Michael David White

Looking at $5 Trillion in Losses and Zombie Debt in Residential Mortgages

All the players played the game. Thanks for the note. mdw


On Nov 29 11:43 PM BRUCE E. W. wrote:

> I really appreciate the effort you take and the interactive style
> you bring to liven up the dialogue Michael. Taibbi had an article
> on the Mortgage market and stated (basically) about derivitives that
> they are securitized instruments, "...ie chop the mortgages up into
> little bits, repackage them as mortgage-backed securities like CDOs
> and CMOs, and sell them to unsuspecting customers on the secondary
> market." (Cynical or realist perspective depending on your viewpoint
> in retrospect). He also stated quite candidly:
>
> "By almost any measurement, Goldman was a central, leading player
> in the subprime housing bubble story. Just yesterday I was talking
> to Guy Cecala at Inside Mortgage Finance, the trade publication that
> tracks statistics in the mortgage lending industry. He said that
> at the height of the boom, in 2006, Goldman Sachs underwrote $76.5
> billion in mortgage-backed securities, or 7% of the entire market.
> Of that $76.5 billion, $29.3 billion was subprime, which is bad enough
> -- but another $29.8 billion was what's called "Alt-A" paper. Alt-A
> mortgages are characterized, mainly, by crappy documentation and
> lack of equity: no income verification, no asset verification, little-to-no
> cash down. So while "only" 38% of the mortgage-backed securities
> Goldman underwrote were subprime, more than three-fourths of their
> securities were what is called "non-prime," ie either subprime or
> Alt-A. "There's a lot of crap in there too," says Cecala." The SOURCE
> link is for the full article:
> www.alternet.org/workp...
>
>
> "Suck on Our Yachts": Goldman Sachs Issues Non-Apology for Destroying
> the World Economy
> By Matt Taibbi, True/Slant. Posted June 22, 2009.
>
> These "reality" footnotes, of course, need to be tucked into the
> pages of the "textbook" version of what is supposed to explain what
> is actually going on in our business nation in real time.
>

Looking at $5 Trillion in Losses and Zombie Debt in Residential Mortgages

Sounds like good financial planning. Thanks for the note. mdw


On Nov 29 02:59 PM nmelendez wrote:

> Truth be told, the party is over. It's now time to pay the piper.
> Me, my house payment is 1/5th of my net. That's the way i planned
> it. I guess you can call me a conservative democrat and not a liberal
> Republican. :)

Looking at $5 Trillion in Losses and Zombie Debt in Residential Mortgages

My pleasure. Thanks. mdw


On Nov 29 09:26 AM chris coonan wrote:

> Also, thanks to the author, for responding to so many comments.
> It is good to see on SA, I wish more authors would take an active
> role in the discussions.

Looking at $5 Trillion in Losses and Zombie Debt in Residential Mortgages

It ain't chump change. Thanks for the note. mdw


On Nov 29 09:24 AM chris coonan wrote:

> An astounding sum of money, makes the Dubai debt look like a shiney
> penney!

Case-Shiller Still Predicts Massive 45% Fall from Today’s Values

The data was chosen based upon its usefulness. The prediction it makes is not very from the 120-year data set. Check out 120 years at newobservations.net/pr... thanks mdw


On Nov 29 02:44 AM Jimmyz wrote:

> Uhh....I would still take Shiller's opinion over yours any day!<br/>

Case-Shiller Still Predicts Massive 45% Fall from Today’s Values

You have to remember that ordinary people don't go into a purchase transaction comfortable with losing money. That having been said, only big-cash high-experience buyers should be playing the game today. Thanks for your note. mdw


On Nov 28 05:47 PM jstratt wrote:

> I appreciate the authors point and accept the basis of his argument.
> Thanks for an outstanding post!
>
> That said! I dont fully agree with it based on my observation of
> the market. First point however is what would a house be valued at
> today if we had average long term interest rates. Lets all agree
> that 5% mortgages are far below average. Just averaging the highs
> and lows in my lifetime from my head would suggest 8.5% is closer
> to the average. That would significantly reduce real estate valuation.
>
>
> Another commenter made the point that 20% down used to be required
> and that is much different than today. It has a huge effect on demand
> for housing.
>
> One other thought is that perhaps some of the home equity loan money
> added value to houses that isnt in the data.
>
> Regardless as to the reason, I would suggest from various data including
> auction prices for homes that a bottom is not 45% below current prices.
>
>
> In todays world a person at work declared bankruptcy after medical
> issues and lost his 900 sq ft house. Then he went looking and found
> a 1600 sq ft house on 3 acres. The real estate agent didnt think
> it would be a problem, and it wasnt.
>
> As long as anyone breathing is the qualification for financing, prices
> are not going to approximate past history.

Case-Shiller Still Predicts Massive 45% Fall from Today’s Values

I'm sick of people who make comments without facts to back them up. Case-Shiller is a real live fact sir. Thanks for your note. mdw


On Nov 28 01:26 PM sickofthehype wrote:

> Dollar depreciated 18% this year alone, not to mention the depreciation
> since 1997. Worthless article. Many spots are already overshot
> to 1997 prices right now and homes are selling for a fraction of
> replacement cost. Unless you can prove deflation will take hold
> over the long term versus the upcoming inflation that is clearly
> the agenda, I will say it again, the article is worthless.

Case-Shiller Still Predicts Massive 45% Fall from Today’s Values

If you get one of those Chinese credit cards, please send me an app. Thanks for the note. mdw


On Nov 28 11:03 AM Djvu wrote:

> thats why Obama went to China to ask Chinese banks to buy US banks
> and US real estate lol
> Obama Invites Chinese Banks. see industry.bnet.com/fina.../

Case-Shiller Still Predicts Massive 45% Fall from Today’s Values

I do not envy your work, but I appreciate your comment. Thanks for the note. mdw


On Nov 28 10:23 AM mrresponsible wrote:

> Having been in the rental business for over 35 years and watching
> the market closely in Denver, I see people moving in with family
> and friends - rents are going down here even though Denver is in
> a much better position than other cities. I can tell you that expenses
> are going up on rental properties while the income is declining and
> anyone who purchased properties in the last 8 years with less than
> 30% down are dragging cash out of their pockets to keep things going.
> A huge factor is our society has declined and many renters do not
> respect the property and does not pay have decent credit.

Case-Shiller Still Predicts Massive 45% Fall from Today’s Values

Just remember, the fix is in with the feds funding every mortgage written in the United States. Thanks for your note. mdw


On Nov 28 10:14 AM einstein p fleet wrote:

> Not all bubbles were created equal, especially the residential real
> estate bubble. South FL is a prime example. The first wave of speculators
> literally took millions of dollars in loans on apartments they bought
> with no money down, tossed the keys in the mail box, and left the
> country. People bought houses they couldn't afford, borrowed against
> them to buy cars they couldn't afford, and eventually lost both.
> Right now people can't afford to sell their homes, as they would
> require a large payment to the bank at closing. They can't afford
> to rent either, as rentals are going for a third or less of the cost
> of their mortgage --- slowly bleeding whatever savings they have
> until they are forced into foreclosure. Given the economy was primarily
> based on real estate development and tourism, the jobless rate in
> South FL is well above the 10% national average. What may be keeping
> it down is exodus of people out of the state.
>
> A 45% correction from these levels is certainly possible, perhaps
> even on the low side, especially if the slow bleed continues for
> several years. When people have jobs that allow them to afford
> to rent or buy, and the buyer can actually make a profit on a rental
> property, we will finally see a bottom. Right now, it's like watching
> an avalanche moving in slow motion.

Case-Shiller Still Predicts Massive 45% Fall from Today’s Values

I'm all for frugality, but I think Democratic economics is adolescent deviance. Thanks for your note. mdw


On Nov 28 09:16 AM Thrift Maven wrote:

> China and/or Japan need to offer U.S. consumers credit cards with
> fixed 6%-7% interest rates. Many Americans could then transfer their
> 18% - 24% card balances to these cards, and eventually pay down their
> debt. The Chinese/Japanese would fare much better than the paltry
> sums they are getting for buying U.S. Treasuries and consumers could
> return to buying their manufactured goods and generate many transportation
> and sales jobs here.
>
> The great lesson learned after 30 years of Republican decimation
> of our society (downward spiraling wages, upward spiraling healthcare
> costs, paralyzed state taxation, unaffordable housing, deregulation
> of lending and rip-off of Indian tribes - don't forget your long-term
> memory, voters) is that Black Swans (R) are just as likely as H1N1
> flu bugs. This generation of Americans might well become as frugal
> as the Prussians were.

Case-Shiller Still Predicts Massive 45% Fall from Today’s Values

Employment affects bill-paying capacity. Thanks for your note. mdw


On Nov 28 06:50 AM chris coonan wrote:

> location location location is working on a Citywide level today....and
> the reversion to the trend line is justified by the lack of credit,
> and the falling value. the vulture buying is not enough to prop
> up this market, and there are too many forces presenting a headwind
> to recovery.

Case-Shiller Still Predicts Massive 45% Fall from Today’s Values

Sounds realistic to me. Thanks for the note. mdw


On Nov 28 03:44 AM TheFounder wrote:

> For example, some of them will rent a B class property for $700-1000
> per month. Some will rent a C class for $300-600 per month. Some
> will stay as you indicate.

Case-Shiller Still Predicts Massive 45% Fall from Today’s Values

I am not talking. The data is talking. Thanks for your note. mdw


On Nov 27 10:19 PM Kimball Corson wrote:

> If what you say is true then why does Case of the Case-Shiller Index
> think that the housing market is bottoming? See, wallstreetpit.com/498-...
> What he suggests implies you are wrong.

Case-Shiller Still Predicts Massive 45% Fall from Today’s Values

Extrapolating from ten years of data prior to the bubble start is a data set worth looking at. Thanks for the note. mdw


On Nov 27 10:03 PM Kimball Corson wrote:

> The correct baseline is not an extrapolated trend. It is a combined
> trend line of real rentals and real housing construction costs. Real
> housing prices need to be figured in relation to the other two because
> those three markets need to be together in equilibrium. Real housing
> prices slid out of wack a few years back.