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Guest Post: The FHA Is Blowing Up: Bad News For The Housing Market

Tyler Durden's picture


Submitted by Mike Krieger of Liberty Blitzkrieg blog,

A very important article came out from the Wall Street Journal yesterday titled “FHA Nears Need for Taxpayer Funds,” and it outlines the serious financial problems facing the Federal Housing Administration.  For those that are unaware or need a refresher, the FHA has been the key element to the phony “housing recovery” the government has been trying to create.  In the wake of the collapse of 2008, Fannie Mae and Freddie Mac blew up and what was left to pick up the pieces was the FHA.  No private player would issue loans with down payments of 3%, but this was no problem for the FHA!

Interestingly enough, a lot of the subprime borrowers that blew up the housing market the last time became the primary customers of the FHA.  Let’s see, 3% down and subprime borrowers…what could possibly go wrong?!  From the WSJ:

The Federal Housing Administration is expected to report this week it could exhaust its reserves because of rising mortgage delinquencies, according to people familiar with the agency’s finances, a development that could result in the agency needing to draw on taxpayer funding for the first time in its 78-year history.


Together with Fannie and Freddie, federal agencies are backing nearly nine in 10 new mortgages.


The FHA accounted for one third of loans used to purchase homes last year among owner occupants.


Though the agency guarantees fewer mortgages than either Fannie or Freddie, it now has more seriously delinquent loans than either of the mortgage-finance giants. Overall, the FHA insured nearly 739,000 loans that were 90 days or more past due or in foreclosure at the end of September, an increase of more than 100,000 loans from a year ago. That represents about 9.6% of its $1.08 trillion in mortgages guaranteed.

This is a big deal.  The FHA is already in trouble despite a miraculous “housing recovery” and we haven’t even hit a severe cyclical economic slowdown yet, which is almost certain to occur in 2013.  What shambles do you think the housing market will be in once that happens and the last backstop to housing is broke?  You can kiss this “housing recovery” goodbye.  I think home prices nationally could fall 25%+ from here.  For more detailed thoughts on housing read my piece from April titled Thought of the Day – House Flipping in Colorado.

Full WSJ article here.


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Thu, 11/15/2012 - 15:08 | 2985060 The Gooch
The Gooch's picture

Section ATE itself.

Thu, 11/15/2012 - 15:21 | 2985104 Popo
Popo's picture

Another awesome piece from Mr. Krieger.  

But.. I must make one comment on semantics:   When housing prices go down it is "good news" for housing prices, not "bad news".   Please note that in every other industry, falling prices is considered a "good" thing.   If food prices go down, we all agree that this is "good".  If gas prices go down, we all agree that this is "good".  But when it comes to housing prices, banking propaganda (which has infected the media) has everyone believing that falling housing prices are "bad".   To adopt this mindset is to ally oneself with housing investors, banks and mortgage originators.   It also pretends that houses are an "asset class" and not both a consumer durable and a necessity of life.   When the necessities of life fall in cost, this is in no way "bad news".   On ZH of all places we should avoid this rhetoric.

So the "good" news is that housing prices may fall.    That's great to hear.   The next generation of Americans will benefit greatly.   That's important.


Thu, 11/15/2012 - 15:21 | 2985134 Bohm Squad
Bohm Squad's picture

+1...We want asset prices to increase and liabilities to decrease - a house is a liability regardless of what my banker says.

Thu, 11/15/2012 - 15:40 | 2985222 NotApplicable
NotApplicable's picture

Well, given that the FHA is likely sitting on a sizable inventory, they should just get reverse mortgages from The Fonz.

Thu, 11/15/2012 - 15:45 | 2985248 AldousHuxley
AldousHuxley's picture

Housing is only an asset to a bank for mortgage interest income and to governments for real estate tax.


For purchasers it is a liability.


Isn't it funny how the expensive housing is located near central bank branches?


It is set up to give more power to bankers over economy.

Thu, 11/15/2012 - 15:51 | 2985269 MillionDollarBogus_
MillionDollarBogus_'s picture

Falling prices = deflation.
Bernanke's worst nightmare.

Thu, 11/15/2012 - 18:46 | 2985991 AldousHuxley
AldousHuxley's picture

price correction  = American capitalists getting what they deserve....lower asset prices for economic policy that drove jobs out of the country last 30 years of neo-liberal policies.


jobs have been exported, but elites are refusing to have their assets devalued and want unemployed workers to pay more taxes to pay for housing subsidies.


solution is 50% cut in housing costs. Cap that shit along with medical cartel to % of GDP so people can spend money on stuff other than some old ugly house.



Thu, 11/15/2012 - 16:13 | 2985379 NooooB
NooooB's picture

Where is the outrage?!  This Mortgage crisis is such bullshit on all fronts. Why should people who lied on their mortgage applications, or simply over-leveraged themselves be given a pass? If they Lied, They should be prosecuted for fraud. If they over-leveraged, then oh well, tough shit. And instead of prosecuting the banks for deceptive practices- both on the consumer side, and then when they packaged these shitpiles ito MBS's. And WHY THE FUCK should the FED be buying these TURDS as though they WERE ACTUALLY A THING?!! Fuck the banks! MARK THAT SHIT TO MARKET and let the chips fall where they may! The FED will take that shit off their books and WE will pay the price. If this isn't just another shit show of consumer/corporate welfare than I don't know what is...

Thu, 11/15/2012 - 17:51 | 2985789 AGuy
AGuy's picture

Call me Cynical (or Ishmael if you perfer)

Why do I think the FHA is going to get a big fat bailout soon? If not from Congress then from the Fed as Bernanke said that Banks weren't doing enough. Bernanke could just buy of worthless FHA loans thus freeing up capital for FHA to continue betting on bad loans.



Thu, 11/15/2012 - 18:55 | 2986020 AldousHuxley
AldousHuxley's picture

Fed's job is to stablize the market, but in reality they serve to protect the downsides only.

Keynes too...said government save surpluses in good times, spend the surplus in bad times. Politicians practice spend in good times, spend debt in bad times.

Fed has been letting bubbles get too big in good times, rescue banks with government subsidies in bad times as buyer of last resort.


that means buying overpriced shit and preventing real free market correction.


imagine how much more people would have if housing costs less? there's plenty of land, just regulations blocking building.


but Fed lets markets overheat, but do not overcorrect. This works in favor of status quo  and bankers because poor can never get a good deal on an asset sale.



Thu, 11/15/2012 - 19:24 | 2986110 AGuy
AGuy's picture

"This works in favor of status quo and bankers because poor can never get a good deal on an asset sale."

Not so sure on that. Its usually the rich that buy up distressed assets for pennies. Example the S&L assets sold through the RTC during the late 80's and early 90's.

FWIW: My point is that I don't believe the FHA issues will result in another big RE sell off. As the Fed will step in and provide liquidity. They already commited a pound of flesh during the 2008 crisis. I don't see them not bailing out the FHA.

"imagine how much more people would have if housing costs less?"

Housing prices are only a portion of the issue. The 800 lb gorrilla is credit. Without cheap and easy credit the sheeple can't afford to buy even at reduced prices, even at half-off prices considering that consumers can only make 3% to 5% downpayments at existing prices. The Housing bubble consisted of about 25% of NINJA loans (No Income, No Job or Assets).

In my opinion the Fed already injected a lethal dose of Credit Herion during the last decade. Its just a matter of time before the patient dies, no matter what the Fed does. If the Fed withdraws, spiraling deflatiion, pump stagflation (current) or high inflation (coming).




Thu, 11/15/2012 - 18:50 | 2986005 StychoKiller
StychoKiller's picture

It's obvious you just don't care enough about the moochers...

Thu, 11/15/2012 - 16:02 | 2985318 Stock Tips Inve...
Stock Tips Investment's picture

In the present circumstances is bad news. There are still "too much" people who are heavily indebted to their homes. A fall in the price of houses, creates a new financial problem. A financial problem, it always ends in a general problem in the economy. If a fall in house prices, "activate" the claim, then would be nice. But that is not the case right now.

Thu, 11/15/2012 - 16:22 | 2985422 NEOSERF
NEOSERF's picture

Asset prices and particularly "Retirement Asset Prices"...subtle but important given the pig in the python boomers represent right now.

Thu, 11/15/2012 - 15:24 | 2985151 Jethro
Jethro's picture

The government is reaping the benefit of this news from starting the idea in the late 90's that housing was an "investment" and not a commodity---and somehow immune to supply and demand.  This could only happen with the involvement from the government and banking sector working together to get people that could never afford houses, into housing contracts at any cost.  Let the market clear this mess.

I can't see how prices won't go down.  I just wonder what interest rates on housing will do?  Can they de-couple from ordinary interest rates, and then fall under a different regime?  Anybody know the answer to this speculation?

Thu, 11/15/2012 - 15:47 | 2985254 NotApplicable
NotApplicable's picture

There's no longer any such thing as ordinary interest rates, given the actions of Timmah, backed by Bennie and the Inkjets.

Besides, rates are no longer the determining factor for most, as creditworthiness no longer exists in the supply of potential homeowners. Demand was pulled forward until the vacuum it created imploded the entire "market."

As for the future, your interest rate will be determined by your political minority status, assuming you're in the right one.

Thu, 11/15/2012 - 15:50 | 2985266 AldousHuxley
AldousHuxley's picture

the trick is not to let nominal price go negative.

real price compared to real assets and inflation adjusted is negative on housing.


stable home price during 4% inflation means you lost 4% of the largest asset you got stupid americans.


measure housing prices against college costs or healthcare costs and you will see how rich you really are.

Thu, 11/15/2012 - 15:34 | 2985173 ptoemmes
ptoemmes's picture

Right.  Agree.  


But in the up-is-down world you reference it is good (or desired by the central planners ) because the desired result is not "just" increased home value/prices.  No, it's increased value in excess of balance due on the mortgage resulting in equity, resulting in HELOCs or equity extraction re-fis - an intermediate end in and of itself - but the ultimate then is to - buy baby buy shit.


See other top post on The Bernank demanding more out of tapped out homeowners.


Not me....

Thu, 11/15/2012 - 20:56 | 2986352 midtowng
midtowng's picture

Wasn't Fannie and Freddie supposed to be getting wound down as well?

Thu, 11/15/2012 - 19:22 | 2986106 kalasend
kalasend's picture

What is the historical reason (if there's one) that mortgage loans got no initial margin? 

Just imagine if there IS initial margin on mortgage loans, the entire world can be honest about just a bunch of bricks...

Thu, 11/15/2012 - 15:07 | 2985061 hedgeless_horseman
hedgeless_horseman's picture



I am going to go out on a limb, here, and predict another bailout using freshly printed Bernanke Bucks.

If your only tool is a printing press, then every problem is deflationary.

Thu, 11/15/2012 - 15:11 | 2985086 hairball48
hairball48's picture

I am going to go out on a limb ..... ROFLMAO!!

Thu, 11/15/2012 - 15:24 | 2985150 tickhound
tickhound's picture

more like a stub, made of concrete.

Thu, 11/15/2012 - 15:11 | 2985090 otto skorzeny
otto skorzeny's picture

wait- who's the tool -The Bernank or his printing press?

Thu, 11/15/2012 - 15:27 | 2985165 SilverFish
SilverFish's picture

Both are tools.


One can be retooled to make Playboy magazines, the other is a sociopath and has no real benefit to any sane person.

Thu, 11/15/2012 - 15:25 | 2985136 Bicycle Repairman
Bicycle Repairman's picture

Let's take it a step further and create a new federal agency and fund that.  Then they don't have to say that Fannie or Freddie or the FHA is BK or needed a bailout.  Just say that mortgages are now insured by the Federal Housing Safety Administration or whatever you want to call the slush fund.

Just add another shell to the shell game.

Thu, 11/15/2012 - 15:49 | 2985265 NotApplicable
NotApplicable's picture

Spoken like a career civil servant!

Thu, 11/15/2012 - 17:42 | 2985757 Half_A_Billion_...
Half_A_Billion_Hollow_Points's picture

my confidence is restored

Thu, 11/15/2012 - 15:24 | 2985148 Alhazred
Alhazred's picture

This is why we need a gold standard.

And an end to the fed wouldn't hurt.


Thu, 11/15/2012 - 16:11 | 2985370 rosiescenario
rosiescenario's picture

...nice...however with WWIII now kicking off in the ME, it will go unnoticed.

Thu, 11/15/2012 - 16:27 | 2985445 steelhead23
steelhead23's picture

Well, surely the FHA cannot default and obviously will get a loan from Treasury - or Bernanke will buy some FHA "assets" for 100 pennies on the buck or other such nonsense.  This is obvious.  What isn't so obvious is how would FHA pay for loans it might get?  Would it raise insurance premiums and further deflate housing's sails?  Also, all laughing aside, I am wondering how Obama, whose central talent is public speaking, will respond to the crumbling of the facade of normalcy he has struggled to create.  I don't mean just the rhetorical gaming of FHA's bailout, but really dealing with the issue in a forthright and effective manner?  After all, a large portion of FHA's problems were set in motion by the global settlement of foreclosure fraud - a settlement in which Obama loudly touted the princely sum of $25 billion extracted from the banksters.  Yves piece on this issue suggests they are more than $50 billion in the red.  The ring in hell for politicians has them explaining why all their rhetorical successes turned out to be reality failures - no teleprompters allowed.

Thu, 11/15/2012 - 15:05 | 2985063 youngman
youngman's picture

Hey...but we are making a profit on our GM stock...right? ....oh oh

Thu, 11/15/2012 - 15:22 | 2985137 Manthong
Manthong's picture

 There have just got to be some logical Keynesian investment approaches for Obama to take and get this fixed.

What if he covered all the FHA house rooftops with Solyndra tubes, put a Chevy Volt and charging station in every garage and assigned each house its own personal mail carrier?

That seems like a truly Obamaniacal  government solution to this problem.

Thu, 11/15/2012 - 15:32 | 2985186 Schmuck Raker
Schmuck Raker's picture

We will as soon as we sell some of our interest in Ally to those suckers at AIG. Ha hah...oh, wait.

Thu, 11/15/2012 - 15:12 | 2985067 TruthInSunshine
TruthInSunshine's picture

I cited this article in a thread yesterday, and it's truly disturbing. The FHA is the taxpayer.

But everything's fine ("The Joes" said so; LaVorgna & Weisenthal):


WSJ: Housing Agency (that insures 84% of New Mortgages) Close to Exhausting Reserves

From the WSJ:

"Overall, the FHA insured nearly 739,000 loans that were 90 days or more past due or in foreclosure at the end of September, an increase of more than 100,000 loans from one year ago. That represents around 9.6% of its $1.08 trillion in mortgages guarantees.

The FHA's annual audit estimates how much money the agency would need to pay off all claims on projected losses, against how much it has in reserves. Last year, that buffer stood at $1.2 billion, representing around 0.12% of its loan guarantees. Federal law requires the agency to stay above a 2% level, which it breached three years ago.


The decision over whether the FHA will need money from Treasury won't be made until next February, when the White House typically releases its annual budget. Because the FHA has what is known as "permanent and indefinite" budget authority, it wouldn't need to ask Congress for funds;

[...wait for it...] would automatically receive money from the U.S. Treasury."

So, the real kicker is that the FHA (which now insures 84% of all new home mortgages since lenders/processors just want the transactional/closing fees & dish that shit off to the taxpayers) won't have to formally request a bailout from the treasury, because such funds are automatically guaranteed under current regulations.

Good thing the Treasury is flush!!!


Housing "Investors" v2.0

Thu, 11/15/2012 - 15:19 | 2985102 hairball48
hairball48's picture would automatically receive money from the U.S. Treasury."

Is that kinda like FHA's own QEternity?

Thu, 11/15/2012 - 15:27 | 2985170 catacl1sm
catacl1sm's picture

What happens if FHA needs money, Treasury is broke, and the Debt Ceiling is hit all at the same time? Perfect storm 3.0?

Thu, 11/15/2012 - 15:34 | 2985196 Schmuck Raker
Schmuck Raker's picture

We'll just borrow from the EU, they're loaded.

Thu, 11/15/2012 - 20:09 | 2986246 BraveSirRobin
BraveSirRobin's picture

By "loaded," do you mean drunk out of their minds?

Thu, 11/15/2012 - 15:45 | 2985244 LMAOLORI
LMAOLORI's picture



What happens? They just won't put it on the budget no one will be the wiser (sarc) 

Obama's Budget Has One Small, Missing Piece.... For $6.3 Trillion Dollars

HOT: Fed Hides Major Accounting Change

Accounting tweak could save Fed from losses

Thu, 11/15/2012 - 16:21 | 2985419 El Viejo
El Viejo's picture

That's the European solution.

Thu, 11/15/2012 - 15:44 | 2985235 EscapeKey
EscapeKey's picture

...meanwhile, in skittle-shitting unicorn Marketwatch-space, where everything is a reason to buy:


Mortgage delinquencies, foreclosures drop Foreclosure starts hit lowest level since 2007: MBA





Federal law


law is only for little people

Thu, 11/15/2012 - 15:08 | 2985073 Skateboarder
Skateboarder's picture

Housing will bottom out when million dollar homes are valued closer to cost... say, $250k.

Thu, 11/15/2012 - 15:27 | 2985174 catacl1sm
catacl1sm's picture

Million dollar now, 6 years ago, or 12 yrs ago? Big difference.

Thu, 11/15/2012 - 16:28 | 2985427 El Viejo
El Viejo's picture

Whatever the market will bear. 

Get it? Bear? Market? It's a bubble within the first bubble damn it!

Thu, 11/15/2012 - 15:12 | 2985076 otto skorzeny
otto skorzeny's picture

they're building a few houses around here(330K for a plastic shitbox) but they are being bought by cops, firefighters, other illustrious govt employees that will ALWAYS have a paycheck and a fat pension at 50 y.o. /sarc

Thu, 11/15/2012 - 16:31 | 2985476 El Viejo
El Viejo's picture

Depending on the state they may not have a guaranteed pension. A lot of pension plans are in serious trouble. The laws in some states prevent the raising of taxes to pay off insolvent pension plans. In other states the tax payers may not go down without a fight. Take a look at Wisconsin.

Thu, 11/15/2012 - 15:10 | 2985077 buzzsaw99
buzzsaw99's picture

The solution (according to the bernank) is to loosen those lending standards.

Thu, 11/15/2012 - 15:14 | 2985101 kralizec
kralizec's picture

The bottom can't be that far off...I think we can get there quickly. 

Thu, 11/15/2012 - 16:05 | 2985334 the not so migh...
the not so mighty maximiza's picture

With Obama we will get there quickly.

Thu, 11/15/2012 - 15:14 | 2985081 BLOTTO
BLOTTO's picture

Great deals in Toronto, Ont.

(here comes sarcasm)


For $500,000+ you can get a nice semi-detached unit - with no front yard and no driveway.

But - you can't move into the house yet because you need to spend another $100,000 in upgrades and to fix shit up before you can make it livable in the fucking thing.

Then you spend the next 30 years of your life paying the mortgage, fix ups, property taxes...and hopefully it will be worth over $1,000,000+ so you can almost...almost break even (=no chance).


Thu, 11/15/2012 - 15:41 | 2985225 Rip van Wrinkle
Rip van Wrinkle's picture


Try this for size in the UK for a million+ of your bucks.

Thu, 11/15/2012 - 15:57 | 2985292 dugorama
dugorama's picture

wow.  no thanks.  1.5 bath?  "retains many of it's original features" sounds like partially remodeled. 700k pounds.  wow.

Thu, 11/15/2012 - 15:58 | 2985294 Tinky
Tinky's picture

An amusing footnote: the windows aren't even double-glazed!

Thu, 11/15/2012 - 16:23 | 2985384 Fuh Querada
Fuh Querada's picture

Great post !
In London, UK, anything, I mean ANYTHING is possible in the property market.
Living area 1000 square feet?
Ratable value (for taxation?)
"Detached" is fucking good. About 6 " separating each neighbouring property.
Love the ultra wide-angle photos that make a 10 foot back yard look 5 times the size!
Wasn't there a converted ladies' public toilet going for a million or so in North London a year or so ago?

Thu, 11/15/2012 - 16:49 | 2985534 jomama
jomama's picture

does it come with shitty weather year-round?

Thu, 11/15/2012 - 23:12 | 2986654 TruthInSunshine
TruthInSunshine's picture

I stayed in London for 10 days last year (okay, roughly- it was all a blur), and if you've never been there, been to Hong Kong or Zurich, you would literally (most likely) be dazed at how high the prices for everything are, as well as the dizzying list of layered taxes on just about everything. It was mind blowing.

London is to England what New York City (especially Manhattan) is to the U.S.; it's the parasitic city of financial "industry" that not only doesn't create anything of real value, but it's a giant black hole/vortex that sucks up resources from the rest of the nation (thanks to government subsidies, bailouts, preferential treatment, paid off politicians, and an owned-and-paid for fractional reserve central bank AND treasury department), where other peoples'/entities' monies go to line the pockets of criminals and get Corzined.

Both cities are malignant cancers, disease infested pustules & concrete symbols of CronyKomradeCapitalism (socialism) and all that is wrong with both nations' economic & political structures.

Thu, 11/15/2012 - 15:12 | 2985093 Zer0head
Zer0head's picture

Obama speaking now on the ongoing Sandy nightmare

"believe it or not their going to be some complaints over the next few months (about how this was handled)"


"I'm very proud of you New York"

Thu, 11/15/2012 - 15:19 | 2985124 Sofa King
Sofa King's picture

Be fair, he threw a "shout out" and a bunch of "awights" intertwined with a whole mess of "uhhmm's".  The dude is a terrible public speaker when it's not rehersed.

Thu, 11/15/2012 - 15:27 | 2985172 Jethro
Jethro's picture

"Good job Brownie" moment?

Thu, 11/15/2012 - 15:27 | 2985171 silverserfer
silverserfer's picture

Imagine how Mitt would have responded. "Well we really dont have money for those blue states. Were going to have to just tear down manhattan and sell off the scrap on the open market." 

Thu, 11/15/2012 - 15:30 | 2985180 SilverFish
SilverFish's picture

........... or, "Everyone will be receiving a set of magic underpants as soon as we can get the mail running. I suggest you wear them."

Thu, 11/15/2012 - 15:34 | 2985198 silverserfer
silverserfer's picture

or, " this is just aweful folks. I wish there was something more we coud do but we just dont really give a fuck." Donate to the red cross or something if you want. I don't know."   

Thu, 11/15/2012 - 15:49 | 2985264 BraveSirRobin
BraveSirRobin's picture

Maybe we can sell Mahatten back to the Indians. They can turn Wall Street into a casino.

Thu, 11/15/2012 - 16:56 | 2985558 PlausibleDenial
PlausibleDenial's picture
  • Turn, Wall Street is already a casino
Thu, 11/15/2012 - 15:13 | 2985095 surf0766
surf0766's picture

See marxism works !

Thu, 11/15/2012 - 15:14 | 2985099 AurorusBorealus
AurorusBorealus's picture

I was one of the first to call attention to this issue... .  The problem, as I mentioned a year ago or more... is vast beyond comprehension.  The problem is not simply guarantees on first mortgages.  The FHA holds all sorts of mortgage papers... in particular reverse mortgages on houses for seniors (which the FHA has been guaranteeing for some time).  I shudder to think how many $150,000 mortgages the FHA holds for 88-year old widows who receive $900 a month in Social Security and whose property is deteriorating each day because there is no one sufficiently fit to do routine maintenance and there is no money to hire someone.

Thu, 11/15/2012 - 15:23 | 2985145 dbTX
dbTX's picture

Spot on !!

Thu, 11/15/2012 - 15:15 | 2985107 BraveSirRobin
BraveSirRobin's picture

Quit the negative vibes, already. You should be well assured. The president says we are headed in the right direction, and Ben has his finger poised over the "0" key, just in case.

Thu, 11/15/2012 - 15:37 | 2985209 Thisson
Thisson's picture

The president is about as believable as Bahgdad Bob ("We butchered the force present at the airport. We have retaken the airport! There are no Americans there!") or, if you prefer, Joe Isuzu.

Thu, 11/15/2012 - 17:02 | 2985596 Big Corked Boots
Big Corked Boots's picture

He may not be believeable, but he is apparently electable.

Thu, 11/15/2012 - 15:14 | 2985108 davidsmith
davidsmith's picture

Actually, it's got another 40% to fall.  Indeed, any "investment" idea for housing is about to disappear.  Why?  Because FM will sell to the Fed, which will write down the principal.  Once this happens, you will see lawsuits (which will win) claiming that this is a policy of the United States to raise the "level of scrutiny" for housing policy, ABOVE minimum scrutiny.  There are three levels of scrutiny for policy, depending on the fact:

1. minimum scrutiny

2.  intermediate scrutiny

3. strict scrutiny

If a fact is in the political system, policy is only subject to minimum scrutiny.  However, even intermediate scrutiny means a fact is OUTSIDE the political system and there is no more

1. discretion

2. deference

3. reasonableness

4. balancing

in the political system with respect to policy regarding that fact (those are the four buzz words which, under West Coast Hotel v. Parrish, mean the government can do whatever it wants with respect to a fact and YOU have no individually enforceable rights with respect to that fact).


Overall meaning?  Overall meaning is that Lindsey v. Normet (establishing that there is no individually enforceable right to housing and so government can do what it wants with respect to housing), is out the window, and housing evictions will be eliminated in the U.S. under ALL circumstances (this is in the process of happening in Spain and the EU generally).


The Constitutional regime is changing in the United States.  All the "social" facts and "positive" rights are in the process of being written into law, and the enormous power of the political system over most facts is in the process of ending.


You shouldn't be surprised.  There have been three Constitutional regimes in the U.S.  The West Coast Hotel/U.S. v. Carolene Products regime is the current one, and it is seventy years old.  No Constitutional regime lasts forever.  It has been known for 40 years that legal developments are in the process of tearing down the intellectual bankrupt distinction between "social" and "political" facts and "negative" and "positive" rights.


ANYWAY, there will be virtually no economic opportunities in housing, going forward, quite simply because no one will be able to use foreclosure/eminent domain/whatever, to get you out of your housing.  It's yours.

Thu, 11/15/2012 - 15:15 | 2985110 Urban Redneck
Urban Redneck's picture

People have had FOUR YEARS to unload these stupid position and let the banks flip them to Fed. LET IT BURN.

There will be no recovery until the housing market finds its natural equilibrium pricing.

Thu, 11/15/2012 - 15:24 | 2985149 Bicycle Repairman
Bicycle Repairman's picture

Absolutely correct.  Fair warning has now been given.  Burn them all.

Thu, 11/15/2012 - 15:38 | 2985208 IridiumRebel
IridiumRebel's picture

I have had my house on the market for months and I just get fucking tire kickers who want me to give the house away. I am giving it until Spring and then I will be giving it away. My parents and wife's parents have the same problem. If it gets bad enough, I will just rent the fucker and call it a day. 

Thu, 11/15/2012 - 16:50 | 2985369 IridiumRebel
IridiumRebel's picture

and FUCK YOU to whoever downvoted me you Schaudenfreude Fuckface.


EDIT: Lick my balls too.


Edit Part Deux: Eat my ass.


Edit number three: Shart on toast and eat it.


********************KEEP DOWNVOTING, BITCHEZ****************************************



Thu, 11/15/2012 - 16:49 | 2985536 slyhill
slyhill's picture

Over-leveraging is hereditary? Huh, Ill be damned...


Thu, 11/15/2012 - 16:53 | 2985550 IridiumRebel
IridiumRebel's picture

buying a home is over-leveraging? You're right......I'll just rent or go find a cave. BTW, we get 100 acres of land in upstate NY right on the border of the marcellus shale region. TRUST ME, we will be fine. I just love how many here love digitally kicking people in the nuts. I actually kinda like it, cuz I at least get reality here. NIce to see you all care so much about your fellow man. I'll go fuck myself now.

Thu, 11/15/2012 - 21:27 | 2986432 fuu
fuu's picture

Dude you can't invite a website to kick you and then bitch that we don't care. We gave you exactly what you asked for.

<heart hug>

Fri, 11/16/2012 - 17:11 | 2989640 Lednbrass
Lednbrass's picture

Owning 100 acres is a wise move.

Expecting a positive return on housing in the US after 2006 (outside of a few urban zones hooked up directly to the money faucet) is not. Good luck to you, get what you can and get the hell out.

Thu, 11/15/2012 - 15:16 | 2985115 Mattress Money
Mattress Money's picture

I wish I wasnt an 80's baby. We are f*cked, and I did get a chance to establish myself. FIDDUCK

Thu, 11/15/2012 - 15:19 | 2985125 Titus Flavius C...
Titus Flavius Caesar Vespasianus Augustus's picture


Well - jeez, the housing recovery was always bullshit.  I think the 'recovery efforts' were essentially designed to, in the longer term, transfer more realty to banks and bank-owned corporations, and they'll rent the fuckers out. 


Rental income, baby.  Streams of revenue from people who didn't read their fucking mortgage contract. 


Evil, not stupid, folks. 


By the way - the rot goes all the way down.  The guys appraising the homes always overshoot to get more money from the originators, brokers, tigers and bears, oh my. 

I began to suspect something was amiss back in 1998 when a disbarred former attorney with 9 fingers handed me an appraisal claiming a house in the Mattapan section of Boston was worth about 50% than even an incorrigible moron would have paid for it.  That fucker was getting 6 points back and front for having his office slaves forge some W2s and 5 years later, probably bought some notes on the very properties he helped 'clients' 'buy'.


All of which is why we can't have nice things.


Thu, 11/15/2012 - 15:22 | 2985135 Winston Churchill
Winston Churchill's picture

I'm sure this was allowed for in the CBO forecast.S/

Thu, 11/15/2012 - 15:23 | 2985147 zapdude
zapdude's picture

Well, crap.  I selfishly wish to find a greater fool to buy my home before the housing market takes yet another swan dive.

I'm looking to sell my house, relocate to another city (warmer & greener in the Southeast) in the next 3-6 months.  I plan only to RENT and will not buy a home for several more years minimum until we've truly reached bottom.  Or Armageddon is upon us in the years ahead, and then we're all just fighting zombies anyway. 

Thu, 11/15/2012 - 15:25 | 2985155 ziggy59
ziggy59's picture

Plus lots of houses ala Sandy will enter market over next 12 mo. Many will be toxic due tomold, etc, plus with ncreasing unemployment, etc.. Foreclosures will rise legitimately from Sandy..

Thu, 11/15/2012 - 15:25 | 2985157 Downtoolong
Downtoolong's picture

And everyone is worried about capital gains tax rates.

Don't you have to have a capital gain first?

I think we're about two years away from being able to eliminate that term from the Financial Dictionary altogether.

Thu, 11/15/2012 - 16:25 | 2985433 Seasmoke
Seasmoke's picture

99% capital gains X 0 = ZERO

Thu, 11/15/2012 - 15:33 | 2985192 Northeaster
Thu, 11/15/2012 - 15:57 | 2985287 Dkizzle49855
Dkizzle49855's picture

All I can tell you is we DID sell our home in So Cal and it finally closed at the end of October.  As a daily reader of ZH, never in my wildest dreams would my house be under contract in less than 36 hours and over the asking price and it sold for $50K more than the exact same house across the street sold for 10 months earlier.  Maybe I found my own Unicorn that shits Skittles, but I will take it since we are on our way to Texas before the end of the year.  I will also tell you that dealing in the lenders were a absolute nightmare in which our buyer with a high FICO score and 50% down still had difficulty with their loan and it finally closed almost 3 weeks late.

Thu, 11/15/2012 - 16:58 | 2985580 zapdude
zapdude's picture

Good for you.  If I don't land in Georgia, it's because I went to Texas. 

I only hope to make it into Texas BEFORE they secede. 

Can you imagine the line of cars & RV's and moving trucks headed south into TX if they actually DID secede?  I told my wife last night that I would fly to Mexico and sneak across the border back into TX if I had to!

Thu, 11/15/2012 - 17:37 | 2985740 unununium
unununium's picture

Lenders know intimately that an entity can look financially sound on the outside and yet be rotten to the core.  Intimately.

Thu, 11/15/2012 - 16:03 | 2985321 Vince Clortho
Vince Clortho's picture

Speaking for Homeowners across the country, we are truly ecstatic to hear that the value of our houses decreasing is a good thing.

Thu, 11/15/2012 - 16:26 | 2985435 Quantum Nucleonics
Quantum Nucleonics's picture

This isn't exactly new news.  The FHA has been legally insolvent for at least 2 years now.  The rule of law is dead, so why are the morons that run our country or the zombies that vote for them going to bother with the FHA now.  Team Obama, Congress, and the Media will just shove it back under the rug, and assume no one relevant will notice.

Thu, 11/15/2012 - 16:26 | 2985438 yogibear
yogibear's picture

Look at the real estate price decreases of the Great Depression (decline of 80%) and Japan (fall of about 87%).

That's where it's headed.

Thu, 11/15/2012 - 16:26 | 2985441 Seasmoke
Seasmoke's picture

still no one mentions the mortgages are UNSECURED !!!!!!!

Thu, 11/15/2012 - 16:33 | 2985479 SmittyinLA
SmittyinLA's picture

Last night my buddy was telling me of all the housing bargains in Vegas, he bought 2 with 10K down and "claims" a positive cashflow from renters, he said "I can't lose" I said what about taxes, insurance, and maintenance, those costs aren't fixed nor is the house value-which is tied to tremendous federal financial support, when withdrawn prices will crater, then I mentioned NV changing demographics, they're going full retard Mexican Socialist-at least in Vegas, and NV aint got no prop 13.

What happens to current house prices when interest rates go to 6%?

What happens to rents when the 47% free shit army loses some or all of their benefits?

What happens to rents when everybody's medical insurance goes up 20% per year for 10 years?

What happens to rents when the Mexican mafia imposes a rent revenue tax?   


Oh ya, we got 60 million baby boomers that will be selling soon and downsizing/moving to condos and apartments in FL too. 


Oh ya, we got an Obama housing sales tax too.


Today's home buyers are going to get bent over and raped repeatedly for the next 30 years, along with their financiers.  

Thu, 11/15/2012 - 16:33 | 2985483 experimentals
experimentals's picture

Housing in Southern California will not be falling anytime soon. I'm stuck in a weird situation due the the sale of one of my investment properties.   My logic tells me , this economy is cruddy people are struggling more than ever, no way housing can continue rising sell sell sell.   Buuuuuut what I'm seeing on the street is  a completely different outcome. The property has 3 units and collects $3,000 gross a month in rents. I see my renters struggling because they are on the low end, but the investor demand and the cash that's entering the market is just out of control.    

Then you have the 80% of the population that is employed.  Not all of them are doing well but a good majority of the people my age (30-40) are making a decent combined income now that they are married.   I would say here in the suburbs east of Downtown Los Angeles, the typical young couple makes a combined income of $80k-$150k.  Teacher and Policeman , Social Worker and Corrections Officer, Accountant and Accountant, Electrical Engineer & Human Resources Bitch, Firefighters here all make over 6 figures, etc etc.  I bought a property for $165k 13 months ago and now have an investor who wants to buy it all cash for $265k .  


The inventory for these new buyers is very very low.  Yes it is artificially low, but it's only going to get worse.  Why you may ask.  Well the bailouts are working to a certain degree.  Most of the properties considered "Shadow Inventory" are never going to hit the market.  The banks are forgiving 2nd mortgages left and right.  And now they are actually starting to reduce loan balances on first mortgages.  I've been in the business since 2000, and al through 2008-2011 everyone was asking about principal reductions and 2nd TD eliminations but it was never happening. It was always rumors.   In the past 6 months I've known first hand of so many cases where a mortgage payment of $3000 has been reduced all the way down to $1200-$1500  to the deadbeats who weren't paying a dime for an entire year.  At $1,500 /mo (cheaper than rent) all the baby boomers who fucked up are getting a second chance. 


Maybe it's the begning of hyperinflation I'm seeing.   But if that's the case then I should be buying more property hand over fist.   


Dramatic Increase in California
Foreclosure Cancellations

October 2012 California foreclosure Cancellations were up 62.1 percent from the prior month, and 36.7 percent compared to last year. While this is not the first time Cancellations have spiked, this is the largest one-month increase since we started tracking foreclosures in September 2006. It seems likely that the increase is being driven by the Homeowner Bill of Rights legislation that goes into effect on January 1, 2013 and its provision to restrict the dual-tracking of foreclosures. Dual-tracking is the term applied to loans which are being considered for either a short sale or loan modification while simultaneously proceeding through the foreclosure process. Prior to January 1, lenders will have to cancel any foreclosure on a loan for which a short sale has been approved or a loan modification is being considered, and it appears that process has likely already begun.

October 2012 California Notice of Defaults was down 8.0 percent from the prior month, and down 48.9 percent compared to last year. October 2012 California Foreclosure Sales were up 9.3 percent from the prior month, but down 38.9 percent from the prior year.

“The California Homeowner Bill of Rights that takes effect in January 2013 is beginning to impact foreclosure trends,” said Sean O’Toole, Founder & CEO ofForeclosureRadar. “This is another example of where changes in foreclosure trends are driven by government intervention, and not necessarily economic recovery. While the impacts are still unclear, the elimination of dual tracking may avoid some unnecessary foreclosures, but will lengthen the foreclosure process and delay ultimate recovery. Expect further impacts to foreclosure trends in the months ahead.”

Thu, 11/15/2012 - 17:24 | 2985702 Dkizzle49855
Dkizzle49855's picture

EX, I agree with our opinion on the inventory issue at least where in live in North LA county in the SCV.  That is what one of the 7 realtors that visited my house during the 1st full day on the market said to me.  I thought she was full of shit when she told me that I would have multiple offers on my house the following day, but that is exactly what happened.  She had been working with a family for 4 months and they kept getting out bid on properties. The other HUGE reason my house sold was it was the only house that was currently for sale in my small developement and it was not a foreclosure or short sale.  In other words, a family could move in around 45 days later.

Thu, 11/15/2012 - 16:33 | 2985485 Notarocketscientist
Notarocketscientist's picture


Thu, 11/15/2012 - 17:34 | 2985735 chinaboy
chinaboy's picture

Can you or ZH please explain why it is "reserve" that brings bown this government insurance?


Thu, 11/15/2012 - 18:44 | 2985983 SmittyinLA
SmittyinLA's picture

You can't "insure" something for less than it costs to "insure" something, even if you're the government. 

The FHA "insurance" program is a fraud not based in reality, the "premiums" that FHA collected weren't based on actual credit risk and liabilities but based on fantasy and political patronage, the "predicted losses" which FHA fees were based were fantasy, now that the "reality losses" are hitting "fantasy premiums" and fantasy loss reserves FHA has to get more capital to pay for "real" losses.

Thu, 11/15/2012 - 20:09 | 2986248 gwar5
gwar5's picture

Nice explanation. Just reminded me that BofA also just put toxic trillions of bad debt onto the depositors banking side of accounts last year -- over the vehement protests of Sheila Blair, (now former) FDIC Chairladyparts. BAC can now take down entire FDIC system all by itself with their toxic debts that don't even belong under FDIC "insurance".


Bernanke and FED totally ran over her to make it happen after she'd already rejected it.


Thu, 11/15/2012 - 19:56 | 2986200 gwar5
gwar5's picture

in 1997 I saw a demographic study predicting a housing top in 2011 due to aging baby boomers having 2nd homes already. They were 5 years early. Now, bad economy and housing deflation spells doom and gloom and a generation of ghost houses.



Thu, 11/15/2012 - 21:41 | 2986477 robertocarlos
robertocarlos's picture

House prices in my Province have not stopped increasing since forever. A home costing 100k in 01 is now at 250-300k. If you ask for an inspection or conditions when buying a house you will not get the house so people don't ask for inspections or conditions. Realtors think it's OK.

$300k to live in this hell hole when you could live in the USA for that price. It's madness.

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