I am Getting Married Today

It seems like every time I really enjoy writing, and the blog is starting to grow something major in my life changes and I have to put it on the back burner.

I am getting married today to a very beautiful and wonderful w0man so needless to say I am going to have to take a temporary break from the blog.

I will be gone on my honeymoon for 2 weeks, however, I promise I will be back and bringing you my latest Housing FEAR articles once I return.

In the meantime please check out HousingPanic, Housing Doom, Irvine Housing Bubble or one of the many other great links in my sidebar to keep you informed and entertained while I am gone.

Thanks for being a reader :)

Looks like OPTION ARMS have done Wachovia in.

I knew Wachovia would be in trouble when I was still seeing their commercials for "Pick a Payment" Option arms as recently as this spring. You had to know that the ad wizards in charge of this company were not very bright when they continued to offer toxic mortgages well into 2008.

Check out this great article that explains it better than I can...

Almost a year ago I noted that you would be able to determine the banks that would recover the fastest from the mortgage crisis by identifying the ones that are ending their exotic loan programs, because it would indicate which banks actually learned their lesson around offering toxic mortgages. I.e. the banks that are still offering exotic loans haven't learned a thing, and are just going to get into more trouble in the future.

This brings me to today's news that Wachovia has "just" decided to stop offering option ARMs , despite the fact that mortgage crisis is well over a year old and we're coming upon the one year anniversary of the credit crunch.

(From the WSJ) "In a reversal, Wachovia Corp. said Monday it would stop making option adjustable-rate mortgages, which were why the bank bought Golden West Financial Corp. but is now stuck with more than $120 billion of the rapidly souring loans.

Wachovia also said it will let option-ARM borrowers escape prepayment penalties, but loan balances likely have swelled too big for many of these borrowers to refinance.

The changes effectively mean the dismantling of the core product of Golden West, the Oakland, Calif., thrift Wachovia bought for $25 billion two years ago. Option ARMs give customers multiple payment choices, including a minimum payment that may not be enough to cover the interest due. Borrowers who elect the minimum payment on a regular basis can see their loan balance grow.

For months, Wachovia had been dramatically curtailing its origination of option-ARM loans, so the moves weren't entirely unexpected. But the changes were still a blow at Wachovia, based in Charlotte, N.C., which has seen its shares fall 70% in the past year.

For years, the "Pick-a-Payment" option ARM was the core offering of Golden West's World Savings unit. But the company saw its market share slip as competitors such as Countrywide Financial Corp. and Washington Mutual Inc. aggressively marketed these loans to a wide variety of borrowers. In 2006, Golden West was the third-largest originator of option ARMs, with $31 billion of these loans, according to Inside Mortgage Finance. At the end of the first quarter, the company held $121 billion of Pick-a-Payment loans on its books.

But option-ARM originations have dwindled as the number of problem loans has climbed. Option ARMs accounted for just $4 billion of mortgage originations, or less than 1% of total loan volume, in the first quarter, says Inside Mortgage Finance. In 2006, their peak year, originations totaled $255 billion."

IF that doesn't spell: "Uh, we don't know why our mortgage investments went south and are bloody clueless" I don't know what does. Merely curtailing a toxic mortgage doesn't solve problem it just lessens the impact, and Wachovia should've been focused on a complete evisceration of the problem. Wachovia should've admitted that their Golden West Financial investment was a bust last year and ended its option ARM originations then, instead of continuing the practice and making things worse.

Finally the key metric on option ARMs to focus on this: "More than 18% of the option ARMs originated in 2005 and 2006 are already at least 60 days past due, says Barclays Capital, which looked at loans that were packaged into securities. The vast majority of these borrowers have yet to see their monthly payments recast so they begin making payments of principal and full interest, at which point payments can increase by 60% or more."

In other words the problem is about to get markedly worse because most option borrowers haven't hit the point where they won't be able to make their payments, and due to the nature of an option ARM very few of these borrowers are going to be able to refinance without a severe capital infusion or principle forgiveness.

Sources:

The Wall St. Journal: "Wachovia to Discontinue Option-ARMs" -- Valerie Bauerlein and Ruth Simon, July 1, 2008

It is still hard to believe the greed and stupidity that so many of these banks had offering these products in the first place. Even during the housing boom when no one thought the good times would ever end, these loans did not make good business sense. How a bank can continue doing it for a year after the mortgage meltdown occurred is simply mind boggling...But in case you have been living in a cave and could not comprehend how Wachovia was able to post a 9 billion dollar loss today... Now you know :)

Reflections of the Second Great Depression

Scared yet?

You should be.

The Real Irony of the CondoFiasco story.

Most of you who read this blog know the story of Condofiasco.com
In case you don't there is a guy named Zack Preble who put down a deposit of $75,000 on a pre construction one bedroom condo in Miami back in 2005 at the peak of the boom. He hoped to flip the 375K unit to someone else before he even had to close on it. If sucessful he would have made a huge profit for basically doing nothing more than signing a contract.

The real estate market turned on Zack, and the closing date approached quicker and quicker while his condo dropped in value. He was facing a choice of either walking away from his life savings of 75,000 dollars or closing on a condo he could not afford (and was now worth only a fraction of what he agreed to pay)

It was kind of like Alien vs Predator... No matter who wins, he would lose.

Zack came up with a plan to sell shares of his condo for approx $35.00 to people who visited his website. He hoped that the investors buying the shares would allow him to hold on to the condo for a few years until the market turned around. Unfortunately the plan failed because he was only able to sell about 1,000 dollars worth of shares.

As the closing date approached (In January of 2008) Zack disappeared from his blog for a few months and no one knew what happened to him. Zack miraculously appeared in May with news that the closing date was now May 26th and that he now had a new scheme. He would try a reverse auction to sell his condo.

Watch the video here...
http://cbs4.com/video/?id=56004@wfor.dayport.com

Read the full article here.
Click here for the article


Don't get me wrong, I have nothing against Preble. He seems like a guy who just got a little carried away by greed and made a bad investment during the housing bubble like a lot of us did.

However, The Irony of this story is just getting started...

It turns out that Zack Preble is one of the founders of Foreclosure.com



I just find it ironic that a guy who makes a living off people losing their homes, ended up losing his own condo before he even moved in. ;)

I guess sometimes life really bites you in the balls.

I just can't get enough of this video.

It's time for some campaign'n

This is really a work of art.

Bank Run, Coming Soon to a Neighborhood Near You

From Wikipedia, the free encyclopedia

(also known as a run on the bank) is a type of financial crisis. It is a panic which occurs when a large number of customers of a bank withdraw their deposits because they fear it is, or might become, insolvent. This action can destabilize the bank to the point where it becomes insolvent. Banks retain only a fraction of their deposits as cash (see fractional-reserve banking): the remainder is invested in securities and loans. No bank has enough reserves on hand to cope with more than the fraction of deposits being taken out at once. As a result, the bank faces bankruptcy, and will 'call in' the loans it has offered. This can cause the bank's debtors to face bankruptcy themselves, if the loan is invested in a plant or other items that cannot easily be sold.

A banking panic or bank panic occurs if many banks suffer runs at the same time. The resulting chain of bankruptcies can cause a long economic recession.^[1]

As a bank run progresses, it generates its own momentum, in a kind of self-fulfilling prophecy. As more people withdraw their deposits, the likelihood of default increases, so other individuals have more incentive to withdraw their own deposits. A bank run is a kind of positive feedback loop which has much in common with the reflexive processes described by George Soros, amongst others. Another example of a reflexive process is economic bubble.

HOUSING FEAR TIPS

• If you have more than 100k in any bank take any amount over 100k out immediately and place it in another bank.

• JUST BECAUSE YOUR MONEY IS IN "CASH" DOES NOT MEAN IT IS SAFE. I RECENTLY TOOK MONEY OUT OF A MONEY MARKET ACCOUNT BECAUSE I LEARNED IT WAS NOT FDIC INSURED. USE DUE DILIGENCE TO MAKE SURE THE BANK, FUND, MONEY MARKET, ETC YOUR CASH IS IN IS INSURED.

• IF YOU HAVE OVER 250K IN ANY 1 RETIREMENT ACCOUNT. ROLL SOME OF IT INTO ANOTHER ACCOUNT.

Now grab some popcorn and enjoy the start of the second Great Depression.

More on Alberta's housing bubble.

Another video on the housing boom going on in Alberta Canada's wilderness that puts California's housing market to shame.

• 21 year olds making $1600 dollars a WEEK.
• Fast food workers getting paid 14-16 dollars an hour
• 1100 a month rent is lowest you will find, but currently a 0% vacancy rate
• 400K for a crappy shack
  

Paulson hints at no bailout for fannie or freddie

Paulson had an equally dreary report for homeowners worried about tumbling home prices.

“Many of today's unusually high number of foreclosures are not preventable,” he said. “Due to the lax credit and underwriting standards of the past years, some people took out mortgages they can't possibly afford, and they will lose their homes.”

Homeowners should not anticipate a government bail-out, said Paulson.

“These borrowers can and should be living up to their mortgage commitment—government intervention here would be inappropriate.”

Paulson extended the same advice to large financial institutions. Banks should not expect to be bailed-out by government, despite intervention by the Federal Reserve in the near-collapse of Bear Stearns in March.

The fresh manure is really hitting the fan now

shit hits the fan

The point at which "the shit hits the fan" is the point at which an already unstable situation devolves into utter chaos, often in spite of--or even due to--a higher authority's attempt to control it.

-

-Courtesy of Urbandictionary.com

Who knew that the real housing bubble was in BFE Canada

I wish I could find the other parts of this that were aired on CNN.

Long story short, in Alberta Canada they are paying high school dropouts 100-120 grand a year to work in the oil sands. There is so much inflation in the economy and such a shortage of workers that they are paying fast food workers 13.50 an hour.

The price for a single family home, in the middle of the wilderness, is 1,000,000 dollars and the price for a trailer park home is 250,000... And you thought California was bad :)

Bruno Powroznik was arrested by London Police for the video posted below

From the House Price Crash forum by their moderator on behalf of the London Police.


There was a posting on You tube recently by an individual suggesting that he
may turn up at a social function related to your website that is apparently
taking place on 8th July 2008 in Glasshouse Street, London, W1.

The person who posted this on You tube suggested that he would turn up with an
AK47 assault rifle and cause problems.

For your reassurance, police from West End Central Police Station have
arrested and charged Bruno Powroznik in connection with this.

Our assessment is that the risk level is LOW as it appears to be a misguided
prank and that such an attack will not happen.

If anyone has any concerns please telephone Detective Inspector Andy McDonald
on 020 7321 8870

Is the Housing Crash causing people to go Mad?

A little background...
There is a website based in England called Housepricecrash.co.uk

The site was created during the housing boom when wise homeowners decided to become "STR's" (Sell to Rent). They realized that house prices were much to high and due for a crash. The STR's sold their house at the peak, then rented a new house while keeping the profit from their home sale in a savings account with the intention of buying a home again when prices were low after the crash.

Bruno (the guy who made the video above) hated the STR's for doing this and has been making videos for the past 2 years chastising the STR's and denying that house prices would ever crash. Over time as the housing market melted down, much to his dismay, he has slowly become more and more insane, and his video's have shifted from economics and housing crash into very bizarre and disturbed rants.

In this video Bruno learns of the meeting place of the next housepricecrash.co.uk meeting and makes a video threatening to shoot them all with his AK-47.

It seems that the housing crash is not only taking a toll on peoples financial health, but also their mental sanity.

Great advice on how to lowball an offer when house shopping

When the market turned up in the late 1990's the balance of power in the market shifted. During the last decline, the buyers had an advantage. During the bubble the advantage went to the sellers. The seller's market went on for so long and became so feverish that people have forgotten (or may never have known) what it was like to see buyers in control of the action. The purpose of this post is to re-educate buyers on how to behave in a buyer's market.

Buyers have the Power

As a buyer, you must remember you are the one in control. You are the scarce commodity in the marketplace. The seller is one of many for you to chose from, and they are all desperate. They need you. You don't need them. No matter who you buy from, you are going to leave all the other sellers disappointed because they are going to continue to be trapped in their homedebtor's prison. You can't please everyone, so focus on pleasing yourself.

Screw the Sellers

Don't become concerned with the sellers needs, wants and problems. Does it matter to you if this house is their entire savings for retirement? Do you care if a sale below a certain price puts the seller into bankruptcy? If these issues matter to you, ask yourself this, "Would you give them money if you were not buying their home?" Unless you are running a charity, you should not care about the consequences of someone else's financial decisions. They created their own problems, it is not your responsibility to solve it by overpaying for a house.

Pay the Lowest Possible Price

This may sound like common sense, but the behavior of knife catchers over the last couple of years shows otherwise. Don't ask for or take any incentives, and pay your own closing costs. You are paying for this stuff, it is just buried in your loan. You will be paying interest on this purchase for the next 30 years, and you will be paying a 1% property tax on these costs for as long as you own the house. You are far, far better off lowering the price and foregoing the incentives and paying your own closing costs.

Use a Buyer's Brokerage Like Redfin

Redfin and other buyers brokerage typically kick back 2% to you at closing. Work out a deal with them in advance where they will agree to take a 1% commission at the closing so you can lower the price by 2%. Again, you are paying taxes on the purchase price, so you want to make this as low as possible.

Your First Offer is Your Best Offer

This is the most counter-intuitive part of buying in a buyers market. Ordinarily sellers, or more accurately the seller's realtor, try to create a sense of urgency to buy the house. They want you to think other people are looking, there is going to be a bidding war, you need to get your offer in today, etc. Remember, in a buyer's market these ploys are all lies. You are the only buyer, and you can take as long as you want to buy the house. Your task in negotiating is to create a sense of urgency and panic in the seller. This is why you make your first offer your best offer.

Start with a bid at least 10% below asking price; however, it can be less if the most you are willing to pay is less. Lower your bid as follows:

If you are actively bidding on the property, make your offers expire in 5 days. If you are still interested in the property resubmit a fractionally-lower offer after 7 days (make them sweat for 2 days.) Don't make is so much lower as to lose consideration, but make it enough lower that the seller gets the message that they need to come to your price before it gets any lower.

If the seller makes a counter offer, retract your offer and resubmit a lower one. Works the same as the time decay offer above. After you have lowered your offer a few times, the seller may panic and take your offer before it goes any lower. This is what you are after.

Lower your offer $500 each time you speak with the seller's realtor. Every time they communicate with you, they will pressure you to buy. Lower your bid each time they speak with you to send a message that their pressure is not working, and it is, in fact, hurting their client.

Lower your offer $2,000 if the realtor uses one of the standard lies I mentioned above.
If the realtor tells you there is another bidder on the property, immediately withdraw your offer and tell them to call you if it falls out of escrow with the other buyer. Since this statement from the realtor is almost certainly a lie, it will cause them to have to explain to their client why the only buyer around has pulled their offer.

Don't Close the Gap

When the seller starts to counter-offer, it is very tempting to agree to their price to close the deal, particularly if they are below your original offer. Don't do it. In a buyer's market, the seller will come to you. You have the power. However, if they are below your original offer, and if you really, really want the house, you may raise your offer one time, but do not get closer than 1% to their counter-offer. The selling broker makes a 3% commission, and the realtor you have been dealing with probably makes 1.5%. By getting to within 1% of the seller's counter-offer, the realtor can choose to give up part of their commission to make the deal. Since they are desperate as well, you should go ahead and squeeze them. A 1/2% commission is better than no commission.

After you have agreed on price

Just because you have reached agreement on the sales price does not mean you are finished making this deal the best it can be. Go through your inspection sheet and establish holdbacks for all repairs. Make the holdback amount 150% of the lowest qualified bid. Say you are doing this as an incentive for the owner to get this work done before move-in. Also, if there are decorative items you do not care for, use the same holdback procedure for these items. The time to get your granite tops is before you move in.

If you are really tough

For those of you with nerves of steel (and a desire to abuse your power,) I have a few additional suggestions for you:

A week before closing, tell the seller or realtor you are considering pulling out of the deal because you have found another property you like. See if they offer you an additional discount.

Three days before the closing, withdraw your offer and say you want an additional $1,000 off. Offer no explanation: You are only doing it because you can.

Ask the seller to write you an emotional letter thanking you for purchasing their home. Send back the first one they give you saying they did not praise you enough.

Conclusion

Not everyone has what it takes to implement all of these price-busting techniques. However, the more of these you put into practice, the lower the price you will pay for the home you want. You will never see the seller or the seller's realtor ever again. It does not matter if you offend them. In the end, they will be relieved you bought the house even if you made their lives hell in the process.

Fannie and Freddie cracking down on the "Buy and Bail" scam

Looks like too many people were having fun with the "buy and bail" scam and ruined it for the rest of us.

The fed is now cracking down and putting it to an end...

Breaking News!

Fannie and Freddie are changing the rules on how payments on existing primary homes are treated when a buyer is purchasing a new home and plans to rent out the old house. In the past, we have been able to offset the payment on their existing home by showing a lease for the house and counting the rental income to cover the house payment.

Under the new rules, this will only be possible if there is a minimum of 30% equity in the existing home. So, if the house had a $200,000 mortgage on it, then it would have to be valued at over $285,000 to be acceptable as a rental conversion. Otherwise, the buyer has to be able to qualify with both house payments and has to have 6 months of house payments in reserve after closing. Ouch . . .

This change in guidelines appears to me to be directly related to a new phenomenon; people buying a new house and then letting their old home go into foreclosure after closing on the new house. I have been reading about this on the web. The idea is if you owe more than your home is worth then you go out and buy a new home at a great price. You indicate that you are going to be renting the old house out. After closing on the new house you stop making the payments on the old house which has negative equity and it goes into foreclosure. Sure your credit is wrecked but you already bought a new house and your bank loses all of the money on the old house. Some great scam eh?

I don’t know who comes up with these ideas but it is bad for everyone. Forces home values down further and adds to the steep losses which are seriously undermining the banking industry in the U.S. Whatever happened to the idea of living up to your obligations?

The bottom line is that the effort to close up loop holes like this is making it harder for legitimate buyers to keep their existing homes, rent them out and buy a new house. Stay tuned. The currents are changing on a daily basis and I’m just trying to keep you informed.

______________________________________________________________
Written by Ken Mascia
Oxford Financial, 248.644.1200
Visit Website
Search for homes in Oakland County
_____________________________________________________________

Never trust Realtors

Realtor, Barbara Corcoran, who has been fired from 4 jobs before entering into a career in real estate gets called brilliant by Donny Deutsch. (early 2007 interview)

...
..
.


Fast forward: 2 years later, Barbara Corcoran appears on Larry King Live, June 24th 2008, pumping the housing market and calling a bottom!

KING: Barbara, how do you view it?

CORCORAN: Well, I'm seeing this foreclosure mess as a beginning of a turn. And perhaps I sound a little too optimistic, but it's great when a lot of foreclosures hit the market, because it drags prices down not only for those foreclosures, but for every neighboring house around there. And that usually drags other buyers into the market and that begins the action that spells a recovery.

KING: So you say this is good?

CORCORAN: I think it's great. I don't think we're at the bottom. Everybody always wants to sharp shoot the real estate market. You just can't do it. The best can you do is buy at the bottom or within the bottom, so to speak. And I believe right now, with all the bad news out there, it's not going to get anymore bottom than this.



:) lol!

Survey... People won't be buying a house anytime soon.

CNN has recently been pumping some "We are now at the bottom Propaganda". Larry King has had a few episodes recently with cheerleader NAR types loudly trumpeting that we have hit the bottom and now is a great time to buy!!!!!!111one!

Well this survey below basically proves otherwise...


In a recent poll conducted by Harris Interactive and commissioned by the National Apartment Association (NAA), 1,258 homeowners, 563 renters and 228 people who live with friends or family were asked about buying and renting in the current housing market.

Key Survey Findings


* 69 percent of renters plan to stay renters for at least five more years.
* 71 percent of those surveyed believe there are advantages to renting vs. owning
* 80 percent of respondents believe the housing market will not improve over the next six months.
* 72 percent of homeowners will stay in their home for at least another year.


Of the current renters who were surveyed, 69 percent say they plan on staying renters for at least five more years. Fifty percent say they will stay in their current residence unless forced to leave.

The vast majority of survey respondents--71 percent--agree that there are advantages to renting vs. owning in today's housing market. Forty-eight percent cite financial reasons, while 32 percent appreciate the flexibility of a short-term lease.

More than three-quarters of the 2,000+ people surveyed think that the troubles currently plaguing the housing market will get worse or stay the same over the next six months.

Thanks Homeguide123 for posting the survey

Ron Paul Brilliantly Explains why OIL is so High

Ron Paul discusses the price of oil and warns of the propaganda growing about attacking Iran.

done...done...done...and another one bites the dust...

IndyMac appears close to collapse

US regulators may not be ready to protect bank

By Kevin Smith, Staff Writer

Article Launched: 06/27/2008 11:16:51 PM PDT

IndyMac Bancorp Inc. appeared to edge closer to a meltdown Friday as its stock fell to 75 cents a share amid concerns that a collapse could leave the Pasadena-based bank's borrowers and depositors in the lurch.

Sen. Charles Schumer, D-N.Y., says federal regulators may not be ready to protect them and that a wave of IndyMac depositors withdrawing their funds could leave the bank "in a disastrous financial situation."

IndyMac ranks among the 30 largest companies in terms of total annual revenue in the San Gabriel Valley, according to research conducted by this newspaper. In 2007, it employed 10,000 workers and had revenue of $2.8 billion.

A financial collapse could leave scores of employees without jobs. At one point IndyMac employed about 3,000 workers in Pasadena, but that number has shifted several times as the bank has sought to "right-size" its operations.

IndyMac officials could not be reached for comment late Friday.

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