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Got PrimeX Short?: Half The Country's Mortgages Are Underwater

Tyler Durden's picture


That PrimeX, or the index based on jumbo prime mortgages formerly considered ironclad and trading just around par, recently had some "volatile" times, is no secret. Last month's collapse in the PrimeX has been well documented on these pages, following a Fitch report that the prevailing underwater equity accepted number of underwater mortgages, a sacrosanct number at about 28-29% "just because", may be too low. Yet according to a note by real estate expert Mark Hanson, referenced by CNBC's Diana Olick, the truth of the matter is that, if one were to truly factor all implicit equity reductions, the number of underwater houses is...half. Expect this to proceed like a shockwave in the PrimeX space once the market comprehends what this means, with the usual 3-6 day delay.

From Hanson:

On US totals, if you figure average house prices use conforming loan balances, then a repeat buyer has to have roughly 10 percent down to buy in addition to the 6 percent Realtor fee to sell. Thus, the effective negative equity target would be 85%. You also have to factor in secondary financing, which most measures leave out.


Based on that, over 50 percent of all mortgaged households in the US are effectively underwater — unable to sell for enough to pay a Realtor and put a down payment on a new purchase without coming out of pocket. Because repeat buyers have always carried the market as the foundation, this is why demand has not come back. It's as if half the potential buyers in America died over a two-year period of time.

And as Olick further explains, while one can use all sorts of technical and chartist mumbo jumbo to explain why PrimeX is due to a rebound, the truth is that the fundamentals are increasingly looking as those of the same asset class that once upon a time started with the word "sub."

 It's as simple as buying and selling. Negative and effective negative equity are causing stagnation, which may in the end be far more detrimental than foreclosures. The argument to solve this problem is principal forgiveness, and it is gaining traction politically and somewhat less in the banking sector.


Principal forgiveness, or lowering the balance of a large chunk of the nation's mortgages, would be costly at best but could be catastrophic at worst. "Those thinking principal reductions are a panacea have never originated a loan, done the street level research, and do not really know the borrowers behind their data," argues Hanson. "More than likely it would create a far greater number of new strategic defaulters than the number it would legitimately save from Foreclosure."

Short PrimeX yet?


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Tue, 11/08/2011 - 15:51 | 1857828 GeneMarchbanks
GeneMarchbanks's picture

'Short PrimeX yet?'

Gimme a sec...

Tue, 11/08/2011 - 15:55 | 1857850 thetruth
thetruth's picture

let me know if you figure out how

Tue, 11/08/2011 - 16:33 | 1858046 RiverRoad
RiverRoad's picture

What's that entity Shiller's got?  Does it include Prime X?

Tue, 11/08/2011 - 17:05 | 1858176 Smithovsky
Smithovsky's picture

seriously - tyler(s), anyone - how can we trade this primex thingamajig?  

Tue, 11/08/2011 - 17:05 | 1858178 Pladizow
Pladizow's picture

Easy - short BAC!

And doesnt this data this directly contradict Kyle Bass' trade yesterday in MTG?

Tue, 11/08/2011 - 17:08 | 1858205 ghostfaceinvestah
ghostfaceinvestah's picture

Or short MTG (but don't tell Kyle Bass).

Tue, 11/08/2011 - 17:12 | 1858223 TheSilverJournal
TheSilverJournal's picture

Bye bye housing market. Housing is set to fall 70%-80% considering hyperinflation will remove the easy credit because the printing press will be rendered worthless, the Fed will be ineffective in backing mortgages, American's will become much poorer because hyperinflation is economically devastating and people will move in with friends and family to save an housing maintenance and utility costs, as well as many will altogether leave the country, which will further expose the overbulding of housing that cheap money and government backing of mortgages has created.

The purchasing power of silver, on the other hand, is set to rise 3,000%. The purchasing power of gold will rise at lest 500% and the silver to gold ratio will shrink to at least 10 to 1. Silver will soon have the purchasing power that $1,000 can purchase today.

Now is the time to take the equity out of your home if you would like to keep that equity. The best way to save is with silver. Gold is a great option too. If you're looking to save in USD, nickels now have a melt value of more than $.05.

Tue, 11/08/2011 - 20:21 | 1858903 MrSteve
MrSteve's picture

Currently, gold to silver is 51, 1735 to 34. If silver is set to rise 30X to $1020 and gold 5x to $8675, your new 10 to 1 ratio is close enough.

I don't understand why you think silver will soar so far ahead of gold. Isn't silver an industrial metal today? We are having a monetary crisis, not an industrial shortage of silver. Doesn't that imply gold is more critical than silver?

Central banks are buying gold, not silver. Gold has more than doubled from its past historic high of $850 while silver has not doubled from its past historic high. This is another sign that the role of silver is changed. ( I look at Kodak)

If silver is the next big thing, why not platinum too?

I can see all paper currencies being revalued against gold, no one is seeing a future silver standard. I'm just askin'..

Wed, 11/09/2011 - 00:40 | 1859619 JLee2027
JLee2027's picture

Platinium is not money, silver is. In addition, silver (and Gold too) have some industrial usage that have occurred in the past 40 years - thus reducing supplies to critical levels. But it is money first, and nothing else. 

Central banks are not buying silver because there are no large supplies left.  If you notice there are no large supplies of Gold either. Both are being hoarded, but physical Silver is truly rarer than Gold at this point.

It is easier to fool people by controlling the tiny paper silver market and supress the price. That's why it's not trading for hundreds of dollars an ounce....a 20 to 1 paper leverage holds it down.

Can't be a silver standard because the supply is too low.


Wed, 11/09/2011 - 11:51 | 1860940 TheSilverJournal
TheSilverJournal's picture

Just because silver isn't seen by most people as money now, doesn't mean it won't be. Hell, the Charsaitan doesn't even see gold as money at the moment. The question you have to ask yourself is when hypinflation causes fiat to disappear, where will that purchasing power transfer to? Much of it will transfer to gold and silver. If you're comparing previous highs from 1980s to now you have to take inflation adjusted highs. Gold has not yet hit its peak which is maybe around $2,100 and silver maybe around $ silver is still 75% below it's 1980 high. When money flows into PMs, the gold to silver ratio will shrink.

Tue, 11/08/2011 - 17:36 | 1858345 GenX Investor
GenX Investor's picture

Didn't anyone tell you, the banking sector is fixed and it is going to lead the SPY up to 1350 by year end.

Tue, 11/08/2011 - 18:32 | 1858555 Grinder74
Grinder74's picture

I'd say principal forgiveness might work if it wasn't done the Democrazy way--giving to any joeshmoe that thinks they're entitled.  Why not make it contingent on having made on-time mortgage payments for a certain amount of time, and based on that time qualify for different ranges of LTV.

The same idea could be done with the ridiculous student loan balances.  Why not simply offset a person's loan balance up to the amount of per-person portion of the national debt?  That could be a real stimulus, since I no longer have to make 300/mo payments, and the Treasury just wiped out 45k of treasury debt.

Tue, 11/08/2011 - 18:34 | 1858561 Grinder74
Grinder74's picture

Or better yet, allow me to sue the homebuilder and loan originator for fraud since apparently they did not actually build a 350k house but a 250k house.

Tue, 11/08/2011 - 15:53 | 1857834 SheepDog-One
SheepDog-One's picture

Wow what great news...can we peg DOW 12.300 by close at least? 

Tue, 11/08/2011 - 16:02 | 1857893 disabledvet
disabledvet's picture

If you think there's a debt problem with the US consumer wait 'till you start drilling down on the trillions of debt USA Inc owes. I'm just guessing of course but "the market rally's because the good money will imminently extinguish the bad (criminal) kind."

Tue, 11/08/2011 - 16:07 | 1857919 HelluvaEngineer
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WTF - did the traders just come back from their BJ break, only to see the Berlusconi update?

Tue, 11/08/2011 - 15:55 | 1857836 Deadpool
Deadpool's picture

Squirt PornX yet?

I think the ETF is AHSHT

Tue, 11/08/2011 - 16:26 | 1858011 GubbermintWorker
GubbermintWorker's picture

I thought  it was AWSHT

Tue, 11/08/2011 - 16:40 | 1858080 trav7777
trav7777's picture

I was thinking BLSHT

Tue, 11/08/2011 - 15:55 | 1857843 firstdivision
firstdivision's picture

So go short PrimeX and long Yelp (when it IPO's with -$500MM NI)

Tue, 11/08/2011 - 15:55 | 1857846 The Deleuzian
The Deleuzian's picture

Housing still has a long long way to go down...

Tue, 11/08/2011 - 16:02 | 1857889 NotApplicable
NotApplicable's picture

Naw, you seem to be forgetting that these houses are all owned by Obummer. No market, no market pressure, no problems.

So... everything else just has a long way to go in order to catch up, with the last thing being salaries.


Tue, 11/08/2011 - 17:20 | 1858279 I Got Worms
I Got Worms's picture

This thread needs a little Drive By Truckers - couldn't be a more appropiate song (Sinkhole):


Tue, 11/08/2011 - 17:05 | 1858189 Ruffcut
Ruffcut's picture

Housing is not going down as much as it has stalled. In a holding pattern, probably to another leg down, but at this rate it could last several rats lifetime.

Nobody that wants cash for their shack is selling. Those that want to move up are trapped. ALmost like a shitty used car market.

I think it will only go "so" low. My pyschologist friend has a 6.5 loan and can't feif for lower, He bought at peak 2006. He can make 1g a day and is bitchin. yep, while drivin a mercedes, subura and ferrari. Damn sucks to be him, don't it?

Tue, 11/08/2011 - 17:34 | 1858336 RiverRoad
RiverRoad's picture

It's all relative, isn't it?  But how is it a move "up" when it's a move to a depreciating asset?  If he's got half a brain in his head, he'd better be buying those cars used.

Tue, 11/08/2011 - 15:55 | 1857848 DormRoom
DormRoom's picture

lol..  big banks stalling foreclosures so they dont' have write downs.  Meanwhile millions of home are destroyed by mold, aclimate weather, and general neglect.  trilllions of dollars of wealth destroyed by negligence. poof. gone.  but the taxpayers are forced to continue paying the ransom.



Tue, 11/08/2011 - 16:03 | 1857898 NotApplicable
NotApplicable's picture

Why don't they occupy main st?

Tue, 11/08/2011 - 16:20 | 1857978 11b40
11b40's picture

Well, it would be a lot more comfortable with winter coming on.  After all, there are plenty of empty buildings going to waste. 

I travel all around the South by car on a regular basis, and have been watching Main Streets dry up for 30 years.  These past few years have seen a huge acceleration in the the point where it often feels like I am in a foreign country.  It is very depressing, driving down streets you can remember as bustling towns & passing empty storefronts that once were home to your customers.

In 1995, my agency had over 2500 accounts.  Today, there are less than 200.

Tue, 11/08/2011 - 16:35 | 1858055 RiverRoad
RiverRoad's picture

America:  The new Cuba.

Tue, 11/08/2011 - 17:09 | 1858210 Pladizow
Pladizow's picture

Cuba wishes it was as communist as America!

Try to plant your own food, have a lemonade stand or garage sale in America today - a swat team will be at your front door demanding you show proof of government permission to exist!

Tue, 11/08/2011 - 17:43 | 1858370 donsluck
donsluck's picture

What the hell are you talking about?

Tue, 11/08/2011 - 16:37 | 1858064 MachoMan
MachoMan's picture

We're actually adding to our main street...  but, our growth is coming from the drying up of satellites...  if you have less than 1k people, you're fucked...  everyone is consolidating, trying to duke it out over the couple of available jobs.  Luckily, we've been adding jobs...  and some decent manufacturing jobs too, not just service bullshit. 

My guess is that we'll get the swarms...  like all booms...  the bust isn't too far behind.  Ride the wave I guess and wait for the next one.

Tue, 11/08/2011 - 17:23 | 1858298 I Got Worms
I Got Worms's picture

Where you located macho?

Tue, 11/08/2011 - 17:40 | 1858361 MachoMan
MachoMan's picture

Northeast Arkansas...  cheap cost of living (real cheap)...  city governments that bend over backwards to get manufacturing biz here...  decently intelligent workforce...  diverse economic base (big ag, service, manufacturing, hospitals, etc.)...

Our housing market on the top end is in shambles...  anything over 5x avg. family income is destined to sit on the market for a while...  anything 3.5x or less is sold...  quickly...  anything 1.5x or less is mercilessly bid up to about 2x via unending credit/unkie samuel.

Tue, 11/08/2011 - 18:01 | 1858444 RiverRoad
RiverRoad's picture

Funny, as in that's odd, can't figure out why the Clinton's didn't retire to Arkansas.

Tue, 11/08/2011 - 19:59 | 1858852 MachoMan
MachoMan's picture

Lot of retirees coming here...  we have lots of medical providers and cheap, nice places to stay...  dollars go a lot further down here.

Tue, 11/08/2011 - 17:07 | 1858200 traderjoe
traderjoe's picture

Big box retailers, the Internet, and the FIRE economy.

And our debt-money system hosted by private banks.

Tue, 11/08/2011 - 17:10 | 1858211 ParkAveFlasher
ParkAveFlasher's picture

Why don't they occupy the abandoned homes?  Turn the yards into corn rows and tomato patches.  The four car garages become home factories.  Squat that shit.

Tue, 11/08/2011 - 16:05 | 1857913 pelican
pelican's picture

At what point do we stop paying attention to the banks and at what point does the court have better things to do then foreclose?

Tue, 11/08/2011 - 16:38 | 1858075 MachoMan
MachoMan's picture

Courts don't foreclose...

Tue, 11/08/2011 - 16:08 | 1857925 HelluvaEngineer
HelluvaEngineer's picture


Seriously - who's gonna know?

Tue, 11/08/2011 - 16:44 | 1858107 TruthHunter
TruthHunter's picture

Doesn't work too well yet.  Not enough cops layed off.

Tue, 11/08/2011 - 17:10 | 1858215 ParkAveFlasher
ParkAveFlasher's picture

beat me to it.  damn

Tue, 11/08/2011 - 16:09 | 1857931 chunga
chunga's picture

Are they really stalling or are they having...ummm...trouble ramming them through the courts?

MERS, GMAC, ORLANS MORAN, How's that for a combo?

How many problems exist with this one Assignment of Mortgage? An auction will likely be conducted today based on this document.

If it does - and a foreclosure deed is recorded - it WILL be challenged.

Tue, 11/08/2011 - 16:22 | 1857990 RiverRoad
RiverRoad's picture

And don't cha just love that Title Insurance gig pulled off on everyone by the lawyers?

Tue, 11/08/2011 - 16:34 | 1858032 chunga
chunga's picture

The Title Companies were knocking 'em dead during the Great "buy now while you still can" Real Estate Rush. Not so much now. They're holding a lot of bad paper.

This assignment breaks the chain of title.  It is impossible and it is fraudulent.   MERS then allegedly assigns the Mortgage only to GMAC.   So what happened to the note?   Also, the date of signature by Varindar Kaur does not  match the date of the notarization.  The date was clearly altered and not initialed..  Even if initialed, it still looks like a 12, or a 10 or a 16.  It is not a 17.

Tue, 11/08/2011 - 16:53 | 1858144 MachoMan
MachoMan's picture

Yup...  The thing for title companies though, they'll have to eat the legal fees of the buyer at foreclosure sale...  but, if the thing falls through, then they've got a gutlock on the foreclosure plaintiff/bank/etc...  There can't be any other reason or culpable party other than the bank if the foreclosure buyer is divested of the purchased property.  Cakewalk...  and I'm sure they'll come crying to the banks for the atty fees too.

Generally speaking, the banks, assignees, and purchaser should all be in the same boat for trial...  after that, if they lose, the gloves come off.

Why wait to challenge until a foreclosure deed is recorded?  You're gonna lose quite a bit of credibility with the court (despite probably being legally entitled to do so).  The court is going to wonder why you sat on your hands and equitable remedies are gonna be challenged, at best. 

Tue, 11/08/2011 - 17:01 | 1858174 chunga
chunga's picture

Case is in RI Superior Court before a judge that can barely read. He keeps ruling plaintiff has no standing to challenge assignments. The foreclosure deed can and most definately will be challenged pursuant to state statutes. 

Tue, 11/08/2011 - 16:11 | 1857935 Captain Kink
Captain Kink's picture

A friend in Florida just told me that he left his house in Palm Beach County and moved to Venice (FL)...  Paid cash for the new place (a foreclosure for under 100k), tried to short sale the old place back to the note holder at 225k, while he paid 365k and owed 325k.  He told me that he has not paid property tax for over 3 years and has not paid the mortgage for almost 2 years.  He keeps getting letters from Chase, suggesting they meet to work something out.  florida is a recourse state, but they cannot attach your pension (30 years at GM) or Social security (turns 62 this week and his wife is already collecting) or your new residence, so he is laughing all the his new house without a mortgage.  the banks don't want the homes on their balance sheets, and Chase gets paid for "servicing" the mortgage, so they don't care. 

Tue, 11/08/2011 - 16:24 | 1858000 Stax Edwards
Stax Edwards's picture

Hmmm, I think I know this guy, lol

Tue, 11/08/2011 - 16:53 | 1858003 RiverRoad
RiverRoad's picture

Florida bitches.  And secede from the Union.

Tue, 11/08/2011 - 17:23 | 1858300 The Deleuzian
The Deleuzian's picture

I liked "Succeed" better RiverRoad...Sometimes 'typos' are 'freudian slips' or I guess 'Lacanian Slips'

Tue, 11/08/2011 - 17:40 | 1858362 RiverRoad
RiverRoad's picture

Thanks.  Grammer's a bitch.

Tue, 11/08/2011 - 16:27 | 1858018 gloogle
gloogle's picture

There's nothing like a happy ending...

Tue, 11/08/2011 - 16:31 | 1858041 iDealMeat
iDealMeat's picture

Soo.. the state is the bag holder from him not paying property taxes?  Does he really think his Pension is safe?  pooof.. gone.  or a hair cut for those back taxes..

something about "death and taxes" come to mind..

Tue, 11/08/2011 - 16:57 | 1858157 MachoMan
MachoMan's picture

Eh, no...  the state auctions it for assessed value (probably set by state constitution/statute) + taxes owed...  So, on something like this, maybe 20% market value + taxes owed...  buyer takes free and clear of all recorded lienholders that had notice of the sale...  any unrecorded liens are extinguished.

This is going to be a really big deal for the banks...  the states are going to take them to school.

Probably have a couple more years til this property is auctioned though...  takes forfuckingever. 

Tue, 11/08/2011 - 17:08 | 1858206 RiverRoad
RiverRoad's picture

Find some drugs in the house and the Feds auction it a lot faster.

Tue, 11/08/2011 - 16:12 | 1857944 The Proletariat
The Proletariat's picture

..."trilllions of dollars of wealth destroyed by negligence."  What wealth....the imaginary type?

Tue, 11/08/2011 - 17:48 | 1858392 donsluck
donsluck's picture

The result of hard (construction) work type.

Tue, 11/08/2011 - 18:00 | 1858440 Crack-up Boom
Crack-up Boom's picture

At least some of the wealth is real.  Last time I bought a house I saw first-hand the damage to some beautiful homes as a result of being empty and sustaining water damage.  Those homes used to present an opportunity to the flippers, but the market makes flipping much more difficult.

Tue, 11/08/2011 - 18:07 | 1858471 RiverRoad
RiverRoad's picture

Thank god.

Tue, 11/08/2011 - 15:56 | 1857855 Gubbmint Cheese
Gubbmint Cheese's picture

I'd expect euro bank selling is also having a big impact on Primex levels.. lord knows they are selling everything else..

Tue, 11/08/2011 - 15:56 | 1857856 Dick Darlington
Dick Darlington's picture

Wow, the uber bullish shit just keeps coming and coming.

Tue, 11/08/2011 - 15:56 | 1857857 NOTW777
NOTW777's picture

does cnbc receive a promotional fee for pumping PHM and homebuilders everyday

Tue, 11/08/2011 - 16:05 | 1857911 NotApplicable
NotApplicable's picture

Ironically, the housing industry is the final facade of an economic engine. Well, other than its Wall St. sponsors.

Tue, 11/08/2011 - 16:08 | 1857930 rosiescenario
rosiescenario's picture

Why, of course they do....just as MF Global showed them as a large payable on MF's books....this is called "infomercial promotional expense" and is considered deductible by the IRS....

Tue, 11/08/2011 - 16:31 | 1857860 Mercury
Mercury's picture

if you figure average house prices use conforming loan balances, then a repeat buyer has to have roughly 10 percent down to buy in addition to the 6 percent Realtor fee to sell.

I'll concede the ~6% (or keys-in-the-mailbox @ 0%) but why should we assume this seller needs to roll into another house purchase he can't afford?

I suppose no lender should be prevented from entering into a principal forgiveness deal if it makes more sense than a foreclosure would (although woe to the bank who's PF stats don't "look like America") but if the government pushes for or requires this....God help us all (again).

Step away from the market Uncle Sam, hands up where we can see them and let's just let markets clear already.


Tue, 11/08/2011 - 16:56 | 1858152 trav7777
trav7777's picture

The federal government workforce decidedly does not "look like america."

Tue, 11/08/2011 - 15:58 | 1857867 mind_imminst
mind_imminst's picture

Principal Forgiveness=Productive people who save money and pay their mortgage get screwed again.

Tue, 11/08/2011 - 16:04 | 1857910 LawsofPhysics
LawsofPhysics's picture

The only thing that is guaranteed, now how do we bet on it?  Is there an ETF for that?

Tue, 11/08/2011 - 17:45 | 1858376 Omen IV
Omen IV's picture

why are you whinning? its all part of the creative destruction of capitalism - you made a bad decision NOT to screw the banks - get with the program ! 

Tue, 11/08/2011 - 15:57 | 1857868 chunga
chunga's picture

More bullish news for

Tue, 11/08/2011 - 16:30 | 1858037 ghostfaceinvestah
ghostfaceinvestah's picture

No, no, keep buying that $3 stock, Kyle Bass gave the all-clear.  Never mind that over half of their delinquent borrowers have missed 12 or more payments, but they still insist that a good chunk of them will cure.

Tue, 11/08/2011 - 16:40 | 1858077 chunga
chunga's picture

Somebody nailed it on that thread and it wasn't Bass. It's simple. MGIC will deny all claims and/or throw their "too big to fail" hands up in the air. I'll take another bail out please and thank you.

Tue, 11/08/2011 - 16:50 | 1858132 ghostfaceinvestah
ghostfaceinvestah's picture

Their "bailout" will be sticking Fannie and Freddie with the claims they can't pay, like PMI did, there will be nothing for Kyle Bass.

Tue, 11/08/2011 - 18:38 | 1858571 chunga
chunga's picture

Fannie and Freddie will be more than happy to oblige. Woo Hoo! Record Bonuses! 

Tue, 11/08/2011 - 15:57 | 1857869 tmosley
tmosley's picture

Better grow gills so you can breathe underwater, bitchez.

Tue, 11/08/2011 - 16:04 | 1857909 MsCreant
MsCreant's picture

Better stop thinking of houses as investments, bitchez.

At least for now.

The only reason it would ever make sense that their $ value would go up would be inflation. Otherwise, there is no intrinsic reason for the values to go up. Too many of them in existence now. 

Tue, 11/08/2011 - 16:07 | 1857921 NotApplicable
NotApplicable's picture

"Luckily" many are in disrepair, and will be condemned and dozed to remove the suburban blight.

See, government can solve anything!

Tue, 11/08/2011 - 16:11 | 1857941 The Deleuzian
The Deleuzian's picture

Go long The Broken Window fallacy!!!!!!  A sure thing!

Tue, 11/08/2011 - 16:13 | 1857950 RiverRoad
RiverRoad's picture

Conflagration might work.

Tue, 11/08/2011 - 16:22 | 1857988 The Deleuzian
The Deleuzian's picture

Oh! it's coming...

Tue, 11/08/2011 - 16:41 | 1858086 Manthong
Manthong's picture

"will be condemned and dozed to remove .."

The developed property TAX LIABILITY.

Tue, 11/08/2011 - 19:00 | 1858645 ClassicalLib17
ClassicalLib17's picture

It costs taxpayer money to bulldoze and dump.  Most municipalities are now out of cash to do this.  The taxpayers are broke.  In my city of 90,000, we have over 1500 vacant homes and counting.  With the ARM resets happening over the next three years, it's looking bleak.  Not to mention our public sector union employee demands on top of this disaster.  Illinois is not the best place to own property in America, but I am stuck here for now. 

Tue, 11/08/2011 - 17:00 | 1857881 The Deleuzian
The Deleuzian's picture

The more BS coming out of DC or WallStreet that attempt to bring the housing market back to life will only prolong the duration and intensity to the downside...(Period)

Tue, 11/08/2011 - 16:01 | 1857883 Templeton
Templeton's picture

If anybody can come up with an ETF or some product to short that's available to Joe Blow with an E*Trade account, that would be cool information.

Tue, 11/08/2011 - 16:02 | 1857888 Belarus
Belarus's picture

This is rear-view mirror stuff, isn't it? All I know is the DOW is on track for another 5% week. Yippiieee!. Hell, even Kyle Bass is buying stocks as he joins Buffett, etc. and is buying mortgage insurers no less.

Buy stocks. You'll feel better. Trust me. 

Tue, 11/08/2011 - 16:02 | 1857895 LawsofPhysics
LawsofPhysics's picture

The patterns that we are seeing in the charts on low volume just reeks of manipulation.  Inflation still too low, print to the moon, your labor be damned.  hedge accordingly.

Tue, 11/08/2011 - 16:04 | 1857907 zerozulu
zerozulu's picture

As long as real GOLD follows paper gold, things will not get better.

Tue, 11/08/2011 - 16:05 | 1857914 LawsofPhysics
LawsofPhysics's picture

I would argue that when paper gold becomes detached from physical, then you can sweat.

Tue, 11/08/2011 - 16:06 | 1857918 HellZero
HellZero's picture

Still waiting for the real ramp up to happen

Tue, 11/08/2011 - 16:08 | 1857927 The Deleuzian
The Deleuzian's picture

Once again...Trying to shove a square peg through a round hole can be physically done...You just have to push really hard!...In other words...Housing prices can go up but it will take a trashing of the $....

Tue, 11/08/2011 - 16:08 | 1857928 RiverRoad
RiverRoad's picture

Oh, if anybody's "principal " gets forgiven it'll be those jumbo doozies fer sure.  Too bad.  We all coulda lived like kings if we coulda just paid those property taxes...

Tue, 11/08/2011 - 16:10 | 1857934 adr
adr's picture

Bwahhhhahahahahah ha ha haaaaaa ha ha

All there is left is to laugh in the face of this farce of an economy. It just boggles the mind. Drop SNAP and there will be bloody riots in the streets within 15 minutes. Same with unemployment.

Fuck, 50% of mortgages underwater it's more like 80%. Anyone that bought a home in the last 10 years is underwater. I could maybe break even on my home after three years but there goes my $15k down payment and I don't have enough to get a new home.

Wall Street is fucking Disneyland, hell Disneyland is a more realistic representation of reality.

Tue, 11/08/2011 - 16:21 | 1857987 delacroix
delacroix's picture

a lot of people who bought earlier, refi'd

Tue, 11/08/2011 - 16:11 | 1857939 RobotTrader
RobotTrader's picture

Horrific day for the bears

Virtually every SPY short from August 4th is still underwater

Despite the biggest European credit crisis since the Middle Ages

Tue, 11/08/2011 - 16:12 | 1857946 The Deleuzian
The Deleuzian's picture


Tue, 11/08/2011 - 16:23 | 1857992 somethingisrotten
somethingisrotten's picture

How's that NFLX and FSLR ski slope treating you, MoMo ???????

Tue, 11/08/2011 - 17:13 | 1858232 DarkestPhoenix
DarkestPhoenix's picture

Don't worry; he got a sweet deal buying 10,000 shares of GRPN at $30, and he's going to ride it to the MOON!

Tue, 11/08/2011 - 16:25 | 1858007 The Proletariat
The Proletariat's picture

There was a credit crises during the Middle Ages?????

Tue, 11/08/2011 - 17:18 | 1858270 ParkAveFlasher
ParkAveFlasher's picture

ye olde fubprimme meltedowne

Tue, 11/08/2011 - 17:52 | 1858409 RiverRoad
RiverRoad's picture

Yeah, they were leveraging turds for fuel.

Tue, 11/08/2011 - 17:53 | 1858414 RiverRoad
RiverRoad's picture

Yeah, they were leveraging turds for fuel.

Tue, 11/08/2011 - 16:14 | 1857957 EscapeKey
EscapeKey's picture

Good to see "Mr Mortgage" is back. I recall his mortgage updates back in '08, they really were excellent.

Tue, 11/08/2011 - 16:16 | 1857966 Archimedes
Archimedes's picture

Wow! It has been a while since Mr. Mortgage has spoken. I believe him to be the most creditble voice on housing. 2012 will be the year of the strategic default.

Tue, 11/08/2011 - 16:18 | 1857972 RobotTrader
RobotTrader's picture

WFC up 4%, banks are strong today

Don't even mention PCLN

Up $70 from its after-hours dump after bombing earnings guidance

Tue, 11/08/2011 - 16:21 | 1857986 somethingisrotten
somethingisrotten's picture

How's that NFLX and FSLR ski slope treating you, MoMo ???????

Tue, 11/08/2011 - 16:25 | 1858002 RobotTrader
RobotTrader's picture

NFLX is a broken stock.  Never owned it.

FLSR is a proxy for Euro Debt.  Still weak.  Ask Leo.

Tue, 11/08/2011 - 16:28 | 1858020 somethingisrotten
somethingisrotten's picture

Are you saying that you never owned any of these garbage momo stocks that you keep annoying us with ??????????

Tue, 11/08/2011 - 16:41 | 1858082 tmosley
tmosley's picture

Wow, you are an utter peice of shit, Robo.

There wasn't a day, NOT A DAMN DAY, I didn't hear you pimping NFLX, and now you claim you didn't own it?

You should be hung from your own intestines.

Tue, 11/08/2011 - 18:04 | 1858457 spartan117
spartan117's picture

I don't think that's the REAL ROBO - TRADER.  I think there was only one "T" in his name.  Unless, this is the REAL RobotTrader, and the RoboTrader that we are use to is the fake one.  Oh I give up.

Tue, 11/08/2011 - 18:08 | 1858476 tmosley
tmosley's picture

Nope, people just call him "Robo".  He always had two T's.

If there was ever a RoboTrader, that one was fake.

Tue, 11/08/2011 - 20:25 | 1858923 Bobbyrib
Bobbyrib's picture

I think Spartan is right.

Tue, 11/08/2011 - 16:20 | 1857981 Caviar Emptor
Caviar Emptor's picture

Does "paying for" things really matter anymore? It shouldn't 

Implicit in the Fed's printing press is the theoretical ability to "give" each citizen of the entire world $1million. Or maybe a billon. The notion of needing to pay for stuff is a barbarous relic

Tue, 11/08/2011 - 17:07 | 1858202 mayhem_korner
mayhem_korner's picture



Selfishly, I like the idea of giving everyone $1 million.  Make my stack of gold maples really, really shiny.  :D

Tue, 11/08/2011 - 16:24 | 1857999 Seasmoke
Seasmoke's picture

Mark Hansen = Mr.Mortgage !!!!!!!!!!!.......Where have u been ????????????

Tue, 11/08/2011 - 16:27 | 1858016 Seasmoke
Seasmoke's picture

who would ever sell an underwater house and bring money to closing when you can just stay in the house  and/or pack up leave for free ........sorry realtor scumbags

Tue, 11/08/2011 - 22:39 | 1859376 Alpha Monkey
Alpha Monkey's picture

An acquaintance was lamenting the fact that credit unions repo houses much faster than the TBTF banks.  $200K buy-in, units in her building now go for $48K. Oops...

Tue, 11/08/2011 - 16:29 | 1858024 gatorengineer
gatorengineer's picture

Barry will fix it <sarc>

Tue, 11/08/2011 - 16:29 | 1858026 RobotTrader
RobotTrader's picture

Who would do Diana Olick?

Anyone here have a librarian fantasy??

Maybe Andrew Sorkin??


Tue, 11/08/2011 - 16:35 | 1858057 The Deleuzian
The Deleuzian's picture

Robo...We all have Librarian fantasies...Otherwise we woulden't be here...It's a substitute.............

Tue, 11/08/2011 - 19:32 | 1858776 Spastica Rex
Spastica Rex's picture

OH! Librarian! I thought he said "Libertarian!"

Tue, 11/08/2011 - 19:39 | 1858790 The Deleuzian
The Deleuzian's picture


Tue, 11/08/2011 - 17:22 | 1858293 gangland
gangland's picture

 youre long MF arent you

Tue, 11/08/2011 - 16:34 | 1858051 ghostfaceinvestah
ghostfaceinvestah's picture

$100 oil is going to do wonders for the economy, too.

Tue, 11/08/2011 - 16:37 | 1858067 BigRedWall
BigRedWall's picture

OK so if every home owner sells/defaults at same time then the losses (severity) on mortgages banks/bondholders have will be higher than the number implied by previous negative equity press reports?  Got it.  Big deal, only fools make estimates of loan severity based on CNBC reports...

Tue, 11/08/2011 - 16:53 | 1858145 ghostfaceinvestah
ghostfaceinvestah's picture

you must have read a different article than i did, Hansen was saying to properly calculate negative equity you need to consider transaction costs, seems like a reasonable argument, I don't get where you read it implies everyone defaults at the same time.

Tue, 11/08/2011 - 16:40 | 1858079 reggiehammond
reggiehammond's picture

I was in spain for two months recently and I can tell you their real estate scene is very very shitty but so is everything else over there except for the mujeres so no on really notices the real estate with all the protests.

Tue, 11/08/2011 - 17:03 | 1858184 RiverRoad
RiverRoad's picture

Whatever happened to Spain blowing up?  Lots of noise and video and now not a mention.  Could it be because Santander was on the list of 29 Euro banks too big to fail?

Tue, 11/08/2011 - 16:45 | 1858111 mayhem_korner
mayhem_korner's picture



Half the world hates
What half the world does every day
Half the world waits
While half gets on with it anyway

Half the world lives
Half the world makes
Half the world gives
While the other half takes

Half the world is
Half the world was
Half the world thinks
While the other half does

Half the world talks
With half a mind on what they say
Half the world walks
With half a mind to run away

Half the world lies
Half the world learns
Half the world flies
As half the world turns

Half the world cries
Half the world laughs
Half the world tries
To be the other half

Half of us divided
Like a torn-up photograph
Half of us are trying
To reach the other half

Half the world cares
While half the world is wasting the day
Half the world shares
While half the world is stealing away

(channeling N. Peart)

Tue, 11/08/2011 - 16:55 | 1858149 Jean
Jean's picture

Is that half of the mortgages with clear title, because the "equity reduction" or more accurately the "velocity reduction" for that mess needs to be priced in?  If you can't sell because your underwater, there are no buyers, or a buyer can't get title - the result will be the same.

Tue, 11/08/2011 - 17:06 | 1858194 mayhem_korner
mayhem_korner's picture



Nice.  Like MtM v. FAS 157 accounting, no?

Tue, 11/08/2011 - 17:03 | 1858179 fonzanoon
fonzanoon's picture

It's time to seperate the economy and the markets. The are completely disconnected.

Tue, 11/08/2011 - 17:04 | 1858186 fonzanoon
fonzanoon's picture

I only wrote 12 words in that post and two of them were spelled wrong. wow.

Tue, 11/08/2011 - 17:11 | 1858217 The Deleuzian
The Deleuzian's picture

Grammer Nazi's don't get the girls fonzanoon! 

Tue, 11/08/2011 - 18:13 | 1858487 RiverRoad
RiverRoad's picture

Ahh, so you're goin' with grammer....

Tue, 11/08/2011 - 18:24 | 1858508 The Deleuzian
The Deleuzian's picture

I think Grammer proper is anal to the Nth....However RiverRoad, you were beyond Grammer!!!  More like knowledge you have but yet to reconcile...

Tue, 11/08/2011 - 17:05 | 1858190 Yardstick of Ci...
Yardstick of Civilization's picture

What we be the best two or three equities to short to take advantage of this PrimeX meltdown?

Tue, 11/08/2011 - 17:14 | 1858242 ghostfaceinvestah
ghostfaceinvestah's picture

I think the mortgage insurers, look at MTG, still has $38B of pre-2009 exposure on its books (over 80% of its total exposure), versus $7B of investments.


Sorry Kyle, you bet wrong.

Tue, 11/08/2011 - 17:21 | 1858289 gangland
gangland's picture

Peace Prize Hellfire Velvet Barry American Exceptionalist shitty on the hill #winthefuture, 50 million food stamps 70 million in poverty 30 million in deep poverty us ranks below mexico chile vietnam in poverty half of all mortgages under water 30 million unemployed 75% hs drop out rate 200 trillion real debt HAHAHAHHAHAHAHAHAHAHHAAAAHAHAAHAHAHAHAHAHAHAHAHAAHAHAAAHAHto eternity.....


interactive brokers ceo bought 8 million shares MF @ $1.20 HE IS STILL LONG THE SHARES!!


Tue, 11/08/2011 - 17:45 | 1858375 Catullus
Catullus's picture

Wait, my Adjustable Rate Mortgage has this thing called Leverage To Value in it? What's that? But interest rates are down! Why is my mortgage going up?! Wasn't Obama supposed to fix this?

//laugh track//

Tue, 11/08/2011 - 19:30 | 1858770 Snakeeyes
Snakeeyes's picture

Way over 50%. Consider FHA 0% down (now 3.5% down). With fees with Realtor fees, we create INSTANT UNDERWATER BORROWERS!!! And millions of them!!!!

50% of Mortgage Borrowers Are Underwater – Example of FHA’s “Underwaterworld”

Wed, 11/09/2011 - 01:02 | 1859655 ItsNotYouItsMe
ItsNotYouItsMe's picture

If anyone thinks write downs/forgiveness is the answer ... think again:

Loan Write Down = 1099 (i.e. TAX liability as income)

Good times ...

IF, at the same time that hell is freezing over, you manage to get you're loan written down, be prepared to pay the TAX on the forgiveness total to the tune of 28+%.  YES ... speaking from experience ... this is classified by the IRS as INCOME. 

So ... if you can't afford the monthly bill on a $250K mortgage, what on God's earth thinks you can afford the TAX hit on a $75K write down?  That's a "due now" payment of nearly $20K to the IRS (and no, making payments is probably not an option as the IRS has NO patience with deadbeats) ... is an easy thing?

The House Always Wins...

They got you coming and going ... when the government is paying $100K+ and benefits, et. al. for its employess (see: for finance and accounting jobs/salary), do you think they are hiring on the lower end of the curve?  They've got people on their side figuring out EVERY possible angle to get your money.

In summary ...

  • Write downs will NOT work (TAX liability)
  • Forgiveness will not work (TAX liability)
  • Interest rate reductions will NOT work (too little too late)
  • In the LONG run, write down/forgiveness will NOT work as they impact your credit and RAISES your interest rate on ALL OTHER outstanding credit effectively neutralizing or making things worse (yes, credit entitites keep close watch on your rating and up your rates if it changes)

And So It Goes ...

The ONLY way out ... inflate prices until housing prices are where they should be.  Enter, The Fed.  Remember, property taxes are impervious to inflation while the expenses they pay are not.  Inflation hits government hardest (due to their extremely poor use of funds) and thereby is passed on most painfully to home owners.

So, inflate housing prices back up to 2007 levels and you fix everything!  You get your taxes back and the government gets all the money it needs.  Problem solved!  Yea!  Thanks God for The Fed ... they are brilliant!

Of course, forget about the fact that, by that time, it will be $2500/mo for groceries, or $9/gal for gas, or $260/mo for cable, or $900/mo for electric, or $225/mo for cell phone, $200/mo for water/trash ... etc., etc. 

But, then again, wages will go up by 10%+ per year, year over year, right?


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