Rob_W_

Mortgage Fraud - The Root of America's Economic Malaise

Commenting on the attached (below), I think the high incidence of fraud (or see-no-evil, if we want to take a neutral stance) is directly related to a lack of up front capital, the low-or-no down payment loans. LTV is important, but loan-to-equity is more important. I never understood how a best-case scenario of starting at 0% equity - 125% loan payouts were not uncommon, for a nice cozy (-25%) starting position for the banks collateral - could be considered "low-risk" by anyone with any financial training of any kind.

@Tom Armistead: Andrew, LTV is one of many issues - lies about employment, occupancy and other financial obligations on mortgage applications are more important from the point of view of stopping losses before they occur.

@Windsun33: Mortgage fraud has become so common because there are no consequences anymore.

Continuing to Pay for an 'Underwater' Home: Conditioning, Morality or Naivete?

I think what you say re: your mortgage broker speaks volumes about the mindset that got us into this mess. A sample of two is an anecdote, for sure, but I do not think our experiences are unique. My mortgage broker (a family friend) was shocked and amazed that while I *could* afford to leverage myself to the hilt for a house on the water, with all the trimmings, I had no plans to do so. She insisted I could easily afford a house in the 500-700K range and therefore I had some mysterious obligation to go "all in" - in her mind "could" and "should" were the same thing. I deferred and bought the house my wife wanted for the price I wanted to pay. I wonder how many people drank the kool-aid and pushed their finances to the limit on bad advice?


On Dec 18 10:17 AM TeresaE wrote:

> When we bought our house in '04, we KNEW we were buying near peak
> (in Michigan). We searched for NINE months, laughed our butts off
> at sellers that seemed to think a state with no jobs could actually
> support the increase in housing prices and told our mortgage broker
> (who lost his job & house two years ago) to pound sand when he
> told us we should be buying a McMansion on an ARM with nothing down.
>
>
> So, instead of following the lemmings, we found the worst house in
> a great neighborhood, decided to take an equity line instead of cashing
> out retirements (our previous divorces did not leave us with cash)
> and figured, "you have to live somewhere."
>
> Now the city says our house if finally worth what we paid for it
> (they had it grossly overvalued for the first 4 years), of course
> it's not.
>
> BUT as a small business owner, at the mercy of banks to keep our
> commercial mortgage, we CAN'T take the hit. If we were to do what
> is truly in our best interest - to walk away - we would lose everything,
> including the ability to make a living (even a meager one at that).
>
>
> Having said that, there are a couple situations where we might choose
> to walk away, not just from the business, but the house (in our world
> they might as well be the same thing). The bad part is IF it happens,
> I will have to divorce my husband to separate our taxes because we
> will NEVER have the ability to pay the tax on the "gains" the IRS
> believes in.
>
> Really, for anyone that truly understands tax consequences, continuing
> to overpay for an asset will be cheaper than owing the IRS with their
> 100% penalties and 22% interest rates. As many who choose to walk
> will soon find out.

5 Reasons Gold Is Going to Rise: A Response to Nouriel Roubini

Dude, coins in metric units during the Roman Empire? You are off by a dozen centuries, maybe a bit more ...


On Dec 15 09:16 PM Thomas George wrote:

> I have read some articles that suggests that debasement of gold coins
> happened by shaving gold off the coin. People end up with an 8g coin
> bearing the stamp of 10 g.

Housing: The High Cost of Leverage

Well, banks can't really hand losses to the public unilaterally, at least not directly (see systemic risk for exceptions). Our elected representatives are the enablers, the banks are the bums with their hands out begging for change.


On Dec 15 10:47 PM Tesa wrote:

> Karl Smith, of course you are right. Without minimum down payment
> the borrowers can just walk away and handing the losses to the banks
> who hand them to public.

How Buying a Home Is Gambling

The utilitarian function most definitely factors into the Cost Benefit Analysis of home ownership vs. renting. Unless we want to take the "I'll live in a refrigerator box or be a squatter" argument seriously, you have to figure the cost of renting in the equation. An investment in equities does not defer any living expenses, but of course may generate income. Home ownership defers whatever rental expense you would otherwise incur, and this is part of the value of a RE investment. Abstractly, the deferred rental expense minus the incremental cost of property taxes, insurance, and maintenance is the "dividend" for owning a home.

The cost-benefits are pretty easy to figure out for straight consumption vs. consumption with residual value (ownership). To simply state that real estate is a good or bad idea is a flawed argument, the same as making a blanket statement about any other asset class.


On Dec 11 03:34 PM GoMyLittleSheep wrote:

> "I can't live in my 401K or IRA investments. I can't live in my precious
> metal holdings or any equities I may own. I can live in a house."
>
>
> You can't live inside the deed to your house - that would be a more
> appropriate comparison since you seem to confuse the difference between
> certificates that spell out rights of ownership with actual goods.
> Your stocks are tied to physical resources just like your houses
> deed is.
>
> Having an utilitarian function (being able to "live in" a house)
> does not enter into the definition for being a "good investment".

How Buying a Home Is Gambling

I think that Tom is implying that *how much* you pay for your home relative to the cost of replacement (value of the lot plus value of the improvements) makes all the difference. I agree wholeheartedly, as you do have to live *somewhere*, especially if you have (or plan on having) a family. I purchased my home for a bit more than the cost of the land plus the construction costs. Many people that moved into my area bought similar homes, on similar plots, for double the amount I paid. I am still comfortably above water, assuming I actually wanted or needed to go anywhere. Many of my neighbors are not. To the author's point, a seller still needs a buyer to get out of a real estate investment regardless of how much equity he/she is holding, but I think you cannot make that point without addressing need, relative value, value vs. rental costs, and exit costs as well. If I *had to*, I could sell my property for *less* than replacement cost or rental*whatever and still walk away with my original capital, but I didn't overpay and that makes all the difference.


On Dec 11 12:47 PM optionsgirl wrote:

> Tom, I am requesting that you clarify your last comment: not to pay
> more than the replacement value. In my mind, that is not possible,
> for if one finances, one pays several hundred percent more than replacement
> value depending upon the interest rate, and if one does not finance,
> one is giving up the interest, dividend and growth value of another
> equities investment. So, what do you mean? Thank you.

Foreclosure Rates Continue Their Steady Decline

And the data you are supporting this conclusion with are .... ? I think it is pretty clear that the current meltdown in the RE market is turning around. That doesn't mean that continued economic weakness won't cause NEW problems, but beating the drum that we have only seen "the beginning" is beginning to look as silly as the year long "this ain't a rally, just you wait and see" crowd.

--RW

On Nov 12 07:29 AM j-dub wrote:

> We are IN BETWEEN the devastation of the sub prime storm and the
> decimation of the alt-a/option arm disaster.
> Otherwise, what great news!!!!

Dow 10k: The Higher They Rise, The Harder They Fall

The author also mentions that he has personally divested in foreign currency ETF's, but disparages corporate earnings (denominated in USD) that benefit from the same dynamic. Dynamic being the operative word. If the author believes that "cash is king", he is snubbing his nose at gains that represent a big move from the March lows. The market was oversold, period. This is not an opinion, it is an observation of recent history. Nimrods have been calling for a massive selloff since Dow 8000! The market may be overbought at current levels, but that is far from certain. This article is nonsense.


On Oct 15 01:38 PM chap08 wrote:

> You say that earnings are "artificially" increased by a weak dollar.
> Please justify this position. They are only artificial if the dollar's
> current level is artificial and the level 2 years ago, or whatever,
> was "right". What evidence do you have for that position? Given that
> the dollar has been manipulated upwards for years, it seems a very
> illogical position to take.

All Eyes on the Residential Real Estate Radar

So what are you saying? That prices will trend downward in a typical off-season pattern, or something else? Your charts show that 2008 was a catastrophe, but that is not news. They also show that off season prices are typically well below the peak season levels. Again, not news. Is your thesis that we should all be Radar Logic subscribers because spot-prices are more meaningful that the other published indexes?

Gold Is Still the Opportunity of a Lifetime

You believe that the likelihood of the US government defaulting AND massive corporate default AND massive consumer default is as "likely as any other scenario"? That is, to put it mildly, a bit outside of mainstream thought. Well, mainstream for anywhere but here. It is also, from the standpoint of basic statistics, utter nonsense.


On Sep 07 04:22 PM whidbey wrote:

> Your arguments are great and I think telling on the issue of money
> and debt.
>
> A deflationary depression is as probable as anything on the horizon.
> It will involve the fact that most private and public debt will not
> be repaid and finally the public and our creditors understand. The
> paper the debt represents will be found to be useless, worthless
> and the stuffing for zombie banks.
>
> The depression will bring confusion, a shortage of money and a threat
> to survival of us all. But if we come out the other side, clear the
> shock waves of bankruptcy, we will see the government attempt Keynesian
> inflation of the money supply.
>
> They may confiscate gold if they dare which will not be allowed,
> but inflation will start once the useless debt is re-categorized
> junk. At that point owning physical gold may be the key to survival
> and preservation of assets. So I agree, hold some metal, and some
> paper gold right through the depression. It will go down, but much
> less than other asset classes. Gold is not only timely, it is a necessity.

If Goldman Sachs' Secret Sauce Is Compromised, What Happens Now?

Sanctuary or equivalent immediately comes to mind.


On Jul 06 07:46 AM Free Mind wrote:

> I have just one issue here... Why on earth is this guy uploading
> such sensitive material from his workplace? He could have saved it
> on a usb disk and uploaded from wherever else (a cybercafé for instance).
>
>
> For being a computer wiz, that does not talk favorably of his intelligence.
> Or is there more to the story than meets the eye?

How Do You Choose the Best ETF?

Half an article? Or is just the shill missing ...

Microsoft's Machiavellian Codec Scheme

I love these "Uber-Geek" (his word) diatribes against MS. I demo'ed Nero. Cost-benefit isn't there for me, at least not with a 23" monitor. I can't get VLC to work at all on XP64. I want to put in a disc and watch a movie. That's it, folks. No tweaking, no hacking, no nothing. All this talk of filters and splitters and codecs gives me a headache, not because I don't understand the technology (I do), but because I can't be bothered with it. I represent the VAST majority of computer users in this regard. Apple owes its existence to ease of use benefits, FWIW.

On 'Rock Bottom' Housing Prices

Anecdotally, I've been shopping bank-owned properties in SW Florida (Cape Coral). There is a lot of investor activity, with multiple offers per property at the current prices. I would hate to be a home owner that bought at the top as the current prices are about 60% of construction costs (according to builders I have spoken with). How much lower can they go ...