This page has been archived and commenting is disabled.
If The Guilty (Mortgage Mafia) Are Never Punished, Housing Will Never Recover
If The Guilty (Mortgage Mafia) Are Never Punished, Housing Will Never Recover
And The Rent IS Too Damn High
Courtesy of Lee Adler of the Wall Street Examiner
Housing data continues to be mixed. Lagging closed sales data shows prices still declining. However, the most current sales data represents January closings, which were mostly sales that went under contract in November 2011. That tells us nothing about the current market. Real time listings data, which over time has correlated well with subsequently reported sales data, is actually up on a year over year basis. The supply side of the law of supply and demand is working. There’s less supply offered at these low levels and seller asking prices have firmed up because of that. But the demand side is still broken in spite of an apparent increase in buyer “willingness.”
Most demand markers remain extremely weak. The number of buyers may have increased, but huge numbers of sales are falling through because of problems with financing. Appraisers, unwilling and unable to see prices leveling out, continue to apply downward time adjustments resulting in one third of contracts blowing up. The willingness to buy is there, but the ability to finance is not. At the same time, a high percentage of sales being all cash suggests that many buyers are sensing intrinsic value in some markets. Unfortunately for the market, value and price isn’t the same thing.
Demand depends largely on employment. While there are hints that the employment picture may be improving, it has not improved enough to cause a sustained increase in demand that would lead to a sustained rise in house prices.
The supply of existing houses on the market has been radically reduced, while builders continue to build. They got a boost in January with a surge in new home demand. It appears that the dead in the water new house market may have turned a corner of sorts, but it’s not clear yet whether a sustained uptrend will follow. Sales as measured by the Commerce Department are barely above record lows. Based on the current NAHB builder survey, February sales data should show a substantial increase.
Inventories of existing homes are way down, and that has helped inventory to sales ratios based on contracts, but one third of those contracts are blowing up due to low appraisals and credit rejections on other grounds. Appraisers applying downward time adjustments to comparable sales exacerbates a problem that might no longer exist if it were not for the low appraisals. It’s a chicken and egg problem. Appraisers won’t stop adjusting comparable sales down in price until the price downtrend stops, and the downtrend won’t stop until appraisers stop using negative time adjustments.
So while there appears to be an increase in the willingness of buyers to buy, there’s no increase in effective demand, or the ability to close the sale, and hence no real improvement in the supply demand imbalance in spite of sharp reductions in supply.
One half of the problem, that of oversupply, is well on the way to being solved. The problem of financing deals so that they can close is not. The same mortgage lenders who caused the problem in the first place by being too easy for too long, are now exacerbating the problem by being too tight.
Their stupidity and short-sighted self dealing are boundless, in the end only harming the market they are supposed to facilitate in the due course of the conduct of their business. A little honesty would have gone a long way. Unfortunately, that’s a non existent quality among the big mortgage banks. They’re crooks, and they continue to screw the system as they seek to cover their crimes. The only way out of what is in its essence a criminal morass is to punish the guilty. The only solution is to put a few thousand of the industry’s top players in jail. That’s not happening, and it’s not going to happen. Until there’s punishment of bad behavior, the bad behavior will only be reinforced.
While lenders ironically screw the system by now rejecting deals that they should make, the shadow inventory problem grows like a cancer in the mortgage and banking criminal enterprises. As I have discussed in the past, and have reposted below, it is less of a direct problem for the housing market. A growing portion of that shadow inventory has become, or is in the process of becoming, non marketable. To the market, the shadow inventory boogieman is just that, a boogieman, not a real threat. But to the criminal enterprise itself, it constantly siphons off its lifeblood, and limits the ability of the mortgage mafiosi to skim and divert fictitious profits into their own pockets.
Ultimately, if people lose confidence and the financial system implodes, then it’s game over and prices will collapse again. For purposes of this analysis, I will assume that that’s not going to happen. As long as the Fed and foreign central banks keep their criminal crony zombie banks on life support they can bleed off the losses over a generation or two and the land of make believe will persist. It will never prosper, but it will persist, while those running the scam continue to stuff their pockets.
A real bottom in prices and the beginnings of a housing recovery will require a sustained increase in effective demand coupled with continued reductions in supply. The supply reductions are happening in a real and material way. There are indications of some increase in demand, including large percentages of cash sales and a surge in contracts signed in January, as well as possibly the beginnings of increasing employment. But these seeds of demand growth have to be cultivated and harvested as closed sales, and it’s not clear when or if the dysfunctional criminal banking system will ever be able to fully perform that function. So while there is probably less risk in housing now due to supply reductions that’s a long way from being in a sustained recovery. That requires consistent effective demand, which is being broadly stifled by the massive effort in the industry and in government to sustain the criminal enterprise.
As for the financial system itself, it will remain under pressure for as long as it takes to recognize the reduced value of housing collateral, a process which, in spite of 5 years of declining prices, hasn’t even begun. I’ve long estimated that the collateral value loss is in the vicinity of 30% nationally, and a report out today from CoreLogic more or less verified that. That there will be more foreclosures, and that the banking system will remain a dysfunctional, disreputable cesspool are givens. As long as that’s the case there will be a ceiling on how far prices can rise, even with wave after wave of malfeasant central bank money printing.
Get regular updates the machinations of the Fed, Treasury, Primary Dealers and foreign central banks in the US market, in the Fed Report in the Professional Edition, Money Liquidity, and Real Estate Package. Click this link to try WSE’s Professional Edition risk free for 30 days!
»
- ilene's blog
- 12209 reads
- Printer-friendly version
- Send to friend
- advertisements -
No, Western Europe is still a wonderful place to live.
Whatever our problems, we do not have the police state - legal repression - mass imprisonment and lawyer-judge extortions like in the USA.
There is hardly anyone in jail here, very little harassment of individuals by police or government or lawyers. Judges here are extremely restrained, and governments hesitate to prosecute unless there is genuinely serious criminal action.
Your personal assets are, ironically, much safer from legal-court confiscation in semi-socialist Europe.
Very little crime here, and in much of north-western Europe, no poverty among legal residents either.
And we own private handguns, rifles and shotguns, too, on the Continent, unlike what many Americans seem to think.
Mostly correct. However, we are now veering toward nationalism and perhaps full blown compulsive collectivism which is fine per se but could erupt into self destructive tendencies. We're at a cross-roads, no doubt in my mind. Problems will either stay local or the international blame will ensue.
Yeah, well, Rome was finished by 44 B.C., but a lot of people in the known world had to continue rendering unto Caesar for several centuries, and even then things still got worse for them. In this case the known world is pretty much the whole world, so don't hold your breath hoping that that things will get better for you in your lifetime.
The governments are now enforcing the laws of the bankers and the bankers will not be brought to the justice of laws that are on the books.
This is the way it is. Things are not likely to return to the way they were.
The situation with law and bankers shows clearly that the country has been invaded and taken over from within. It may be taken back but considering that the ones that control the money are the ones that people have to oppose to take the country back...the chances seem slim. I have hope that the bankers will step on one too many feet and then with the backing of that entity along with the citizens the rule of law may be restored. Many times in history the tide has turned against the oppressors because the situation offered opportunity for others. Hitler and Napoleon were two of those others.
So dump your property as soon as possible and certainly don't buy anything until this blows over. I would wait until at least one of these bankers go to jail. Otherwise why gamble.
Real estate is not the only asset that the lawlessness has moved into to. Contract law of all types is being re-written and acted upon where the bankers are the only beneficiaries.
Life as we have come to know it is over but we can never give up hope that the old life that we knew, under the Constitution, won't be restored.
I just sold my joint & glad I did, better a little too late that way too late. I had lots of equity so I still came out good, but it will be awhile before I think about being a property owner in the USA.
I am trying to put 50 Fight Club Lawyers together.
One in each state - willing and able to file motions of objection to the 50 sock-puppet AGs and their "secret settlement" with the banker men.
Any private sector lawyer who reached such a settlement without requesting any testimony, depositions, or documents would be exposed to malpractice suits.
Any attorneys who wanna play will find out how in the hamlet link directly below:
Harmon Law Continues Jihad on Justice and the Conjured Corporate "Resolution"
A draft is being prepared based on equal protection of the law under the Constitution.
The Bankers are coming! The Bankers are coming! They are coming for YOU!
Senator Moura Steamed Over Chase Foreclosure Flunkies
Senator Moura acts in good faith and allows Chase the whopping benefit of the doubt that Chase (or any alleged assigns) even posess legal standing to foreclose.
aaaaccchh!
Ummmm, well, well, Saxton and the Countess...
Why should real estate recover?
Inflating the RE bubble served a purpose: force the allocations of resources in the US of A so that homes were built in the US and not elsewhere.
US of A social covenant: work hard, shut up and you'll own a house.
Issue: as resources deplete and the concentration of wealth converging to the US environment, jobs paying enough to buy a house in that environment would be not numerous enough.
Solution: increase the housing inventory.
Reflation would not serve the purpose. On the contrary.
The goal is that despite an adverse work environment, US citizens of A can still buy in the US of A social covenant.
US of A citizens who bought a house and lose money on it have still a house.
US of A citizens who shall work jobs not rewarding enough to buy a house without the bubble consequences will have the opportunity to buy a house.
That is the goal. RE recovering goes against the initial intent.
What is abundantly clear is that the rule of law no longer applies to anything in this country. If you have money you can buy your way out of anything. Sounds like Mexico. Can you say BANANA?
Exactly. The "Rule of Law" only applies to you, to me and citizens like us. The inmates are running the prison we're all sitting in.
Actually, banana republic refers to a type of economy before referring to a political system.
Banana republics live off an extractive system of economy. They extract resources and ship them away.
Far from being the case.
As to the rule of law, US citizen rule of law has always been selective in its application. Nothing new here.
It might hurt some to be downgraded to the level of negroes or Indians but hey, entitlements go as long as there are resources to sustain them.
Current issue is not way too many Indians, the current issue is way too many US citizens, not enough Indians.
US citizens are the force behind the overpopulation phenomenum.
Banana Republic implies a puppet government, generally appointed by someone outside the country, in order to foster the interests of say...the United Fruit Company
"Extractive" is right on the money though!
http://en.wikipedia.org/wiki/Edward_Bernays
"Needs to be organized" as well.
"US citizens are the force behind the overpopulation phenomenum."
lol...a billion Chinese can't be wrong, right?
Not to worry, they've cloned & minimized Kathleen Sebelius...20,000 of her can now fit into the warhead of an ICBM.
A billion of african negroes cant be wrong, right?
Chasing the lower consumer serves finely the kicking the can hobby has but when it comes to tackle the issue of overconsumption, nothing better than highlighting who does the consumption.
US citizens do.
It is funny that US citizens with their hatred on equality find suddenly equality when there is obviously known.
No, no, consumers are not equal. Some consume massively, others sparsely.
Consumption and crime, those are the areas US citizens have no troubles finding everyone equal.
US world order.
Ha made me laugh. Chinese citizenism is eternal.
You go from speaking of nations to entire continents (of which there are separate races) and are satisfied you have made a point?
"It is funny that US citizens with their hatred on equality find suddenly equality when there is obviously known.
No, no, consumers are not equal. Some consume massively, others sparsely."
Never speak to me of equality again.
For thirty years you fucks have killed...or abandoned to orphanages...your own children simply because they were female.
The Chinese One Child Policy is a government policy...a "chinese citizenism" policy and in some areas a cultural one where people like you have attached "a value" to human life itself at it's most innocent, vulnerable stage.
And within that miserly "chinese citizenism policy" (for the ones commited to government orphanages...having escaped infanticide) I would agree there is "sparse" consumption.
From vaccines to simple medical instruments to doctors/surgeons that could relieve some the suffering of your own people with ease and very little cost.
Show my post to your PRC handlers and tell them I hate them with every fiber of my being. They are fucking monsters and you help promote them.
" Great Leap Foward "
That is how China sopped-up liquidity ... er, I mean, sopped-up excess population.
The excess being a group of idealistic citizenistas of China that could turn into trouble.
This oozing puss filled lesion (AnAnonymous) I have no use for.
Twenty to forty million people die at the hands of a nations communist central planners/overlords and it's relegated to a mere footnote in history in the march to some sort of world Neo-Marx utopian society.
It flames out everywhere it's tried simply because greed and power lust are human traits not confined to any race or ideology.
Concentrated power always leads to concentrated misery.
I say Europeans and Asians unify in our mutual hatred of negroes and extirpate them from the Earth. After that China can have all of Africa.
Deal?
"One half of the problem, that of oversupply, is well on the way to being solved."
I disagree. The supply of shadow inventory and REO which has not yet hit the market is enormous. The supply of distressed real estate, which is not dislosed in publicly available information, is also enormous. Either this iventory will trickle out for the next 20 years, or it will come out in greater supply over the short term and drive prices down further and force the downward spiral to continue. Either way we're fucked.
I disagree with your disagreement. :)
Having spent half my life in the housing and housing finance businesses I've seen plenty of houses, developments, and whole cities go obsolete virtually overnight. I know the "shadow inventory" exists, but the vast majority of it is functionally, physically, and or economically obsolete and will never be a competitive factor in the market place. "Shadow inventory" in the California Inland Empire isn't going to depress the price of housing in the suburbs of Phildelphia, Kansas City, or Seattle.
So "shadow inventory" isn't inventory in the competitive sense. Most of it either isn't livable, or in places that people want to live. Like I said, it's a boogieman. These houses will not be fed into active supply over time and depress prices that way. But it's a huge problem for the banking system and shadow banking system, one that won't go away, and therefore it indirectly will act as a depressant on the market.
Perhaps you've been down the rabbit hole too long?
crash and burn notice
The guys on top are criminals and that is obvious. But the big con could not have been played without the millions of gamblers who piled in and signed loan contracts to flip properties, leverage their equity to buy junk or just plain stupid enough to believe that the teaser rate would never reset. What is not said is that we are surrounded by small time fraudsters and criminals, many who continue to live "rent free" until foreclosure (courtesy of taxpayers), who fed the big rats on Wall Street and DC. May they all burn in hell!
Don't equivocate - too much of that in our society.
Start with who is responsible for maintaining the validity of the system - the banks.
Once the banks are willing to commit outright fraud it does not matter if the individuals are opportunists or hapless victims, all will have their rights and assets stolen by the supposed stewards of the mortgage system - the Bankers.
And, the bankers are the ones getting bailed out.
Sure, someone might live "rent free" until they are booted out of the foreclosure, but the Bankers who leveraged mortgages 40 to 1 with MBS and CDS, then committed fraud with faked signatures and documents - get bailed out, bonuses, and the property.
They and their political cronies need to be beaten and tar and feathered by mobs of the victimized populace - a tangible consequence of cheating your fellow human being and undermining society. It's not just about money.
The vast majority of Americans support FNM and FRE and want government loan guarantees for mortgages and student loans. Bankers just happen to be the ones making a fortune off of this policy. So don't go crying about it. Most Americans are statists at the core. People who could never imagine a world where they have to take responsibility for themselves. Bankers are a refleciton of how utterly corrupt our society has become. People need to quit playing the victim and, if they are truly serious about change, start by working to get government out of the loan and deposits guarantee business.
That's why they will never vote libertarian
Whoa, hold on.
Sure, there are a great number of flippers, etc. who fed on the housing industry, that's for certain.
But - there was a HUGE amount of fraud perpetrated on regular folks.
If I showed you what I uncovered in our own documents - you would be agast. I'm a compliance "geek" and I was astounded at what I found. The amount of fraud in a single file absolutely floored me. So, imagine this type of conduct multiplied over millions of citizens.
May the banksters and fraudsters + their minions BURN in Hell.
Only loan sharks loan money to gamblers knowing they will never be repaid.
...and if you don't repay?
Then you're owned.
This is about power, not money.
Don't confuse "wealth" with "money".
Haven't you been watching "The Godfather" lately? Money's only a tool.
Fiat currency is nothing but the tangible incarnation of the power to influence human action.
...and we're the cannoli.
Yep.
ilene,
The stimulation of the housing market turned prices quickly in 2010. I am amazed they have not looked to support the market with something that would provide longer term expectations of a healthy market on the part of buyers.
I suspect it is because the FED wants bank balance sheets to shrink and are commited to keeping the IV drip of reserves and interest on the same going while the balance sheets shrink over time.
Did anyone see the note today on hoarding of 7 year T Notes? Also, it would be interesting to know how the FED will manage their bonds going forward. If they sell too fast, prices will erode their profits. If they allow this stuff to mature on their books, how do they sop up the reserves?? I don't believe they have any intention of soping up the reserves.
Reserves are the flip side of the asset on the balance sheet. As holdings mature, that reduces the Fed's assets. Reserves shrink equally. I won't get into the problems that will incur. Suffice to say that for the foreseeable future the Fed has no intention of that happening. It's not going to shrink its balance sheet. Maybe ever.
Lee,
If the FED buys a 7 year T NOTE from a PD, the PD gets cash reserves and the FED has the Note. If the NOTE matures, this does not reduce the reserves as there is some trasactions between the FED and Treasury. Obviously, the FED will work around this, selling securities prior to maturity, but they may get into a spot where this is difficult as interest rates rise. There are larger issues going on as regards the FED and it is very interesting that nobody is talking about this.
Here's an oversimplified example. Say the Fed buys a $1 billion note or bond from the PD. Like all balance sheets the Fed's is based on fundamental double entry accounting. The $1 billion note--the asset-- is entered on the asset side. The Fed pays for the note by crediting the PD's account at the Fed. The new PD deposit of the $1 billion is entered as a Fed liability. Bank deposits at the Fed aka reserves, are Fed liabilities. So yes, the PD "has the cash", but in the form of a Fed deposit liability. That's what money is.
The PDs use that credit to their account to buy other assets, which is how reserves are transmitted into the banking system, and which is also why asset prices rise when the Fed, or any large central bank, is a presistent net buyer (which since last June the Fed has not been, but the ECB has run wild).
Let's say that the Fed does not roll over a $1 billion maturing Treasury note or bill that it holds, as was often the case in the 2008 crash. The reserves are thus vaporized. Poof. Disappeared. Non-existent. The Treasury pays off the the $1 billion note the Fed holds. The $ 1bilion asset disappears from the Fed's balance sheet and so does the Treasury's deposit at the Fed in that amount (the Fed's liability). The Fed's balance sheet is now $1 billion smaller on both sides. The asset is gone and the liability is gone.
The Treasury must simultaneously, or soon after sell $1 billion in new paper to the PDs to recover the cash it used to pay off the Fed, because it needs the cash to pay other bills. The PD buys the new note with cash the PD's account at the Fed. The cash goes into the Treasury's account. The liability side of the balance sheet does not shrink, but it does not return to the previous level. It is still $1 billion lower. This is how the Fed not rolling over its holdings and instead allowing them to mature shrinks reserves.
If you are someone who is seriously interested in these issues, please visit The Wall Street Examiner. If you have questions, there are instructions on the support page there for how to contact me. I'd be glad to talk to you.
"Their stupidity and short-sighted self dealing are boundless, in the end only harming the market they are supposed to facilitate in the due course of the conduct of their business. A little honesty would have gone a long way."
"They’re crooks, and they continue to screw the system as they seek to cover their crimes. The only way out of what is in its essence a criminal morass is to punish the guilty. The only solution is to put a few thousand of the industry’s top players in jail. That’s not happening, and it’s not going to happen. Until there’s punishment of bad behavior, the bad behavior will only be reinforced."
I'm confused, are you saying regulators, politicians, administration officials and their cronies (both past & present) like Bwaney Fwank, Robert Rubin, Gorelick, Johnson, Dodd, Greenspan, Maxine Waters, Schumer, Clinton, Bush et al should be prosecuted and thrown in jail?
What a revolutionary idea...lol.
"Unfortunately, that’s a non existent quality among the big mortgage banks."
Ahhh there it is...I'm not confused anymore. It was the law that was confused.
Carry on!
For some on your list -- Firing squad.
Then, sell lottery tickets to buy a spot as a shooter.
I'd buy up some tickets if I could win a spot or two --
Don't forget 'the rope"- not as quick as a bullet, but that's the point!
Indeed...but surely I'd have to take several shots because I'd start at the ankles and slowly move up :)
The headline applies to a lot of industries in this law forsaken place
this law forsaken place...
The US is not a law forsaken place. It is a law enforcement forsaken place.
There are far too many laws on the books now, and plenty to use to prosecute the big guys at the top but the LEOs have been assigned to follow the "money trail" of the 9/11 terrorists and left the hen house unprotected.
This was not by accident, imo.
Our legislatures are still producing massive amounts of laws and our executives are creating massive regulations for their own czars to apply to the people of the US. (All of which they themselves are exempt from obeying.)
Our problem is the judiciary rubber stamps agreements made by criminals and sanctions lawless conduct at the highest levels. TSA strains gnats and Holder swallows camels.
Some things never change.
That's the way I see it too.
They promote graft and corruption through the 72,000 page tax code. They might as well hang a placard around their neck saying "Vote for Me I can be bought for $10,000."
PURELY criminal...i agree. "A casualty in wait for a war"--which when it comes (and i think a major war in the ME is just weeks away) will reveal "true price discovery." i read the Dr. Housing Bubble blog and to read about..."California"...is to read about something that simply is something only Hollywood could imagine. A median income of 50 grand and the median price of a home in Northern California is like 400 grand? INSANE! the vast majority of homes in the USA are worth ZERO. and that's a fact...waiting to be realized of course. and "when the war comes" it will be as all that shadow inventory...which is positively spectacular...is simply brought to market so that it can finally be counted as an asset by whomever is still solvent out there and therefore "owns it."
Yabutt, the PTB are obviously counting on you not noticing with the slow steady climb of inflation, simultaneously ramping faux prices and masking market-to-market preventing asset write-downs. This is the real heart of darkness. The power elites keep the actual value and the sheeple pay through inflatax.
Must say: The "Mortgage Mafia" title is very catchy. A little memegineering and that should go viral.
When mama was moth.
http://www.youtube.com/watch?v=6v7gVpCCxyw
Which begs the inevitable question, heaven or Las vegas?
http://www.youtube.com/watch?v=dtBr5JKSuks
Nice to see someone who recognizes the moral dimension to our mortgage catastrophe.
There is no moral dimension. Most Americans are just as stupid as they ever were. Only now they have no money and can't qualify for home loans.
Loosen the lending requirements again and I guarantee you every Juan and Juanita from Juarez living in Chicago, D.C, and Dallas will be buying up $300,000 homes like tortillas.
No doubt!