the beach with Bernanke.

Across the dark sky flashed scenes from his unethical life.
For each scene, he noticed
two sets of footprints in the sand,
one beloning to him and the other to Bernanke.

When the last scene of his useless life flashed before him,
he looked back at the footprints in the sand.
He noticed that many times along the path of his life
there was only one set of footprints.
He also noticed that it happened at the
very lowest and saddest point of the mortgage crisis.
This bothered him and he questioned Bernanke about it.

"Bernanke, you said that once I decided to follow you,
you'd walk with me all the way.
But I have noticed that during the most
troublesome times in the housing crisis there is
only one set of footprints.
I don't understand why when I needed you most
you would leave me."

Bernanke replied "My precious, precious child,
I love you and would never leave you.
During your times of trial and suffereing,
when you see only one set of footprints in the sand,
it was then that I froze subprime arms."

McLovin should drop out

McCain Mistress on Right

Shocking resemblance to Cindy McCain

From henceforth, McCain shall be known on this blog as McLovin.

The New York times reports that McLovin has been enjoying the company of a special interest lobyiest who looks shockingly like his wife making the story even more credible. The American people could have nominated a great man like Ron Paul, but instead choose a man who supports a 100 year policy of bankrupting our country in Iraq and a man who allegedly cheats on his wife with a woman who looks like a younger version of her.

Mclovin will lose the general election to Obama in a 40 state landslide and the Republican party will get what they deserve for shunning and ignoring the only candidate who shown the flashlight on the neo-con cockroaches who have hijacked the party.

Hopefully when the embarrassing truth of how much the party has lost its way is revealed this November the Neo-cons will be forced to scurry back into the darkness. God willing, the Republican party will elect a true anti war conservative like Ron Paul next time around.

You better believe it

Why the housing bailout will backfire

The government is starting to get desperate as they realize that we are headed towards a historic banking breakdown and housing great depression.

The politicians don't care about you losing your house. They know you will just rent and apartment and go on about your life happily. Of course it's an election year so you will hear all sorts of "I feel your pain" comments meant to garner votes and express pseudo sympathy for the common man losing "the American dream" but the reality is that is just an ulterior motive and they can really care less.

Don't get me wrong, they do want to keep you in your home, but not for the reason they want you to think.

The banking industry is totally screwed. They made so many bad mortgages and are going to lose so many billions of dollars with the coming wave of subprime arms resetting this summer, and the second wave of option arms resetting in 2010 and 2011 that they know a historic calamity is just around the corner... This is so bad that huge banks like Citibank, Chase, Wells Fargo, Bank of America could very well not be around five years from now if they do not keep people in their homes, and everyone in DC, Wall Street, and the people who read all the housing blogs know it.

Unfortunately most people on main street who only get their news from CNN and Fox really have no idea whats coming.

So the senate, secretary Paulson, and the banks are concocting a scheme to renegotiate, freeze, and lower interest rates for people who can't make the payment. This is the bailout that is meant to stave off the second great depression and save the US banking system.

Here is the problem... I don't mean to sound like a broken record for those who have read my past rants, but it all comes down to moral hazard.

• I put 20% down on my house
• I got a 30 year fixed mortgage at 6.5% in 1-2006
• I had a job
• I had a credit score over 750
• I bought a house with a payment I could afford and have not been late yet.

I basically did the responsible thing and I am going to get screwed. I could have got a 2 or 3 year arm at 5.0% interest and would have been paying much less money this whole time. I could then call my bank, claim hardship that I would not be able to pay my rate after it reset, and stayed locked in at 5.0% for the next few years.

Being irresponsible would have saved me thousands of dollars paying a lower rate for the arm and then being able to stay locked in at that low rate thanks to the bailout.

Instead here I am, I did the right thing, and I will be financially punished for it while the person who got their house with a bad credit score, no down payment, and bought more house than they could afford will get to continue happily living in their McMansion for a rate cheaper than mine.

What they government needs to realize is that not only are more people going to be encouraged to do the irresponsible thing in the future since they face no consequences for their stupid decisions but I think this plan will backfire in a way they have not thought of.

What happens when the responsible revolt? What happens when people who did things the right way threaten to walk away if they do not receive the same low interest rate their dumb ass 550 credit score neighbor is? You can read it on the blogs, people are pissed, and I have a strong feeling that our voices will be heard.

Furthermore, why will investors ever invest in mortgages again knowing that banks are going to change the terms of their contract. That is immoral and just plain bad business. This raises new and troubling questions; when burned investors don't buy mortgages anymore and no one can get a loan in the future what will happen to the housing market? Only when this question is answered will we see the true ramifications of this perverse and often baffling bailout.

My condo development has been blacklisted by WAMU!

The mortgage meltdown is so bad that banks are now refusing to lend money to certain condo developments that they feel are high risk.

If you click Michigan on the Wamu blacklist you will see a list of all the condo developments which have been blacklisted and mine is one of them.

I guess soon you will need to have the full purchase price in cash if you want to purchase a condo which will only drive condo prices down even further.

What a disaster!

CAN YOU SMELL WHAT BARACK IS COOKING?

Am I the only one who notices this?

Listen and compare the two clips and hear both their voices.

They have the same damn voice!
They have the same sounding name... The Rock and Ba-Rock
They look alike... Pretty much.

Maybe Obama should make The Rock his celebrity sidekick sort of like Huckabee and Chuck Norris.

(EDIT)
If you play the two clips at the same time, it really sounds like a hit song... Barack says...They Saaaid... Barack says...They Saaaid!...Barack Says

I think I am on to something here... Can anyone mix this?

Detroit had top foreclosure rate in 2007

LOS ANGELES (AP) — The Detroit area, hit hard by the double-whammy of unemployment and a slumping housing market, had the highest foreclosure rate in the nation last year, with several cities in California ranked close behind, an analysis of foreclosure activity in the country's largest 100 metropolitan areas shows.

Some 4.9 percent of the households in the Detroit metro area were in some stage of foreclosure in 2007 — 4.8 times the national average, according to the study being released Wednesday by mortgage research company RealtyTrac Inc.

Stockton, Calif., ranked second with about 4.8 percent of its households in some stage of foreclosure, while the Las Vegas metro area was third with a 4.2 percent rate.

Irvine, Calif.-based RealtyTrac determines the ranking by comparing the number of households in a metro area with the number of foreclosure filings, which include notices of default, auction sale notices or bank repossessions.

In all, 72,616 filings on 41,273 properties were reported in the Detroit metro area, which includes Livonia and Dearborn. The foreclosure rate represents a 68 percent jump from 2006, RealtyTrac said.

Michigan has been in a protracted economic downturn and has led the nation in unemployment, a combination that has caused many homeowners to fall behind on mortgage payments.

Another Michigan metro area comprising Warren, Farmington Hills and Troy was ranked 17th, with 2.1 percent of its households facing foreclosure.

Truer words have never been spoken.

“Capitalism without failures is the worst form of socialism.”

HousingFEAR "Stimulus Bill" thought of the Day

This shortsighted plan poses a terrible risk to every American taxpayer, especially retirees, because Social Security money will be needed to bail out Fannie and Freddie. And even if you live in high-priced San Francisco, Los Angeles or New York - and stand to benefit from the increased loan limit - this is a horrible fraud on you, too, because raising the limit to $730,000 risks a systemic crisis that will cost far more than any temporary rebate check.

In support of the economic stimulus bill, Bush will have to face "working American families" and explain that some of their tax money is going to be spent guaranteeing $730,000 mortgages on $1 million homes. It's like some sort of upside-down communism where the poor pay the rich welfare. Why should taxes from families earning $48,000 a year be used to support expensive mortgages in New York, Los Angeles and San Francisco? Welfare for the hungry and homeless is evil, but welfare for million-dollar homeowners facing a tough refi ... well, that's called "helping the economy."

I can imagine the president's radio address playing in the heartland: "We have some families with million-dollar homes on the coasts who are really hurting and so we need you, the working families of America, to stand together with them and help them avoid the kind of home price depreciation that might leave them without a new Lexus for years."

-Sean Olender

Center for research on globalization

Yes, Americans really are this Dumb.

The Mouse that roared: Why Ron Paul won the election

As much as I am disappointed and saddened by last night, this message written by Doug Wead on his blog really puts the whole election into context. Ron Paul will not win the nomination, however, the revolution and idea's that his candidacy have ignited will not be extinguished.

Well now, Republicans say, we have a nominee. That may very well be but there was only one clear winner in the confusing GOP nominating contest and it was not John McCain. The winner was Ron Paul. And the effects of his win will be felt for years to come.

Ron Paul made a classic political mistake. He told the truth. In debate after debate he pointed at his party, his president, his fellow contenders for the GOP nomination, shouting aloud like the little boy in the proverbial story, “they have no clothes” and lo and behold, we looked and they didn’t. They were all naked.

He showed that the conservative movement has lost its way, its moral authority and its logic. He showed us that we have become a red team versus blue team. That since we have decided that this is a political war and all normal rules are suspended, conservatives can do liberal things to win it. Conservatives can run up big deficits if it helps their side win. They can dole out needless pork if it elects another “conservative” to congress. They can go to war if it makes their president look like a leader and wins him another term.

But in the process, Ron Paul showed us, that we have lost our way. We are no longer conservatives. We are fighting for power not for principles. We have become corrupted by the process and the only way back is to retrace our steps and find all the things we discarded along he way.

Barry Goldwater lighted a similar fire with his Conscience of a Conservative. Its truth and arguments were so obvious and so honest that one laughed aloud while reading it. But Goldwater, himself, was doomed to political defeat. And Ron Paul had no chance to win this election either. One could see that when he first opened his mouth.

And yet, the words and arguments of Ron Paul are still resonating. They still hang over this election. They are haunting and troubling. They are producing blogs and papers and books and like Goldwater’s revolution they will one day very likely produce their own Ronald Reagan. And when those heady days happen a small but hearty band of pioneers, who first had the nerve to join him and start shouting from the street, “They aren’t wearing any clothes,” will be able to say that they could see what the country missed. They were there when history was made.

John McCain and his poorly chosen words, of staying in Iraq a hundred years, have almost guaranteed that he will be the answer to the trivia question, who was the Republican candidate who lost to the ticket that claimed the first woman and black for the presidency? Another question may very well be, “What other candidate ran that year and launched the movement that has dominated national politics for the last generation?”

And the answer will be Ron Paul.

Tent cities in California due to housing crash?

ONTARIO, California (Reuters) - Between railroad tracks and beneath the roar of departing planes sits "tent city," a terminus for homeless people. It is not, as might be expected, in a blighted city center, but in the once-booming suburbia of Southern California.

The noisy, dusty camp sprang up in July with 20 residents and now numbers 200 people, including several children, growing as this region east of Los Angeles has been hit by the U.S. housing crisis.

The unraveling of the region known as the Inland Empire reads like a 21st century version of "The Grapes of Wrath," John Steinbeck's novel about families driven from their lands by the Great Depression.

As more families throw in the towel and head to foreclosure here and across the nation, the social costs of collapse are adding up in the form of higher rates of homelessness, crime and even disease.

While no current residents claim to be victims of foreclosure, all agree that tent city is a symptom of the wider economic downturn. And it's just a matter of time before foreclosed families end up at tent city, local housing experts say.

"They don't hit the streets immediately," said activist Jane Mercer. Most families can find transitional housing in a motel or with friends before turning to charity or the streets. "They only hit tent city when they really bottom out."

Steve, 50, who declined to give his last name, moved to tent city four months ago. He gets social security payments, but cannot work and said rents are too high.

"House prices are going down, but the rentals are sky-high," said Steve. "If it wasn't for here, I wouldn't have a place to go."

Source

Is this really happening in America?

Oakland County Michigan Housing Price Decline for 2007

Click HERE for the full results.

Perhaps the most disturbing thing (if you are a Oakland County homeowner) is the median sales price decline from 2006->2007 located on the far right.

Some notable figures

Addison Township:
2006: $512,750
2007: $278,432
Diff: -45.70%

Auburn HIlls
2006: $ 177,233
2007: $ 125,167
Diff: -29.38%

Bloomfield Hills
2006: $350,250
2007: $244,600
Diff: -30.16%

Independence Township
2006: $274,759
2007: $208,698
Diff: -24.04%

Oak Park
2006: $120,308
2007: $82,233
Diff: -31.65%


What do these numbers mean?

There definitely was a housing bubble in Oakland County Michigan, and its popping fast!

Thanks Russ for the info.

HousingFEAR thought of the Day.

# losaltosrenter Says:
February 2nd, 2008 at 4:59 pm

I’m looking forward to watching the poor lending practices enema rip through the bowels of the CC industry just as folks start to wrap their head around the mortgage debacle. A lovely 1-2 sucker punch.

Having spent the last three years watching people who make 75, 50 even 25% of what I make load up on big screens, leased sports sedans and granite I’ve often wondered how they hell they do it. The answer of course is being leveraged to their eyeballs and spending 120% of every dollar earned. Meanwhile, we sit debt free and carefully investing the delta between our rent and what a mortgage on a comparable property would cost. Soon, I will spread my leathery wings and descend like a giant, putrid vulture to pick at the carcass of deflated assets that are already beginning to rot and fester...


^I can't breathe, lol!

I have to admit, this video made me weep like a girl.

I still believe.