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The Latest Housing Crash Gimmick: Fannie's "Sale-Rentback" Nightmare
The situation in housing is taking a turn for the surreal. As of tomorrow, bankrupt Fannie Mae will offer deadbeat housing speculators, aka homeowners who bought at the market peak and now can't pay their mortgage, the option to live in their foreclosed upon home while renting it out on a month-to-month basis from the government. As the WSJ reports, "borrowers-turned-tenants will be able to sign leases of up to 12 months and will pay market rents, which in most cases are lower than the cost of mortgage payments." The catch: Fannie will be able to hold the home as not listed for sale. In essence the shadow inventory of millions of zombie houses will skyrocket overnight, further complicating any objective analyses of how many houses are available on the market (the answer: many, many more than you think, but the exact number escapes us). And with housing still collapsing, and jobs still non-existent, more and more people are likely to take advantage of this latest taxpayer subsidized boondoggle. It is clear now that the Fed will do everything in its power to attempt a reflation of the previous housing bubble, instead of wiping the slate clean. Taxpayer losses be damned: there are investment banks with horrendous balance sheets that need bailing out.
Some more from the WSJ:
Fannie Mae wouldn't say how many homeowners it expects will take
advantage of the program. The company acquired 57,000 properties
through foreclosure during the first half of the year, bringing its
total real-estate owned inventory to 63,000 properties valued at $6
billion. The rental program will allow Fannie to hold inventory off
of already saturated housing markets and makes a bet that the housing
market will be stronger one year from now.
And from some deeply probing, permabullish and procyclical commentary that could come from any of a handful of hedge fund managers who implded last year when the market did the unthinkable and actually corrected:
"I'm sure Fannie is hoping that when they sell the properties, the
values will be higher," says David Berson, chief economist for PMI
Group Inc., a private-mortgage insurer. "A year from now, we should be
a year further into the economic recovery, and housing demand will be
stronger…That will allow you to release homes that have been foreclosed
upon but not put on the market."
While there apparently are some stupid things known as application guidelines, Fannie is sure to take a page from the operations of CFC, New Century and all the other bankrupt companies that considered the popping of the housing bubble a purely theoretical construct:
The move by Fannie follows a program by Freddie Mac that began
offering month-to-month leases to owner-occupants who had lost their
homes to foreclosure. But Freddie continues to market those homes for
sale. The Fannie Mae program differs in one important respect:
foreclosed homes won't be listed for sale. In February, both companies
began allowing tenants whose landlords had lost their properties to
foreclosure to sign month-to-month leases.
Borrowers will have to show that the monthly rent is less than 31%
of their gross income. The program, which will use a professional
management company to handle maintenance, will allow borrowers to renew
their leases on a term or monthly basis and properties that are sold
during the lease period will include an assignment of that lease to the
new owner.
Some have been so bold as to question the logic of this latest extend and pretend manoeuvre. Then again, if the full staggering size of the shadow inventory were to come to light and buyers were to realize that they have 100 homes to pick from instead of one, the so called housing pick up would disappear as quickly as all those agency bonds that the Fed has singlehandedly gobbled up and no more are left:
In recent months, some industry analysts have been puzzled over why
more homes haven't been put up for sale as the rate of borrowers who
default climbs higher. Well-intentioned efforts to keep families in
their homes have led to delays that some analysts believe is prolonging
the mortgage crisis by creating a "shadow" inventory of pent-up supply
that will ultimately hit the market.
That has prompted some to question the logic of keeping homes off of
the market at a time when demand for bank-owned properties has been
soaring. The number of foreclosed properties for sale in Las Vegas, for
example, has fallen to a less than three months' supply, according to
SalesTraq, a local real-estate research firm. But housing demand
typically falls in the winter, and the number of foreclosures continues
to grow. "We're past the peak of when you would want to sell," says Mr.
Lawler.
At the end of the day the question as always is who wins and who loses. And in the ongoing escalation of the conflict between Wall Street and Main Street, it is once again no surprise on whose side the Obama administration has decided to position itself.
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They're going to save the spender and punish the saver.
They're going to save the spender and punish the saver.
The most advanced and resilient economy on the planet can readily dispense with such penny-pinching relics. Let us now print some more prosperity, shall we?
Tyler, as was said on another thread, the proper phrase is "Regime" not "Administration".
a new low, as the man invents yet another means to keep all this garbage off the books.
Sustainably, keep all this garbage off the books...
Nope. It's perfectly consistent with current policy. Geitner & Obama believe that the financial problems are a crisis of liquidity, not a crisis of solvency. Therefore, their solution is to inject cash and prop things up until the excess cash reinflates asset values to their pre-crash levels. Simple really.
It's completely and totally misguided, as the banks need to hoard the cash to fight their ongoing solvency problem. So the cash never gets to the people who can use it to bid up assets. But it is, in fact, quite simple.
Yep, they think the tail wags the dog.
Thing is, this scheme *might* have worked... If the debt overhang wasn't so enormous.
It's difficult to even guess what the unintended consequences of this will be. I imagine every underwater McMansion dweller with half a brain will take them up on their offer. Prices may once again become linked to rents. Demand for rental properties may be reduced. Wow, what else?...
The politicians and special interests are intellectually locked in their world of power plays and corruption. They like their self-created fantasy land. How can the pitiful taxpayer dare to question their version of reality.
Dude, you are missing the whole point. This has nothing to do with the housing market. This is a power grab by Obama. Who owns Fannie and Freddie now? The govt.
So now, the government is going to own millions of single family homes?
We are moving pretty quickly to totalitarian Fascism.
Did you see Glenn Beck's conspiracy theory about the govt. revaluing the currency based on real estate?
man, just googleshared this article with the comment "and glenn beck starts to look less like a kook and more like a prophet..."
So, are you ready to give up blog commentary yet? Smart enough to sleuth out the truth, but not smart enough to be on the team. You know what that makes you, right? Dangerous ... and expendable.
Potterville
Next thing the government should do is buy up all the supermarkets, retail space, filling stations etc.
Obama Money ... it comes from his stash
Do many share my belief that even without the 50-70% run up we have had in stocks, we still are most likely worse off now, than last fall? It seems obvious that the market/banks/gov't are being held together with bubblegum and twisty-ties. The question is:does it hold until things really get better (5, 10, 20 years??). It's exhausting to stay short waiting for the turn. Sighhhhhhhhhhh....
Yes, I share your sentiment. The market run up has nothing to do with an improving economy. The run up has everything to do with this graph: http://research.stlouisfed.org/fred2/series/WSECOUT and the FED accepting bottle caps and hermit crabs for collateral. As long as the graph is going up, there is really no reason to be short ANYTHING.
Except the USD.
"...hermit crabs..."
ROTFLMFAO
Comment of the week.
Dammit! I just threw out my bottlecap and hermit crab collections. :(
Sec 14 of FRB act only allows them to own some securities outright. That does not preclude the Fed from loaning money to TBTF and others to purchase stocks.
To buy and sell, at home or abroad, bonds and notes of the United States, bonds issued under the provisions of subsection (c) of section 4 of the Home Owners' Loan Act of 1933, as amended, and having maturities from date of purchase of not exceeding six months, and bills, notes, revenue bonds, and warrants with a maturity from date of purchase of not exceeding six months, issued in anticipation of the collection of taxes or in anticipation of the receipt of assured revenues by any State, county, district, political subdivision, or municipality in the continental United States, including irrigation, drainage and reclamation districts, and obligations of, or fully guaranteed as to principal and interest by, a foreign government or agency thereof, such purchases to be made in accordance with rules and regulations prescribed by the Board of Governors of the Federal Reserve System. Notwithstanding any other provision of this chapter, any bonds, notes, or other obligations which are direct obligations of the United States or which are fully guaranteed by the United States as to the principal and interest may be bought and sold without regard to maturities but only in the open market.
Actually, they just amended the proposal. Now the hermit crabs don't even have to be alive to technically be considered a hermit crab.
Check that.
Now an empty shell will do.
Bubblegum?
Smoke, mirrors and a pure bullshit cocktail whipped up by the big blender (corporate owned media)
We're worse off now and farther from reality than we've ever been. The bizarro years of 2005-2006 were a bastion of sanity compared to this. Prepare accordingly.
"BRILLIANT!!"
I'm going to go drink a case of Guinness and try to forget I ever read this article.
Jump! You Fuckers!
I love that video!
I am into the vodka already
Why would anyone rent a house for a year when it is quite possible to stay in the house for months without paying anything? Stop paying the mortgage and wait until you are evicted and then go rent a place.
+1
+2
One of my old friends in Tampa is having a ball with this messed up real estate market. He stopped paying his mortgage last December, deciding it was more important to keep his credit cards than his house. So far, nothing has happened. He pays the utilities and mows the lawn and the bank doesn't bother him. So while he's "saved" $27K, I've been paying my mortgage like a schlubb.
How many of these squatters are pouring their money into the stock market instead? How does this not end badly?
My nephew bought a CA home for $412,000 ... it's now worth $275,000. He stopped paying last year and it went info foreclosure ... he's still there and has a good friend who's been in his for three years. Where's the incentive to 'pay' rent when it comes free?
We have a winner!
Exactly ... the word is out that the banks are not even foreclosing on properties anymore for fear of adding to inventory. They have found a new way to generate revenue by simply attempting to modify mortgages and collecting fees.
Foreclosing costs money, there is also issues of unpaid taxes and HOA fees including property upkeep while it sits unoccupied.
If they ever had to really do price discovery you would find many banks insolvent.
Because now they qualify for Section 8. Too much risk and uncertainty in "quite possibly" staying in the house.
Why not pay the landlord with his own money...
Some will stop paying the mortgage until faced with being thrown out. Then they will sign a lease. Then they will stop paying the rent until faced with eviction, whenever that may be. All the while the house will deteriorate. The property manager will collect fees no matter what.
+1000
I'm glad I read through before saying the exact same thing. "Let's see, I'm living rent-free right now, the only thing better is if you start paying me to stay put and keep the vandals away."
Don't laugh, that's probably next.
I'll do it for free, assuming the bank pays the property taxes.
Unfortunately, people are stupid.
the US government is so pathetic...they are so unwilling to get honest and deal with reality. They have to rely on these 'outside the box' lame-ass schemes to keep the fraud alive. argh...it's hard to watch.
The charades have worked so well in the past, why not continue? Americans are idiots. No, these games will go on until something happens that can't be ignored, like no milk and bread available at the grocery or the sattelite feed for the Super Bowl goes offline.
my bet is ONLY when the satellite feed for Super Bowl goes down, the liqour store runs out of beer, and the local pizza joint quits delivering XXXL stuff crusted meat lovers, with a side of wings.
I want my MTV! Fuck me right in the ass...but don't you dare take away my cheetos, my porn or my MTV! This is America bitch and that's freedom and the American dream. Don't wake me up please...
I think you are absolutely right but don't you think this BS program is one step further to keep people asleep and uncaring?
I mean why should they care about wether or not they have cable television when they are worried about where they will live and uncle sam warbucks comes along and "saves" them. I can't waint for all this to collapse. To think of all the things that would instantanously be cheaper if the dollar just droped and government imploded...
A)Debt would be wiped
B)No Income Taxes
C)No car insurance
D)No car registration
E)No Inflation Tax
F)No tickets or jail time for non-violent crimes
G)No Licencing of business, zoning, permits, etc
H)No Property Taxes
Oh to be FREE...its a nice thought
Americans want to be fooled. Nay, they NEED to be fooled.
Zombie Banks, The Game Has Changed
…Something profound just happened to the way the Federal Reserve (Treasury et al) and the Bank of England are going to distribute national debt. What better place to but debt but a bullied domestic bank. Eventually the Federal Reserve/Treasury/Executive bank will force all domestic savings into zero return Treasury instruments. This is the only place where debt can be placed at this time….
http://www.youtube.com/watch?v=JtnWdgs3i-A&feature=sub
Does anyone know if they will offer pick-a-pay rent rates? So the McMansion owner can stay for less and continue to add to the principal owed. Neg am no doc renting why we could all be moving on up!
I was trying to mull that one myself
what happens to the old mortgage? does it just sit in limbo accruing interest until you are ready to "stop leasing" (from yourself)?
boggling.
I was trying to mull that one myself
what happens to the old mortgage? does it just sit in limbo accruing interest until you are ready to "stop leasing" (from yourself)?
boggling.
TraderMark, you really deserve credit for your call on Gubbment stimulus. For any out there who might be in the deflationista camp, this .gov will layer on stimulus to the moon in the most grotesque and heinous ways imaginable. They will not stop.
A deflationary bust will come, but it might take longer than any of us think possible.
TraderMark, the old mortgage goes away. It is foreclosed and you are paying rent instead -- it does beg the question if their willing to settle for the rent amount why not modify the mortage and save the foreclosure expense and the re-sale issue? I guess then they might have to mark a loss which I am sure their is some way they are not doing in the latest scheme they are pondering.
"You can not pay this month but your rent will only go up next month. Or, you could not pay next month..."
Accountant re-employment program.
So do all the guys who worked at Countrywide now work at Fannie, Freddie and FHA ?
WOW!!! There really IS no limit to stupidity.
Absolutely - stupidity does indeed seem to be the one thing that violates all three thermodynamic laws, and at the same time.
Now if we could just produce a transportation system that ran on stupidity we could eventually recognize the enviro-kooks' dreams of a "green" world.
Trouble is, who (aside from the stupid, of course) would ride on a transportation system driven by, ahem, stupidity?
+1,+1
Brilliance even in the face of stupidity
(Gov't) Employment - check
Food - check
Housing - check
Healthcare - check
Finance - check
Manufacuturing - check
If we are honest, we need to admit that the progression to complete state-control is shear genius. Evil, yes, but genius nonetheless; and all done in plain site. Someone carefully studied history to avoid making past mistakes.
My bet is they go after the pitchforks in term 2.
See my comment above to GFI. It might be time to cancel my existing interwebs account and get a new IP address under a new alias. Shit, illegals have every right (actually, more) to voting, health care, SS, etc under whatever ID they choose.
It's time to seriously comprehend what's going down and take the proper precautions.
deleted by ministry of information
LOL srsly. I mean thought crime is already here with "pre-incarcration".
There will not be a term two...speaking from the point of view of those that voted for term 1. Those that supported term one even more strongly are seriously over it -- the protect the banks forget the rest mentality.
Looks like John Rae is getting his wish. The government will rent the land back to us.
How do you think the Chinese Sovereign Wealth Fund got so big and liquid?
They own all the land and collect rent from long term leases. They don't give a shit about the buildings on the land, just the land.
My guess is .gov will bulldoze the homes that they "own" because we all know that proper ownership is a shitstorm of work that .gov is not equipped to deal with.
Investment prospects: demolition companies, and new home builders.
How is that different from the way property taxes currently work in the US?
They're just going to drag this housing correction on and on and on for years. Would be so much easier to let the banks fail and auction off their "assets". If Joe in LA has a 600k loan on a 200k house, then either 1) he walks away and the bank takes a 400k loss or 2) the bank fails and the note is auctioned off to a bank willing to write down the loan to 200k, and Joe continues on his illogical persuit of the American (Debt) dream.
Am I wrong?
when will this nightmare end?
Repairs? Local Taxes? Securitized Bonds? THIS IS A FUCKING CLUSTERFUCK OF AN IDEA.
Yeah, I was thinking this is a boon for local gov'ts. Odd that the feds would care.
Except for the small detail that local govts can't tax Federal land.
And my guess is by March, Fannie will be nationalized.
Oops.
That should really help out the California problem. Right?
Just imagine if half of the property tax base instantly disappeared.
Oh, for fun.
OHH! Really good point ghostface. That just gave me a big warm and fuzzy feeling!
Argos, I have to ask (I know OT) is that a Vizsla?
The dirt road to serfdom.
The accounting treatment should be interesting. I suspect houses will go from non-performing assets to performing, income producing assets, at par of course.
In other words, I will never ever ever be able to buy a house. I will be stuck renting for the next 20 years while I wait for this housing situation to fix itself.
Unless "communal land ownership" is put in place, in which case... I want you to hand over the keys to your mansion.
i'm actually beginning to think that this entire tragicomedy is the fulfillment of a 300 year old Iriquois curse on the original European settlers
a 'you want private property, here's your private property, let's see if you can keep it' sort of curse.
american homedebtors, meet your new landlord: aunt fannie & uncle fred.
Why own when you can squat for free?
How to turn a two-year recesion into a ten-year depression in just one easy step...
The unfairness of this boggles my mind. So C owns your mortgage and you are out on the street, but Fannie owns your neighbor's so they get to stay?
This isn't genius. This is half-assed. So who's gonna collect the rent for an entity named "Fannie"? The national guard?
There is nothing left at this point. Nobody is going to pay a dime of rent to these bastards.
what's more, who's going to throw out the bums for non payment? Barack Obama? Michelle? Barney Frank?
Folks, it's time to take back our country from the tyrants. The second ammendment exists specifically so that the citizens can protect themselves from the tyranny.
This is all simply another extend-pretend game.......government style.
The devil in the detail, of course, is the definition of " market rent ". There will probably be a lot of Section 8-type adjustments to monthly rentals, courtesy of Uncle Sugar.
This is another death blow to market purging and stabilization in residential real estate. A desperation play that will backfire badly.
Zombie banks, Zombie housing, Zombie manufacturing.
We are in a full-on Zombie Economy.
George Romero must be the "BRAAIINNSSS!" behind the FED.
George Romero's zombies weren't hungry for brains, they were hungry for flesh.
The "braains" zombies were purely non-Romero constructs.
Yes, but I couldn't think of a brain-eating zombie film director with as high a name recognition as Romero. Nice catch.
Pretty simple concept called cash flow. The homes are actually foreclosed on, so they become REO of Fannie, and probably shortly also Freddie and Ginnie, they should still show up in their accounting statements, perhaps as a seperate line item.
More smoke and mirrors.
DOW 10,000 anyone?
In their zeal to prevent losing the House in the 2010 midterms, the Dems are so fucking the second half of Obama's first term its not even funny. The Zombification of America continues full steam ahead.
And the IRS expects me to pay for this? Hey -- good luck with that. Since we're institutionalizing lawlessness, picking winners and losers, I'm going to join in on the fun.
If the Federal government needs more money, they'll have to print it themselves. Oh wait, ...nevermind.
America -- FVCK YEAH!
"Taxpayer losses be damned: there are investment banks with horrendous balance sheets that need bailing out."
You're just figuring this out?????????????????
Better than expected?
The downstream posters must be naive, stupid of both. Take a look at GFI's (and my) comment. Extend & pretend? Not gonna work? Unfairness? Jeez, doesn't anyone here play chess? What you mistake as intent is nothing more than a feint.
Bitches, please. Get a clue - if not for your own sake, then to protect my eyes from burning. What is the end result? Gov't ownership of housing. Add it to the list.
At least someone gets it.
I must say I am impressed at the speed at which BHO is consolidating Federal power. Industry, banks, housing. If you study history, you will see that it usually takes a revolution for a dictator to consolidate this much power this quickly.
"never let a crisis go to waste" - rahm the reemer
I haven't seen much of B9K9 lately, but I'm glad he/she is posting.
I'm pretty sure that BHO had grand plans to consolidate state power as it became clear he was going to be POTUS-elect-- though I suspect that it was expected to be the "hard way' via socilization of healthcare, carbon credits, etc.
The housing crisis, and the way the exiting Bush administration handled it, gave Obama an enormously huge windfall to consolidate power. The opportunity to transfer individial property to the State was on a platter, and all Obama needed was for the TBTFs and Uncle Ben to play along for profit.
And is hard as it is to believe, consolidating this power is coming from BOTH the left AND the right.
It's freaking brilliant.
.. and not a single drop of blood in the streets!
Quietly packing my bags, looking around me and making sure nobody notices..
Once the majority figures this out and tries for mass exodus, it's too late.
Who says the wall at the Mexican border is only supposed to keep Mexicans out? If it can keep Mexicans out, it will keep Americans in.
Be afraid, be very afraid.
If they stopped paying their mortgage, why not stop paying the rent as well? They did not get kicked out before, so who is going to evict them now?
"who is going to evict them now?"
exactly-
it's only a way to keep houses off the market- renter or no renter
Bingo.
Xe will evict them.
It's just a step to the future. The Government will own all the housing and allocate such to its workers. Your home will be provided by your work. The Leadership and inteligencia will live in the better homes, guarded, gated communities befitting what party leadership has earned. Welcome to Commu, I mean, Socialist, Amerika.
Exactly. the posters going on here about "not allowing the market to correct" assume there will even be a market in a few years.
this will be perfect opportunity for fnm to offer new products. all they need to do now is package the rents received from these programs into different tranches, actually why bother if fnm is tarp funded.
think about the profits .....
a good companion article from Ritholtz
Worst Idea of 2009
http://www.ritholtz.com/blog/2009/11/worst-idea-of-2009/
but they fail to mention the Warren (an all in bet on America) Buffett connection, found here
http://www.marketwatch.com/story/buffett-joins-goldmans-fannie-tax-credi...
Hey Copper Tops, if you like that then you gotta love this:
http://www.bloomberg.com/apps/news?pid=20601103&sid=a9wmu6gtS3rM
Dang, you guys scooped me.
"Only if in the taxpayers interest."
I have no interest in this anymore. Do whatever you guys in DC want. If Goldman Sachs needs a tax break, give them one -- what's the point of even pretending Washington DC is interested in doing the right thing anymore.
We'll settle this by virtue of the second amendment.
please try the way of the sixteenth before you start shooting from the hip. thank you.
this will be perfect opportunity for fnm to offer new products. all they need to do now is package the rents received from these programs into different tranches, actually why bother if fnm is tarp funded.
think about the profits .....
beat me by 5 minutes
grrr!
http://www.fundmymutualfund.com/2009/11/fannie-maes-new-deed-for-lease-p...
The federal government is going to take over the housing stock; US peasents will live in government owned housing, at a subsidized rate TBD by bureaucrats, no different than the Soviet Union or East Germany.
Welcome to the new Amerika - "change you can believe in"
Actually, aside from the credit hit, in the long run its probably smarter to just walk away than trying to rent a house that is obviously >125% underwater. If you just owe 125% of your house you qualify for the other government handouts.
Renting something (from yourself) which has no chance of going back to anywhere near speculative heights is actually fiscally pretty dumb. Then again these were people who put nothing down, and threw the closing costs into their mortgage principal so why are we calling them "owners" again?
Boo Yah. I used the same word... surreal. It's all become laughable
"Actually, aside from the credit hit, in the long run its probably smarter to just walk away"
especially in a no recourse State- where the only thing a bank can do is take back their collateral-
without a principle curtailment why would anyone refinance a home that is underwater for any amount- you are only locking in your negative equity postion w/ the bank-
thus we have Wells Fargo converting to interest only for buyers who are upside down and cannot afford their home in hopes of keeping folks from defaulting- but reduce the principal- never happen
walk away people- send in your keys and walk away
fuck the banks and the horse they rode in on
this should then reduce the rentals as well right. IF that happens not sure how the price can go up in the next 5-10 years. They should let the bond holders take a hit now saving a few and screwing the most responsible folks out there.
Not sure why anyone would buy any stocks now when they keep diluting existing holders and covert bond holders to equity holders and still 90% of the SnP companies cannot make decent money and rated junk
What does anyone think about the following as potential consequences:
$6B approx value at 63,000 properties translates into an average "value" of $95,000. While the range and median aren't known, obviously these generally speaking are lower priced homes.
Keeping former owners in a property that will subsequently pay rent could transform neighboorhoods and sections of towns into shantytowns. Does one really expect these new renters/former owners to take care of these properties and "improve" them with their own sweat un-equity? Or, even maintain them as well. Especially in areas where foreclosures outnumber non-foreclosed homes, should these areas (especially if older)turn into rental ghettos, (while there is value of course as a rental property) the resale of those homes will be extremely, exteremely difficult. And to sell at a higher price in a few years is a joke! The pool of potential buyers who would later buy these as owner-occupied is shrinking by the minute due to declining income, no assets/no net worth, declining credit. These consequences seemingly would translate into these theoretical sections like I've described essentially crashing in price, closer to land value or near zero. This seems to be happening in areas such as Detroit, Cleveland, East Cleveland, Slavic Village (Cleveland), Maple Heights (near Cleveland)...I'm from west of Cleveland (a nice part of town) but am so glad to have escaped several years ago.
Just some thoughts; I'd love to hear other readers' thoughts as well.
Sure. It's always worked out well in the past. Right?
http://www.youtube.com/watch?v=cd7VOz_Wstg
http://www.youtube.com/watch?v=_iY6bMNYrzY
http://www.youtube.com/watch?v=EKy3sKnbMPI
Breaking windows nation-wide!!!
Petr Schiff on this abomination!!
http://www.europac.net/videoblog.asp?a=watch
No thanks, I'm sure he'll say buy gold, buy gold.
Thanks, I like Schiff, but he too misses the point. of course this is attractive to an underwater borrower. That is the point - make it attractive so people will willingly become tenants of the state.
Interesting that Schiff's website is coming under attack - they really are scared of him, aren't they?
These are houses that were sold people who could not afford them, and they can't afford them now either. They are buggy wheels.
What to do with those that stopped paying mortgage for the last year or two?
How will this affect those planning strategic defaults? never mind, done
If uncle Sam becomes the landlord then he can pay the local property taxes!
See my post above: it is unConstitutional for local or state governments to tax Federal property.
This is one situation where BHO will use his knowledge of the Constitution to his benefit.
This will, of course, further consolidate power in the hands of the Federal government, as state and local governments become more and more dependent.
The road to serfdom.
Fed blows a bubble, everyone borrows to chase it higher
Bubble pops, everyone is foreclosed on, but debts are not wiped out
Real properties gobbled up by banks and US Gov't. Banks sell them for a song to cronies, US Gov't rents them out.
What do the slaves to debt/renters get in return?
As taxpayers they become liable for the waste, principal, and interest on the trillions of extra debt being created now (including future cost of new programs) allegedly on their behalf.
The prudent ones, who did not ride the bubble, see their savings corroded by zero interest rates and deflation busting policies.
All according to plan.
+1000
you nailed it especially the part about :
"Bubble pops, everyone is foreclosed on, but debts are not wiped ou"
most of the debts are illegitimate and should be forgiven.
clean slate, fresh start, new currency.
Wall Street FUCKED UP and did America (and the world by extension) in.
Now main street is FUCKED and supposed to pretend all is business as usual.
There is only one way to CHANGE this.
Actually a pretty good idea. This way property taxes do not take a hit, FNM does not take a hit, the former owner does not take a hit, the FED does not take a hit, nobody takes a hit. They should do the same with cars, and plasma screens, and perhaps even credit card debt, although I am at a loss as to how we would do that, regurgitate the eaten food perhaps? If it ain't there it ain't there, accounting 101 for retards.
Well add houses to the list of "assets" you would need to be off your rocker to buy as you're competing with the dumbest money on the planet. (Add them to Treasuries, MBS, stocks, etc.)
All of DC has gone completely insane.
What's the next step after they miss two month's rent ? Why does GS want to buy the distressed Fannie debt ? Cuz they know they can collect, while we ALL know the govmint will not be so cruel.
I agree that this makes it hard to figure out what is really going on with the economy, good thing ZeroHedge is here to help with that. However, if I was in charge of Fannie I would do the same thing, sort of.
In my mind this is no different from companies renting supertankers to store crude at sea when oil prices were low. It is silly to try and vomit millions of more homes onto a market that does not want them, or to have them sit empty so they can be stripped and burned. Better to collect some rent and more importantly avoid costs.
The next and more important question of course is what is the exit strategy. I don;t want them to be landlords forever, but if there is a plan to drawdown/forclose on these homes at some consistent pace (say the historic average forclosure rate) or in some strategic way (e.g. in a way that won't undermine their other assets) I don't see a problem
I agree that this makes it hard to figure out what is really going on with the economy, good thing ZeroHedge is here to help with that. However, if I was in charge of Fannie I would do the same thing, sort of.
In my mind this is no different from companies renting supertankers to store crude at sea when oil prices were low. It is silly to try and vomit millions of more homes onto a market that does not want them, or to have them sit empty so they can be stripped and burned. Better to collect some rent and more importantly avoid costs.
The next and more important question of course is what is the exit strategy. I don;t want them to be landlords forever, but if there is a plan to drawdown/forclose on these homes at some consistent pace (say the historic average forclosure rate) or in some strategic way (e.g. in a way that won't undermine their other assets) I don't see a problem
Wow ... toilet goes out in 'rental' home ... call 1-800-WEHELPU. The new government agency (one of the 110 new agencies required to support this effort) shrewdly negotiates the purchase of a new green toilet for $1,400; contracts with union only plumber who charges another $1,400.
Voila ... 2 green jobs / toilet plus (1,000 jobs per agency x 110) = 110,002 jobs saved or created plus $28,000 stimulus with multiplier effect.
It's ok, it's only Obama Money
You know what? It's probably going to work. Short term, yes, long term, maybe not so well.
K-Y for all (except eliot-see marla's post).....
DJ ) 11/05 02:21PM *DJ Congress Approves Jobless Benefits Extension
DJ ) 11/05 02:22PM *DJ Bill Includes Home Buyer Tax Credit Continuation
http://seekingalpha.com/article/171552-wells-fargo-tries-family-values-o...
I hope they write something into the rental agreement so that the landlord has the right to inspect the property at will.
What is this?
People are expected to pay RENT for their homes and TO THE GOVERNMENT?
What's next? People supposed to pay their credit card bills and taxes?
it's gotta be free for all or nothing.
This move also has populist implications. Now the O-team can claim the credit of helping the homeowners and put another spin with their political machine. It might be similar to Bush spinning his tax cut measures (those did plenty to kill the social mobility and widen a gap between have not's and have all's) to push "his" agenda & getting re-elected...
I congratulate us all with entering a new step in evolution of our society - foolocrasy.
must OBEY the image of convenience & comfort.
Don't worry everyone! The governments got it alllll under controlllll....just let them handle it and you go back to sleeep. Here is your banky and your nigh-nigh....just shut the fuck up and sleeeeep.
Incomes are falling.
If Fannie is going to offer rents at your 31% of your falling income and your home is 25% + underwater anyway, who in their right mind will pay the mortgage?
When you take away the dishonor of default, there is no incentive at all to keep piling capital into a levered depreciating asset. In fact. your neighbours don't know that you defaulted if the sign doesn't go out on the lawn and theres a chance that you can rent for one, two years and then buy the house from Fannie at the revised market value anyway (your credit still being relatively intact I presume or at least being just as impaired as everyone else who pulled the same wheeze).
Jeez,and to think ZH'rs worried about the "Moral Hazard"of TARP and cash for clunker's!
And the moral of the story is that next time you get offered a choice between a known quantity in a nasty suit (Hilary) and a charismatic guy in a sharp suit, go for the old broad.
Or go back to failed baseball owners and actors. At least they tend to go blow up other peoples' shit.
Actually, if the gig is the govt has to sell when renter leaves, I don't get how this is market distortion and it makes some sense to me.
Of course, Fan and Fred have lost big money, what they did was horribly stupid and irresponsible with our tax money/govt debt....however, that wound is already inflicted...
Given these houses are worth far less than the loans and home squatters can no longer afford mortgage and they will likely walk away or pay nothing will awaiting foreclosure... is not better to avoid cost and hassle of foreclosure, harm of empty houses on community, transactional costs, and just keep house occupied and keep an income stream. How much does foreclosure cost? how long is the homeowner not paying on loan? how many houses get trashed once empty etc...instead, Fan.Fred get steady stream of income and can unwind their terrible trash in an orderly fashion as people move on from their rentals to another rental...
I'm I nuts, or does this not make sense at this point?
They will have very limited success with their latest Houdini attempt. That's without even considering the unknown unintended consequences.
Most owners going into foreclosure simply walk away rather than hang around the scene of the crime, many others will simply not pay their rent as well, many will first consider the foreclosure/re-rent option when they realize that it's a financially better choice than paying a higher mortgage amount on an underwater house, and then there are all those non-primary homes where the owner already lives elsewhere. And let's not forget the property management costs and nightmare for Fannie, they can barely manage themselves, let alone the largest REO portfolio in history.
But they will try, and try, and try.....
Great comments. Bread and Circuses .... on the "Road to Serfdom".
"Power grab by Obama"!?
look, all the things that some of you here folks are suspectin' the gummint of doin'....are things THE RICH HAVE BEEN DOING FOR THIRTY YEARS. The government has been captured by wealth.
Look, I'm an actual live lefty radical type; I wish Obama really was nationalizing stuff--if he was, WE'D ALL OWN IT. You guys need to stop reading the black helicopter books. You're confusing the tail with the dog.
There is certainly some crappy elements about this rental scheme
however - one thing it may do is stave off the revolution
when you have millions of empty houses - and millions living under bridges and in tent cities - thats when you really will see the politically apathetic American people finally storm the whitehouse
The Road to Serfdom (Winter Watch), quotes some of the commentary here.
http://www.wallstreetexaminer.com/blogs/winter/?p=2711#more-2711
Tricks abound by the Government. I bet most people don't give the government that much credit. It seems the only thing the Gov is really effective at is lying. LOL. What a shame, the 2 party system and the Federal Reserve system is a joke. It's like economic slavery.
Give me control of the money and I care not who runs the country.
John D Rockefeller
Actually Fannie has been doing this locally here in Metro Phoenix since Feb/09 (first time I saw it). Freddie has told every asset management company I have spoken with they will "starve the market of foreclosures." Take it for what its worth. The government entities with over 50% of the mortgages are the 800lb gorilla on the block and they control the market. This is right out of the Resolution Trust Corp play book from the S & L crisis. Though trustees sales increased, the number of foreclosures on the market here locally has dropped in the last year. I think as long as Uncle Sam ie the tax payer, is behind this plan, we won't see another "wave" that everyone is talking about. The feds are controlling the supply side via Freddie, Fannie, Ginnie, etc and the demand side with low interest rates and tax credits for buying. I wouldn't say its game over but I'm not holding my breath for the next wave now that Uncle Sam controls the market more so than most realize.
Actually Fannie has been doing this locally here in Metro Phoenix since Feb/09 (first time I saw it). Freddie has told every asset management company I have spoken with they will "starve the market of foreclosures." Take it for what its worth. The government entities with over 50% of the mortgages are the 800lb gorilla on the block and they control the market. This is right out of the Resolution Trust Corp play book from the S & L crisis. Though trustees sales increased, the number of foreclosures on the market here locally has dropped in the last year. I think as long as Uncle Sam ie the tax payer, is behind this plan, we won't see another "wave" that everyone is talking about. The feds are controlling the supply side via Freddie, Fannie, Ginnie, etc and the demand side with low interest rates and tax credits for buying. I wouldn't say its game over but I'm not holding my breath for the next wave now that Uncle Sam controls the market more so than most realize.
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