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FDIC Keeps Selling
This advertisement does not mention the FDIC. But I’m pretty sure the FDIC (or the banks they control) are in fact the sellers.
The selling outfit is called Prescient. Here is what they have to say about their relationship with the FDIC.
Here is an overview of the assets being offered:
There are some dogs in this portfolio:
I know (more or less) where these two lots are. There was a time that
these would have sold for a nice price. Now they will go for pennies on
the dollar.
At the bottom of this I will provide the details on the loans that are
for sale. It is a long list. There is a $27mm note on an office complex
in Coconut Grove and on the other extreme is a $4,362 first mortgage on a
3/2 townhouse in Miami. One that caught my eye was a $125,000 loan
secured by a 32’ Boston Whaler. Depending on condition this boat is
worth north of 100K. It will be sold for $1 in the package of other
loans.
$200mm of bad loans and REO is no big deal. But this is mostly in S.
Florida. If anyone was looking for a break in the unending slide of RE
in the Sunshine State they should be pushing that timeframe farther
(with lower prices) into the future. There are plenty of more “packages”
like this to come. Hundreds of billions is yet to get settled. A very
big chunk of it will go like the Prescient auction. Cheap.
In the process homes, apartments, office buildings commercial locations
and even boats are going to be devalued. This is price discovery and we
probably have to go through this. But it is going to hurt. I am still
not convinced that the FDIC should be the price leader. In the end they
will hurt more borrowers who in turn will hurt more banks and ultimately
the FDIC. A vicious circle that would appear to be unavoidable.
There is so much talk today whether deflation is a risk and could it
happen. Folks, we’ve got deflation. And with every fire sale of assets
it will spread.
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Thank you, Bruce. I forwarded this to some pals who are ass-deep in the multi-family and commercial real estate field. One of them has disappeared, and reappeared in Costa Rica.
Oooops.
Nero played as Rome burned
Obama played as US burned
...'I got a bad lie, who put this Bush in the way'...
Thanks. But there's a big difference between asset price deflation and consumer price deflation. We have asset price deflation, which is painful but healing and 100% unavoidable after an asset price bubble. We do not have consumer price deflation and it is not a threat.
good job Bruce... Mike Maloney and Bob Chapman are right..
When Gold and Silver prices max out , Real Estate will be
a priced real good ..
If the dollar falls, then Florida real estate will rise as the hard currency Europeans rent winter homes in newly cheap Florida.
It will not be any consolation, but this is also beginning to happen in the UK too. Repos are bound to cause major (and knock-on) asset deflation.
However, maybe we shouldn't think of inflation OR deflation any more. Taxes,Government services, gas, banking and borrowing costs must go up. Food, clothes, cars and assets down. I call this indeflatation: a sort of flation that can't make its mind up. Bit like the President, really.
Here's a UK asset going down the tubes....
http://nbyslog.blogspot.com/2010/09/uk-private-car-sales-collapse-by-40....
PS I quite liked the dog property....
Wardslog,
I get your point that while property will likely continue to go down in value (at least for the next 5-10 years, depending on how much hidden inventory there is, and maybe 20+ years, until the next generation that didn't live through the housing bust comes along), some other things may go up because of scarcity, because they are imported and the local currency goes down, etc.
However, taxes are not one of the things that must go up. This idea that because the tax base has eroded, tax rates must increase is another dis-information campaign by the idiots running the asylum.
They tried the same thing in the '30's in US. As property values dropped and foreclosures trimmed the tax rolls, the idiot local governments said "tax rates must rise or our income (tax receipts) will fall." Result: TAX REVOLT. People stopped paying their property tax and started electing smarter officials.
First step: Shrink govt expenditures dramatically. Not by cutting essential services (the usual step to make taxpayers demand higher rates), but by cutting salaries and benefits of govt workers on a sliding scale (highest paid, biggest cut). Cutting administrative positions to the bone, no firemen cut until there is only the mayor and one secretary in City Hall, etc., etc.
At the national level, we need to cut out large portions (entire departments of govt--i.e. Education Dept--or large fractions of expenditures--i.e. defense procurement of advanced weapons) This will hurt in the short term by increasing unemployment and will limit govt policy options. Nations may have to be slower to get involved militarily in other countries--unless it is a major national security threat and then you go in hard and quick. Do nation ending, not building). Lots of changes are coming because they have to. Entitlements are going to go down or go away. People are going to have to save for their own needs. People are going to die because we can't afford to care for them.
The game has fundamentally changed. Govt has to change also.
Also in FL and jobless after 30 years from the space center. Saw it coming, re-educated at UCF in Urban Planning and Econ. Development - Still jobless and don't want to give away my paid for home to rent elsewhere.
Realtors & venture capital planned to purchase this fall, as it had been determined this was to be the bottom of the RE mrkt. Ha - wonder if that still stands. Now the infrastructure has crapped and nobody has held the firefighter and police pensions in escrow. Just the beginning of New Normal.
I am sorry to hear that. I have a family member who is snow birding right now to florida. But continues to spend his summers up north. heh.
Maybe winter time will bring in plenty of people with money to spend as they flee the north winter.
I recall Ocala and Winterhaven as pretty good places in Florida at least a decade ago. I have no idea what to expect now. But we will see.
It will not stop, it is the first real perpetual motion machine.
Bernake, it that you?
I read ANYTHING Bruce Krasting writes, because he writes so well.
Tough to say whether Bruce will ever beat his "Christmas Party in Greenwich" awhile back.
I am working on that. But the prospects of me and Greenwich are pretty thin after last year. I won't be going back to that party. Maybe I can crash another. I think it was the crack about the shrimp platter....
I agree that was a well written story about the Christmas party. If the shrimp is bad Bruce just wash it down with some beer, that's what I would do. But then again they wouldn't have invited me to start with. I notice the price of GE hasn't changed much since that story Bruce. I'm not saying that means you're wrong about it, I just think it's interesting to note. Trading up in weekend off hours.
LOL, just keep writing for us refugees from the bogus system we find ourselves in...
A close personal friend of mine is a FDIC bank auditor in Illinois. This person gives the final word on whether they will close a bank or not, to put it in simple terms. I'm sorry I cannot provide you with any more credible source other than my word which is based upon our conversations, but I feel it important to share this information with you and with the readers here.
A little background: Most failed banks are essentially sold to other banks and some go into receivership. The common maneuver here is to transfer the assets and liabilities to another bank with some level of guarantee from the FDIC to help support those liabilities. This is [typically] done on a Friday evening and causes the bank to be closed perhaps the next day (Saturday) and then the bank re-opens, business as usual, on Monday. So far, there has been little panic or problems with this [modus operandi].
Now, I can't speak for what is happening around the U.S. but my friend states that in Illinois, they are finding it more and more difficult to find banks that want to help out. That is, the banks that formerly had wanted to purchase other banks have done so and are not interested in buying any more banks. To put it bluntly, the FDIC is running out of buyers. My friend states that often times they are literally coming down to the wire to get all the transactions and contracts, etc. pertaining to the purchase completed in time to seamlessly make the transition, as it is taking longer and longer to secure a buyer.
I'm not quite certain what to make of this other than it's quite obvious that we've reached a saturation point in the banking industry where they themselves can no longer purchase any more failed banks.
So how else can this information benefit the readers? I believe that we should keep an eye out for more banks going into receivership or being absorbed by the Federal Government versus being purchased by other banks. We should also watch for any prolonged transitions of one bank closing and not opening back up under a new bank for more than a couple days. These subtle indicators may be one of those much sought after cues for knowing when to put some plans into action.
Thank you for all you do. Sincerely, - Tanker
http://www.survivalblog.com/2010/09/letter_re_fdic_insider_in_illi.html
In the past few days I read an article somewhere which detailed that the FDIC had reduced the discounts and the loss sharing on the bank sales. That would certainly dull the enthusiasm of potential purchasers. Why take on a pile of BS at 100% when you already have a bunch of it on your own books that the regulators are questioning? Once these folks recognize that this stuff has to go out the door, the real decline will get going.
The other comment in the thread that is very telling is the one about the Miami condo rentals. Maybe the $1,000,000 condo should hvae only been at $600,000. The $2K a month rent will barely cover the taxes and condo fees, if that.
The $2K a month rent will barely cover the taxes and condo fees, if that.
Here in the DK, that happy state only lasts until the tennants take the landlord in front of the rent-board and get the rents reduced ... to about 1950's level. Cash flow on real-estate has been negative for 15 years; the only way to profit was by leveraging the "value" of the property to buy more property to leverage ... Then sell to suckers (or take out "pfandbriefe" secured on the properties and sell those to suckers).
Either we get double-digit interest rates and inflate all this away Or prices reset all the way to 1985 thereabouts. Right now, "They" cannot decide which way the loss must be eaten so I would bet on Both ;-)
MoMoMe...
I wonder if this is part of the reason we've had two full weekends without the FDIC blowing up any banks?
We have had some quiet times on FDIC Friday and we are doubled to 800+ unofficial troubled bank list. One of my old banks is in such deep with so many bad loans in construction and such in our area and that is just a branch. Imagine 1000 other branches the same way.
People are buying homes a little or at least renting and moving in a little bit where we are.
Florida is tough. So is the rest of the USA. But no one ever mentions Hawaii or Alaska. How come?
I don't think Hawaii is any different than other places. The deep pocket people are unaffected but everything else is going down. All those condos owned by Californians are half price and will go lower from their former super inflated prices. The economy stinks, the working person is toast.
I was a RTC workout specialist for the Savings & Loan Industry back in the 80's. Some of the properties were sold back to the defaulting party. Developers made millions off of their own defaults. Same thing will happen here,x5. Most of the RTC workouts were with nothing or 10% down, huge workout terms (5 years payments at 2-3%!) and balloons at ten. NOW, I am hearing throught the grapevine that name your price and they will create a huge balloon (with no interest) for 25-30 years!
"Developers made millions off of their own defaults."
Bingo, hook line and who needs a sinker when there is nothing but whales biting.
I bought some of those RTC properties because they were just to cheap to pass up. Some turned out to be duds (cheap for a reason), but others turned out to be really good deals. I lost a bit of money on some, but overall I came out way ahead.
A no-interest 25-30 year loan would be very attractive to me. I expect lots of inflation in the coming decades. In thirty years, a big mac may be selling for 50 dollars (who knows?). Where do I sign up?
That would only work if there is an underlying economic recovery and pick-up in demand against the underlying. At least in the 80s, there was the ability to shove more square footage down the throats of businesses, and down homeowners. Today, probably not....
Lots of real estate will probably get to be so cheap and paying renters so difficult to find that it will be cheaper to just walk away and turn off the utilities permanently.
All of these assets spiral down to nothing, and are picked up by gold owners?
What's the end game?
Wait, wait! I know this one!
"$200mm of bad loans and REO is no big deal. But this is mostly in S. Florida."
For $200m you could buy one nice house in Palm Beach... 1... nice... house. not 2 nice houses... 1.
So you would be correct in assuming that $200m doesnt buy a whole lot in S. FL... Maybe where you hail from Bruce $200m gets you to first base but not in S. FL...
Just food for thought.
http://www.palmbeachdailynews.com/news/former-cia-director-william-caseys-north-end-house-894365.html
oh come on now. you're not talking about South Florida you're talking about Palm Beach. that's not part of south Florida...fuck that's not even part of planet earth.
I'm in So. Fla also (Miami to be exact) and yes I have seen massive price drops and the properties remain empty. I wouldn't buy anything here right now...but it is becoming a renters paradise. It's not even remotely hard to find brand new condos, very very very nice condos, that were for sale 2 years ago at well over 1 mil now renting for under 2k per month...and dropping lower.
We know there are deep pockets in S. Florida. We also know from this sale that there is tons of stuff that is of no interest to those deep pockets. That is the problem. Question? what was the S florida RE turnover in August? How does that stack up to the 200mm sale here? My guess it is a meaningful percentage.
http://www.reuters.com/article/idUSTRE52N59B20090324
Jorge Perez single handedly over built the condo market in South Florida.
http://www.nytimes.com/2009/10/07/business/07corus.html
Corus Bank assets where in fact sold to whomever… but funded by Stephen Schwartzman and Leon Black. Whom where behind Jorge to begin with… so as much as they have enjoyed the tax benefit of the write down, they will enjoy the ride back up by continuing to own the properties.
So, Bruce… I would disagree with multiple parts of your agreement… and this deal was done 12 months ago? Maybe a lil less, point being it is not new news.
Bruce, you ask the questions and I will sit back and lick my chops.
Long ways down, and I have all the time in the world.
Another fun article to read Bruce.
I'm surprised your hesitant about the FDIC being the price leader. What are the other options? 800 banks (10% of total) on the troubled bank list. A nation overbuilt of residential housing, strip malls, and office buildings. What are the other options? The FDIC is broke. Already got next 3 years of payments from banks in advance.
We need to start clearing the dead wood throughout society. Clearing 'markets'. Yes, lots of equity will get wiped out. Good. That's capitalism. No more bailouts. No more moral hazard.
Liquidate Bitchez!
+1
Safe as houses.
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