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Guest Post: How To Cripple The Real Estate Market In Five Easy Steps

Tyler Durden's picture


Submitted by Charles Hugh Smith from Of Two Minds

How To Cripple the Real Estate Market in Five Easy Steps

Central Planning has crippled the real estate market to "save" their core constituency, the banks.

If you were head of Central Planning (howdy, Ben!) and were tasked with crippling the real estate market, here's what you would recommend.

1. Choke the market and banking sector with zombie banks. Central Planning creates zombie banks in one easy step: it allows insolvent banks to mark their impaired "real estate owned" to fantasy rather than to market. This enables the banks to survive in a deathless state, propped up by free money from the Federal Reserve and lax regulations that enable fantasy accounting and all sorts of off-balance sheet trickery.

Zombie banks have no incentive to auction off their holdings of real estate with defaulted, underwater or otherwise impaired mortgages, for having the market discover the price of these properties would immediately reveal the insolvency of the bank as properties it held on its books at (say) $400,000 were actually only worth $200,000. Since the mortgage is (say) $350,000, then the bank would be forced to recognize a $150,000 loss (actually more with transaction fees, repair of the derelict property, etc.).

If the bank's entire portfolio of phantom-value properties was auctioned off or its price discovered by the market, the bank would be declared insolvent and closed.

So instead the zombie banks' impaired properties clog the market, unlisted, unsold, indefinitely held off the market until unicorns arrive and valuations return to bubblicious 2006 levels where the bank can unload them with no loss.

Since those valuations haven't arrived, millions of properties are being held off the market. This "shadow inventory" is well-known (tens of thousands of people are living rent and mortgage-free in homes that the banks have yet to even put in the foreclosure pipeline), so no one has any confidence that "the bottom is in." Confidence cannot be restored until the market clears the inventory and a real bottom is established.

This destruction of confidence undermines the entire market. Zombie banks create zombie valuations. Who can say valuations won't decline once the shadow inventory finally hits the market?

Keeping zombie banks alive via bogus valuations and shadow inventory of derelict and defaulted homes has another consequence: banks themselves cannot be confident that prices won't decline further, so it makes no sense for them to put capital at risk by issuing mortgages on real estate.

2. Have the central bank (the Federal Reserve) buy up $1 trillion in toxic, impaired mortgages. If these mortgages were such a great deal, then why didn't private buyers snap them up? Exactly: they were fetid garbage no private buyer would touch except at steep discounts that would have sent the banks into insolvency. (That isn't allowed in crony-capitalist State-run economies.)

The market was thus denied the opportunity to discover the price of all this mortgage debt, and this effectively destroyed the private market for mortgages. Literally 99% of all mortgages in the U.S. are guaranteed by the Central State. Suppressing market price discovery works just as well in the mortgage market as it does in the housing market.

3. Lower the rate that banks can borrow from the Fed to zero, and then pay the banks interest on all funds deposited at the Fed. I wish we had this option, don't you? We could borrow $1 billion from the Fed at zero interest, then deposit the $1 billion with the Fed and skim risk-free interest.

But the real-estate effect of ZIRP (zero-interest rate policy) is to lower the mortgage rate to such a low level that it makes no sense to take on the risks and unknowns of real estate valuations for such a paltry return. After all, what if the bank loans $300,000 on a $400,000 home, the value subsequently drops to $300,000 and the buyer defaults? The bank will lose capital it can't afford to lose dumping the property at auction.

Better to avoid the mortgage market altogether by refusing most applicants as risks--and given the high debt levels of most households, they may indeed be poor risks.

4. Try to prop up the housing market by giving poor credit risk buyers loans with only 3% down. This generates a new pool of ready buyers, but since the government is guaranteeing the loan, qualifying is easy and the buyers only have a few thousand dollars of skin in the game. This means defaulting is not very painful, especially if it takes the lender a few years to foreclose on the property.

The net effect of subsidizing poor credit risks to buy houses is that another pool of uncertainty is created, as these buyers are defaulting in droves, dumping inventory that had just been cleared back on the market. (The default rates of FHA loans is skyrocketing, and now the taxpayers will have to bail out the FHA.)

This is what happens when you try to prop up the market with unqualified buyers and 3% down mortgages--those buyers bail out in huge numbers and the homes return to the inventory. The clearing of inventory was as phantom as the real estate valuations on the banks' balance sheet.

5. Load young people up with the equivalent of a mortgage in student loans. That insures that the majority of potential new homebuyers won't be qualified to buy a house--they're already indentured to the banks for student loans. Those fortunate few who get good-paying jobs will qualify for a mortgage when they're getting grey hair; most will never qualify, having been buried by impossible-to-default student loans.

OK,let's see how our Organs of Central Planning are doing: check, check, check, check, check: a perfect score! they're doing everything possible to cripple the real estate market.

Do they care? Of course not; the only goal is to keep the zombie banks alive, regardless of the cost to the nation. Great work, Ben, Barack, Timmy and the rest of the gang at Central Planning: thanks to your policies, the real estate market will never clear and therefore it can never be restored to health.


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Mon, 03/19/2012 - 12:13 | 2269915 Flakmeister
Flakmeister's picture

The real estate market commited collective suicide over a 10 year period starting in the late 1990's..

The above is the equivalent of a seance, an attempt to communicate with the dead......

Mon, 03/19/2012 - 12:27 | 2269966 GeneMarchbanks
GeneMarchbanks's picture

File Under: Rearview.

Mon, 03/19/2012 - 13:08 | 2270133 chumbawamba
chumbawamba's picture

This is nothing less than a global takeover attempt.  The culmination of a 6,000 year game of Risk.  Barack just traded in a set of cards.  He has North America, Europe, Australia, so he got extra armies for those.  He's piling them all up onto the Middle East and he's going to make his final push to secure Asia before he sets his sights on Africa to win the game.  The dice are rolling.

I am Chumbawamba.

Mon, 03/19/2012 - 13:18 | 2270166 economics9698
economics9698's picture

Sad but true.  Central planning always fails.

Mon, 03/19/2012 - 13:29 | 2270206 kito
kito's picture

it seems to work for God. ;)   ................

Mon, 03/19/2012 - 14:57 | 2270524 faustian bargain
faustian bargain's picture

'work' being a relative term...seems more like 'God' is playing, instead of working.

Mon, 03/19/2012 - 18:45 | 2271171 redpill
redpill's picture

The housing market is undoubtedly a clusterfuck and will be for many years to come.  However given the world we live in, where sovereign debt backed by intangible government promises is viewed as a "financial safe haven," even an asset like real estate that could continue to decline in value but that is real and has actual utility (you can live there, and in the case of arable land, grow food) is more attractive than many alternatives. 

Mon, 03/19/2012 - 19:55 | 2271370 HardlyZero
HardlyZero's picture

20 years to come if we are lucky.  If population does not keep rising then there may be "Peak Real-Estate".

Mon, 03/19/2012 - 18:39 | 2271150 bobola
bobola's picture

However, for a 1st time house buyer, there has probably been no better time to make the purchase.

Interest rates and property prices are rock bottom right now.

Can either go lower..??

Mon, 03/19/2012 - 22:42 | 2271891 ChrisFromMorningside
ChrisFromMorningside's picture

Yes, they definitely can. Maybe not if you're Montana or South Dakota. But if you're near a metropolitan area ... Yes.

Mon, 03/19/2012 - 15:49 | 2270730 Miss Expectations
Miss Expectations's picture

His sights are already on Africa...his advance celebrity support team includes Brad Pitt, Angelina Jolie and George Clooney begging for attention/intervention in Africa "for the children."

Mon, 03/19/2012 - 12:37 | 2269995 kralizec
kralizec's picture

10 years?  Try 30!

It all started with the liberals and their mandate that the American Dream must be extended to everyone regardless of risk!  They gave us CRA and told lenders they cannot discriminate on socio-economic status...and more regs followed, and the lenders went along because Dodd & Frank gave us the toxic waste dumps known as Fannie & Freddie to stash all the garbage in, so easy money = easly lending = American Dream for all!

30 fricken years ago, thanks largely to liberal goddamned democrats and their dreams of utopia!

Fothermucking fothermuckers!

Mon, 03/19/2012 - 12:44 | 2270035 WestVillageIdiot
WestVillageIdiot's picture

Once Wall Street figured out how to turn shitty mortgages into gold, via MBS, it was a given that we would get an ocean of shitty mortgages into the market.  Thank god Wall Street had government to do their bidding and mandate all of those shitty mortgages.  The sausage grinder then had plenty of meat.  And then Wall Street got bailed out on their sausage making enterprise.  None of this could have been a coincidence. 

Mon, 03/19/2012 - 12:53 | 2270068 dick cheneys ghost
dick cheneys ghost's picture

Isnt this (real estate bubble) a function of the debt based money system on its last legs?

How can u blame one party over another when the blame should be placed squarely on a fiat/fractional lending debt based money system that needs ever expanding debt/credit creation to keep growing?

Mon, 03/19/2012 - 13:00 | 2270096 Hippocratic Oaf
Hippocratic Oaf's picture

I think your evaluation of mortgages in example 1 is off quite a bit. 20 cents on the dollar is more like it.

Mon, 03/19/2012 - 15:20 | 2270612 Dugald
Dugald's picture

And in Australia too, the Big four banks offering low deposit loans....all to help the poorly performing real estate charitable and couragous of them! No wonder they deserve large bonuses and luxury trips for the staff on cruise ships....

Mon, 03/19/2012 - 12:55 | 2270082 Flakmeister
Flakmeister's picture

Yeah, maybe you are right...

It started in the '80s when everybody got a carte blanche to game the system and unfettered greed became a desirable trait....

Other than that, your post is word salad and somewhat ideologically myopic....


Mon, 03/19/2012 - 14:17 | 2270388 MarcusLCrassus
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Yeah, noted liberals like Ronald 'borrow and spend' Reagan, or George W Bush who told all Americans that we live in an Ownership Society and should all own houses. 


Yep, thanks, I didn't know Bush was a Democrat.  Thanks for the update!

Mon, 03/19/2012 - 16:26 | 2270871 Omen IV
Omen IV's picture

Complete propaganda and nonsense - the ONLY cause of this debacle was Bank Fraud - end to end - show me where the government told the banks to syndicate  - AIR - that is totally worthless MBS that began with phony cut and paste mortgage apps and never in the respective trusts properly documented and transferred with the note   


Mon, 03/19/2012 - 18:10 | 2271091 Hobbleknee
Hobbleknee's picture

And every time the conservatives were in office, they undid everything the Democrats messed up. 

Oops, no they didn't because they're all the same!  Don't fall for left/right paradigm trickery brother.  That's what they want you to do to keep you distracted.

Mon, 03/19/2012 - 12:41 | 2270023 Dr. Engali
Dr. Engali's picture

The U. S. committed suicide in 1913 when it instituted the Fed. We are just waiting for it to be pronounced dead.

Mon, 03/19/2012 - 12:45 | 2270038 WestVillageIdiot
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I believe the suicide began in '61.  That is 1861.  Lincoln is the villain in all of this. 

Mon, 03/19/2012 - 12:50 | 2270063 Flakmeister
Flakmeister's picture

Living up to your name I see....

Mon, 03/19/2012 - 12:53 | 2270069 WestVillageIdiot
WestVillageIdiot's picture

Thank you for adding so little insight.

Please trace the rise of the central government, and central planning, in the United States.  It leads right back to Lincoln.  That was his entire goal for subjugating the south. 

Maybe you should read more and post less.

Mon, 03/19/2012 - 12:58 | 2270093 Flakmeister
Flakmeister's picture

I really recommend you review your history and examine the deal that Lincoln offered the South...

The South gave the North the finger, partially because they thought the could rely on the U.K. since they were captive cotton buyers....

Seems the U.K. didn't like the bad taste that slavery left in its mouth....

Mon, 03/19/2012 - 13:00 | 2270095 WestVillageIdiot
WestVillageIdiot's picture

Who cares what deal Lincoln offered anybody.  The south had every right to secede if they wished. 

Mon, 03/19/2012 - 13:04 | 2270109 Flakmeister
Flakmeister's picture

Get over it...

You fired the first shot and lost the war....


Mon, 03/19/2012 - 13:07 | 2270126 WestVillageIdiot
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You just won "The Stupidest Comment of All-Time" award on ZH.  Thank you for playing. 

Mon, 03/19/2012 - 13:17 | 2270163 Flakmeister
Flakmeister's picture

Its amazing the denial you guys can muster....

Mon, 03/19/2012 - 16:49 | 2270942 malek
malek's picture

You are avoiding to respond to his key fact: "they had the right to secede"

Everything else you are spewing is just distraction...

Mon, 03/19/2012 - 17:28 | 2271018 Flakmeister
Flakmeister's picture

And Lincoln demanded that Federal property be respected...

It wasn't....

Mon, 03/19/2012 - 19:03 | 2271231 malek
malek's picture

No matter what excuse you come up with, it was the demise of "a republic, if you can keep it."

Since then we are a democracy, characterized by steadily increasing 'tyranny of the majority.'

Mon, 03/19/2012 - 18:51 | 2271188 The Alarmist
The Alarmist's picture

"Had" is the operative word here. It is now ingrained in American Jurisprudence that a State has no right to secede, and you can bet your last dollar that the next one that tries will see itself brutally subdued.

Mon, 03/19/2012 - 13:07 | 2270129 njrod
njrod's picture

I'm MF brown as can be, and i'll rep the confederate flag all day!

Freedom, bitchez!

Mon, 03/19/2012 - 13:15 | 2270154 LowProfile
LowProfile's picture

I'm partial to the Gadsen, less baggage with that one.

Mon, 03/19/2012 - 18:13 | 2271096 tmosley
tmosley's picture

Just how old do you think he is!?

Oh, you didn't mean him personally?  You were just attempting to conflate his arguments against federal aggression with slavery, because you possess no strong arguments of your own, and as such must constantly resort to ad hominem?

Mon, 03/19/2012 - 13:16 | 2270159 LowProfile
LowProfile's picture


Seems the U.K. didn't like the bad taste that slavery left in its mouth....


Yeah, I'm sure it didn't have anything to do with pushing a renegade colony into civil war so they could profit off it.

LMFAOSTFU ur killin' me

Mon, 03/19/2012 - 13:25 | 2270192 WestVillageIdiot
WestVillageIdiot's picture

Because we all know the Brits were treating all of the people in their colonies so well.  Thank you for your comment.  The stupidty of the slavery comment was just asinine.

Of course public schools still brainwash our kids into believing that The Civil War was all about Lincoln's desire to free slaves.  Bwahahaha.  What a bunch of bullshit.

Thomas Jefferson died at Fort Sumter.

Mon, 03/19/2012 - 13:29 | 2270211 Flakmeister
Flakmeister's picture

The UK did not push anyone....

The Southern political intelligensia (now there is an oxymoron!) did it all by themselves...

Mon, 03/19/2012 - 15:29 | 2270651 Dugald
Dugald's picture

Well you could have washed out the taste with a mug of tea, but no; some prats went and chucked perfectly good tea in the bloody oggin, bin all down hill since then, and getting worse at record speed....will it end with a crash, or another splash?

Mon, 03/19/2012 - 13:49 | 2270292 Silveramada
Silveramada's picture

yep... and the uncostitutional IRS same year!

Mon, 03/19/2012 - 12:59 | 2270085 JohnKozac
JohnKozac's picture

All mortgages should be kept local. That way, the bank loan officer has "skin in the game." The local banker knows better who is qualified and who is not. Mortgage companies and the FHA should be forbidden and/or abolished.

I've given up on the housing market since I see no signs of change or improvement for at least 10 years. Plus, there are too many other ways to make money with lower risk.


Mon, 03/19/2012 - 13:07 | 2270125 Woodyg
Woodyg's picture

Local counties and cities should install a "vacant house" fine......

Those houses sit there empty,not on the market, no maintenance, getting trashed by rats, the homeless and partying teenagers.....

Further decreasing the value of the house, the value of the other properties in the neighborhood, etc

Any house that sits vacant for 3 months - not on the market - no utilities, etc should face a monthly fine and be foreclosed on by the locality - and then sold.

Mon, 03/19/2012 - 13:20 | 2270178 LowProfile
LowProfile's picture

Also vacant rental property.  Otherwise the banks can just say "can't find a suitable tenant".

Mon, 03/19/2012 - 13:42 | 2270267 TeresaE
TeresaE's picture

Many, many cities around here are doing that.

Guess what?  Law of "unintended" consequences abound.

First the squatters don't notify the bank that they left, then the banks don't notify the city because of the regulatory nightmares and fees, so the cities HIRE MORE PAID FOR LIFE workers to drive around and find the houses, now they have instituted code enforcement in that if your house is empty for ONE day, the sale cannot proceed until the house is brought up to code.

Which results in FEWER sales as the repairs are many times more $$ than the house.

With the exception of the new thing of government cash "buying" foreclosures then lending the money to their cronies to buy them up in lots.  These will be turned into Section 8 housing, with government dollars, then paid for in rent with GOVERNMENT dollars.

Any solutions we come up with that start with the thought/words that "government should institute a law" are doomed to failure as is evidenced by the entire country right now.


Mon, 03/19/2012 - 18:32 | 2271134 disabledvet
disabledvet's picture

and herein lies the only problem with the housing market: no accounting. this was the instrumental in the "great recovery" of the 80's: accounting firms stepped front and center to declare "their piece of your forgotten pie." we've now been whittled down to it big 2 now? Anderson got gleefully taken out with Enron. Now no one even knows what an asset is anymore...other than the fact that it is being stolen by those who have no concept of law to begin with let alone any interest in it. we need an inventory of vacant properties...properly titled whether whoever claims to own it or not likes it or not...and then it needs to be auctioned off. And then AND ONLY THEN can actual banking resume as by then an asset will finally be owned to be "rehypothecated."

Mon, 03/19/2012 - 15:04 | 2270544 HardlyZero
HardlyZero's picture

There are a few more possible outcomes which could cause a more significant downdraft.

1) make private property law suspect to the point that if you are surrounded by property owned by the banks or governments then you have no rights to any support (water, gas, energy) or rights.  This becomes a real problem when discussing property taxes.

2) determine the best way forward is to "give away" distressed properties to people who are otherwise unemployed or disenfranchised.  Ask that they upkeep their property, based only on their government supplied stipend and foodstamps.

3) develop new prison rules and prison-law to allow for many who are leaving their "adopt" distressed many affluent neighborhoods.  This is a type of reverse gentrification but will lead to many interesting outcomes.

4) make sure everyone is happy about the new arrangements, including the banks, counties, and municipalities.

In case the above new setup does not work, make sure there are special land-grab rules included or exclusions, to ensure there are deep clawbacks into the landowners.

It is looking more like all the land will go back to the city-state.

Mon, 03/19/2012 - 18:56 | 2271200 The Alarmist
The Alarmist's picture

The Soviet Union had nothing on the USA ... They had massive shortages of housing because they adopted communism before building all the houses.

Mon, 03/19/2012 - 19:59 | 2271380 HardlyZero
HardlyZero's picture

Magna-Carta no more.  Its been a great 1000 year experiment in private ownership.  The new land barons will be the Billionairs or the government buddies.

I hear many of the wealthy are buying up land all around the globe.  They will form oligarchies and real-estate cartels to offset the taxation and land-grabs. 

There might even be more room for private land-estates that are ex-country.  Who owns anything or the rights will be interesting questions once you are surrounded by federal or banking owned, or corporate owned, or Billionare owned lands.

Mon, 03/19/2012 - 12:14 | 2269919 Jason T
Jason T's picture

Don't forget to increase the property taxes every year too.  

Mon, 03/19/2012 - 12:21 | 2269940 duo
duo's picture

I wish the people in my neighborhood not paying their mortgages would at least use the money saved to buy a lawn mower.

Mon, 03/19/2012 - 12:41 | 2270015 WestVillageIdiot
WestVillageIdiot's picture

It is almost universal, from what I've seen, that the people that are not paying are not using this "free rent" to get themselves ahead.  Their windfall is being pissed away.  That is their nature.  That is what they do.  Few of them will be better off when the free rent ends.  That is doubly pathetic.

Mon, 03/19/2012 - 12:24 | 2269950 WestVillageIdiot
WestVillageIdiot's picture

And don't forget to drive up the input costs of houses through the roof.  Build a shitload of McMansions and then allow oil prices to get driven through the roof due to oceans of liquidity provided by Butthole Ben and his favorite Lexmark bubblejet printer.  Now that decaying McMansion costs an even larger fortune to heat and cool.

Points 4 and 5 contradict each other.  In 4 he says that anybody can get a loan.  In 5 he writes that young people will never qualify for  a mortgage.  The young people will qualify as well.  All they need is a minimal gift from their parents.  They can then have the worst of all worlds.  And still the drones of American consumerism will not admit that they are their own worst enemy. 

Student loans + mortgage + credit cards = perpetual slavery 
Put this another way and you see the equation is really
Government loans + Fannie and Freddie + bailed out banks =  perpetual slavery

And yet the solution for the vast majority of the worker bees is even more goverment "affordability" schemes. 

Mon, 03/19/2012 - 13:35 | 2270210 DaveyJones
DaveyJones's picture

a shitload of McMansions...built like crap

so let's see, crap, financed with crap, repackaged and sold by people who resemble crap, caught but forgiven by a government that is crap equals.... 


Mon, 03/19/2012 - 12:40 | 2269951 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

No one wants to own a house right now, except those who don't own a house, and they can't understand why they wouldn't want to, because it is the American Dream to own a house, and housing prices have bottomed [crickets]. 

Little do they know that in most cases the house will outlive them; there was a previous owner who owned the house, and someone after them will likely own the house; so there can be a case that they do not own the house, but that the house owns them.

Mon, 03/19/2012 - 13:15 | 2270155 Hippocratic Oaf
Hippocratic Oaf's picture

That's fuckin' deep, bro. But I like it.

Mon, 03/19/2012 - 13:17 | 2270161 Things that go bump
Things that go bump's picture

That may be the case, but renting is another, maybe more insidious, form of slavery. Because of inflation, rent is always going up, while after owning your home for 10 or 15 years, the mortgage might start looking pretty good in comparison.

Mon, 03/19/2012 - 13:19 | 2270169 Flakmeister
Flakmeister's picture

You forgot property taxes....

Mon, 03/19/2012 - 14:55 | 2270519 holdingontomypants
holdingontomypants's picture don't think you are paying taxes on a rental house? I don't know of any landlord who doesn't try to cover all his expenses (tax included) so he can get to this thing called profit. The sole reason he owns and rents it out. Think before you say something next time.

Mon, 03/19/2012 - 16:03 | 2270792 Flakmeister
Flakmeister's picture

Yes...but when you look at cost of ownership and Cap rates, you have to include them...

Not to mention capital upkeep and insurance, good for anywhere from 50 to 150 bps pa....

For a lot of areas in the country single-family dwellings still have ridiculous cap rates....

Mon, 03/19/2012 - 13:22 | 2270188 Ghordius
Ghordius's picture

breathing is also an insidious form of slavery. there are several countries on this world where there is the correct/functional/working law-setup/regulation/blablabla to have a fine, working rental market that does not rip you off, even with inflation. copy/paste...

Mon, 03/19/2012 - 12:15 | 2269923 Hedgetard55
Hedgetard55's picture

Bernanke = the Professor Moriarty of Financial Crimes, stealing from every owner of cash and it's equivalents and handing it to his banksta buddies.

Mon, 03/19/2012 - 12:17 | 2269928 The Big Ching-aso
The Big Ching-aso's picture




"Morons to the left of me, economists to the right, stuck here underwater with you."

Mon, 03/19/2012 - 12:15 | 2269925 ZippyBananaPants
ZippyBananaPants's picture

Does anyone really care about any of this?


Where can I get my Peyton Manning Denver Bronco jersey?  Links?


Mon, 03/19/2012 - 12:51 | 2270066 SmoothCoolSmoke
SmoothCoolSmoke's picture

I predict Manning's best day as a Bronco....will be today.   Go Steelers!

Mon, 03/19/2012 - 12:20 | 2269939 Racer
Racer's picture

as long as apple is green they don't care

Mon, 03/19/2012 - 12:22 | 2269947 bushwarcrime
bushwarcrime's picture

The housing market was SATURATED.  For fucks sake, people were buying houses in Arizona and Nevada. In the middle of the fekking desert and thinking, I can keep the air-con rolling 24/7 for sure.  Florida! SEMI-Tropical heat and humidity with sheetrock!  WTF, turn off the air for 2 weeks and it's all over Sammy.  

Mon, 03/19/2012 - 13:26 | 2270197 Things that go bump
Things that go bump's picture

Cobb with 3-foot thick walls would be more practical. Bugs don't eat it and it doesn't burn, cool in summer, warm in winter, known to stand for centuries, made of all natural and mostly free materials, and do-it-youself friendly. 


Mon, 03/19/2012 - 15:04 | 2270541 holdingontomypants
holdingontomypants's picture

Lets see. In 15 years living in Arizona I haven't had a hurricane, tornado, earthquake, flood, snowed in, or any other of those nasty little things that most other states have to deal with. Yep, and by the way, just so you know, its a "dry heat" here in the dessert and it cools down at night about 30 degrees. Enjoy your one of the above issues while I spend the day boating, camping, heck, even snow skiing, and my favorite, quad riding with my boys and target shooting in the 10's of thousand acres of state and federal lands. All within minutes of my desert

Mon, 03/19/2012 - 12:23 | 2269948 Sudden Debt
Sudden Debt's picture

On a long enough timeline, wooden house turn into...


Mon, 03/19/2012 - 12:28 | 2269973 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Man caves.  Litterally.

Mon, 03/19/2012 - 12:25 | 2269957 evolutionx
evolutionx's picture
Summer 2012: Iran war, crash in the markets and financial institutions


five devastating storms will mark the summer of 2012 and thus accelerate the process of world geopolitical swing:

  • . US relapse into recession against the background of European stagnation and BRICS slowdown
  • . dead end for the central banks and interest rate increases
  • . storm on the foreign exchange and Western sovereign debt markets
  • . Iran, the war « too far »
  • new crash in the markets and financial institutions.


Full Analysis:



Mon, 03/19/2012 - 12:32 | 2269978 monopoly
monopoly's picture

Right, no one cares anymore. It just goes on and on. I mean BAC at $10.00, a 100% gain in two quarters. Get me away from this crap.

Mon, 03/19/2012 - 12:34 | 2269988 icanhasbailout
icanhasbailout's picture

Surely you missed a step - I don't see "send false price signals by hiding the massive buildup of shadow inventory" anywhere on that list.

Mon, 03/19/2012 - 12:45 | 2270042 A Lunatic
A Lunatic's picture

I thought there were some irresponsible consumers somewhere along the way as well.............

Mon, 03/19/2012 - 13:41 | 2270263 DaveyJones
DaveyJones's picture

those are a constant

Mon, 03/19/2012 - 12:37 | 2269996 Abitdodgie
Abitdodgie's picture

Nothing a good war will not sort out , when everyone can see it on TV and be happy in the fact that Iranians will be dieing so we can keep our way of life , swip your EBT its free, all you have to do is fuck and 9 months later your in the big bucks . God bless America we get everything we deserve. The 22nd will be a good day ( for some)

Mon, 03/19/2012 - 12:37 | 2269998 Long-John-Silver
Long-John-Silver's picture

When a Fascist State takes control it confiscates all property. This government is in the process of confiscating property by debt default.

Mon, 03/19/2012 - 13:09 | 2270138 oddjob
oddjob's picture

It would not be possible without the stooge enablers that choose to sacrifice others freedom for their own temporary benefit. Most short sighted trade ever.

Mon, 03/19/2012 - 13:18 | 2270170 gwar5
gwar5's picture

I'm with you Long John.


The student loans held by an angry young generation could be written off for jobs in a new civilian army. The UN green wackos make no bones they want mass relocations of humans. Ha! Bankers would reclaim all the natural resources once people turned on themselves and the dirty work is done.

Mon, 03/19/2012 - 13:34 | 2270226 TeresaE
TeresaE's picture

Great catch.

My gut tells me Washington is going to use our houses to pay off a foreign debtor when the SHTF.

Sell our houses right out from under us and allow a foreign, more than likely communist, country to own us.

Buffett said a few years back that Americans were going to wake up and be sharecroppers paying taxes to both China and the US federal gubment.

Looks like he could be more right than most know.

Mon, 03/19/2012 - 12:37 | 2270001 ArkansasAngie
ArkansasAngie's picture

And thus we have last week's OBomb'em executive order.

Mon, 03/19/2012 - 12:43 | 2270019 JohnKozac
JohnKozac's picture

Zero-down neighborhoods turn to slums since people have no stake in taking care of their property:

The Suburban Slum Era Has Arrived

It's been apparent for a number of years now that—due to widespread demographic and economic trends—the suburbs, once the idyllic home to upper middle class members and aspirants, are becoming the new slums. How's that trend developing? Just fine, thank you.

The 3% FHA becomes zero when you add in other "incentives."   For all the reasons you mentioned house prices will continue to drop. I am surprised house owners don't make a bigger sitnk about the zero down free houses being handed out.....reminds me of the public projects handed out to people in the 1970s and 1980s...all turned to crime infested slums.....sad development...

Mon, 03/19/2012 - 13:01 | 2270101 Salah
Salah's picture

Here's how to cure the American real estate quagmire 

1. Stop worshipping at the 'Church of the NAR' that proclaims residential real estate is a sacrament of the US economy.  It's NO SACRAMENT, only the biggest consumer durable; nowhere is housing equivalent to motherhood, apple pie, or baseball.  Buffett once called it a 'malinvestment'.

2. Treat it as such (a consumer durable); possibly use the tax code on a temporary, interrim basis to help capitalize (& tax differently) local residential "real estate dealers"; incentivize them to create regionalized, wholesale "real estate auctions" (just for the dealers).  Yep, it's the auto dealerhip model "hybridized" for real estate.  The objective here is to make price discovery (i.e. "valuation") as instantaneous as possible, along with transparency in all phases of the transaction, and the operational model that blows out unwanted, obsolete, inferior inventory in a hurry.  (pardon me, but it does fucking go down in value)

3. Mandate in 2-3 years all parties to residential RE transactions must be paperless, (hey, the FTC made all the MLS systems share their data publicly--how'd that happen?)  Think those grubby, puffed-up RE agents will be making 6-10% on the gross in transactions they have absolutely zero risk in, for long?  Not a chance.

Mon, 03/19/2012 - 12:47 | 2270032 forward ho
forward ho's picture

anybody able to connect to been taken down. tyler, watch for the off switch.

Mon, 03/19/2012 - 13:31 | 2270219 TeresaE
TeresaE's picture

It's up now.

The ISP's aren't set to start shutting down websites until this summer.

Then, watch out.  Anyone can claim infringement and lots of sites may go dark.

But not that one, not today.

Mon, 03/19/2012 - 12:47 | 2270037 tabasco71
tabasco71's picture

I was talking with an IB friend of mine who suggested long on bank stocks is a good thing right now, because the following is about to happen, and by convention banks always do well in inflationary environments:

1. Stock market goes up (as it is/was yesterday) which causes bank equity to go up. Banks need to lend more to balance.

2. Inflation on its way, consumers need debt to pay for things (houses, cars, food) and go to banks.

3. Regardless of the credit quality, at that stage banks will lend.

The reason this hasn't occurred just yet is that the velocity of money has been kept low which also is falsely keeping the inflation rate low.

Just thinking out loud here....

Mon, 03/19/2012 - 13:10 | 2270141 LowProfile
LowProfile's picture

For a trade only?  Sure.  Plenty of reasons to hedge though.

However, IMO going long the USD makes more sense, and is a far safer trade.  EUR is still in deep shit, immediate QE is not assured, etc.  I've been long USD (unlevered) with the specualtive account since last July, waiting for it to top/PMs to bottom.  The bulk of the wealth is held in core delivered PMs, this is recent surplus looking for an entry.

Mon, 03/19/2012 - 12:48 | 2270050 kito
kito's picture

you cant cripple somebody without prices will revert to cash value...........

Mon, 03/19/2012 - 13:05 | 2270116 Seasmoke
Seasmoke's picture

pay cash and you still sleep with one eye open thanks to property tax rape

Mon, 03/19/2012 - 13:32 | 2270222 kito
kito's picture

just create a religious organization and you will be fine...............

Mon, 03/19/2012 - 12:58 | 2270092 10mm
10mm's picture

Houseing possesion,not ownership,has turned into nightmare,not a dream.Money pit,maintance,taxes.Young people staying away by circumstance or realizing it's just not worth the hassle.I wouldn't blame em one bit.

Mon, 03/19/2012 - 13:01 | 2270098 blunderdog
blunderdog's picture

One way or the other, if you manage to drive wages down at the same time you inflate housing prices with cheap credit, the system's going to fail.

This had to happen regardless of who deserves the largest share of blame.

Can it be fixed?  Pretty easily.  Will it?  Nah. 

Most folks are more interested in the "blame" part.

Mon, 03/19/2012 - 13:04 | 2270113 Yellowhoard
Yellowhoard's picture


So, if Fannie and Freddie own all of the mortgages and the market collapses, that would mean that the government owns nearly all of the housing stock, not to mention most commercial real estate that would fall soon after.

Call me conspiratorial, but isn't that one of the last remaining planks of the Communist Manifesto?

Mon, 03/19/2012 - 18:13 | 2271095 blunderdog
blunderdog's picture

  if Fannie and Freddie own all of the mortgages and the market collapses, that would mean that the government owns nearly all of the housing stock,

Owning the mortgage doesn't mean they own the houses.  They'd have liens on everything, but ownership of real-estate is recorded at the county level.  Not much reason to worry about government liens on all property, in my view--they could already have seized it all anyway, whether for eminent domain or criminal confiscation or whatever.

(But the commies ARE coming for you!  Take refuge in your shelter!)

Mon, 03/19/2012 - 13:10 | 2270123 Shizzmoney
Shizzmoney's picture

5. Load young people up with the equivalent of a mortgage in student loans

Also OP forgets credit card loans, cell phone bills, and car bills and the last big elephant in the room: Health Insurance.  Now since we are all forced to buy it, they set the market.  I guarantee like in Switzerland, half of what I make will end up going to the Health Insurance middle man by 2020.

If realtors/real estate moguls just think they can continue to jack up home prices and have people comes in droves to buy them, they are dillusional.

People in my age bracket today (18-30) are lucky if we can fuckin' afford RENT.

Mon, 03/19/2012 - 13:21 | 2270182 Zero Govt
Zero Govt's picture

Requiring you buy car insurance, home insurance, health insurance etc etc by law is a pure scam

monopolists working with Govt to fleece you from cradle to grave

Stop Paying Your Taxes (don't finance your oppressors)

Mon, 03/19/2012 - 15:35 | 2270675 Currency is Debt
Currency is Debt's picture

Yours is a holy cause.

This is one of the major tentacles of the beast.

It is institutionalized armed robbery on income, consumption and investment.

Mon, 03/19/2012 - 18:19 | 2271099 Zero Govt
Zero Govt's picture

we don't realise our society is literally being robbed to poverty my monopolists

once you see the techniques they use, that ratchet Govt in all its Depts being the primary tool of corruption (of the free market), you wake up what's happening

i've a green 'eco' lightbulb in my toilet, it takes 15 minutes to light anything! It's a European mandated product.. it's a monopoly ...i think it's fuking GE behind it, they make lots of crap nobody wants without a US foriegn loan assistence program

Mon, 03/19/2012 - 19:08 | 2271244 The Alarmist
The Alarmist's picture

Just as well the light takes 15 minutes ... That way you don't see the crap still in the low-flow toilet after the first flush or two.

Mon, 03/19/2012 - 13:17 | 2270132 Zero Govt
Zero Govt's picture

2. Have the central bank (Fed) buy up $1 trillion in toxic, impaired mortgages

Or put another way Blankfein, Dimon et al, have gut-rot a result of their own fraudulent MBS cooking and need to 'dump' as nobody's buying their shit

Cue Nanny Ben (pooper scooper) to tidy up bankers soiled nappies hoo :'(

The Fed: a toilet for banksters needing a dump

this is not capitalism, this is a privilege system for ivy league losers

Mon, 03/19/2012 - 13:15 | 2270140 Widowmaker
Widowmaker's picture


Anyone, ANYONE, buying or bought a US home in the last 10 years is CREAMED. Locked and shocked in that mortgage.  Best political racketeering and social-crime Inc. can buy.

Those in RE since fraud went dramatically public in 2008 will lose only 60%+, the rest well over 80 ANNND you get to pay for it twice -- over 100% loss and stupid fucks might get a clue, but I doubt it.  The law is totally moot, gutted in advance for national insecurity.

Line'em up and knock'em down.


Mon, 03/19/2012 - 13:19 | 2270173 sangell
sangell's picture

The shadow inventory problem maybe coming to a head as the grace period to do a short sale or receive non taxable debt forgiveness on a primary residence expires this year. Now if you are a squatter, living for free, while you try to do a mortgage modification, a short sale or just delay the foreclosure process you've a 12/31/12 deadline. If you try to do the deal next year, oh man is it going to cost you.

Mon, 03/19/2012 - 13:38 | 2270248 VelvetHog
VelvetHog's picture

I'm not really sure I give a rat's ass anymore.  The fucking stupidity is so thick and invasive as to be physically painful.  Piss on it all. 

Mon, 03/19/2012 - 13:45 | 2270280 TeresaE
TeresaE's picture

You forgot the most important step:

Send the bulk of the family-suppoting, house-buying, middle class jobs and businesses overseas.


There, fixed it for 'ya.

Mon, 03/19/2012 - 13:54 | 2270307 holdingontomypants
holdingontomypants's picture

I bought my home a year ago using my VA homeloan program. 100% financing with Chase. Paid 129K on a 2006 built home that last and only homeowners paid 362K for. 4.25% interest so I am pretty happy. My mortgage is $200 less then what I was paying for rent on a home half the size and it didn't even have a pool. On cost me $1,800 out of pocket to buy.

My brother also bought his 2006 built home in same neighborhood last year and he got 100% financing through Navy Federal Credit Union. His interest was 4.67% and his out of pocket was about $800. He paid 87K for it and last owners paid 230K.

Still low down programs available out there for those who want to buy. My home was a Fannie Mae foreclosure and my brothers was a Freddie Mac foreclosure.  

The interesting thing is homes in my neighborhood are on the rise and two similar homes have sold for almost 50K more then what I paid. Mainly Canadian buyers as where I live in Arizona is a city that attracts alot of Canadians who buyer winter homes here.

I feel I did pretty good on my purchase due to looking at how much it cost me to build my last home in 1997 which was $77 per square foot.  My new home including a nice self cleaning pebble-tech pool cost me $44 per square foot. You would have to go to 1980's era to get those kind of construction prices.

My main thing was I sold my last home in 2002 and sat this market out as a renter until December 2010. Only regret I have is I waited a few months to long to buy in 2010 and missed out on that nice tax credit of about 8K. Could have used that for some new appliances.

Not all doom and gloom in the housing market if you buy it right.  

Mon, 03/19/2012 - 14:10 | 2270365 cowdiddly
cowdiddly's picture

Wait until you see the contractors estimate for a new roof.

Mon, 03/19/2012 - 14:37 | 2270454 holdingontomypants
holdingontomypants's picture

In 30 years I will be dead. Shouldn't need a roof before then.

Mon, 03/19/2012 - 14:08 | 2270354 SanOvaBeach
SanOvaBeach's picture

Remember when owning a house made you Mr. Successful.  Most of the morons I talked to did'nt really own a house.  They were buying a house with a mortgage.  As soon as these jack-offs had some equity they would re-finance.  I would be at parties and listen to one stupid yuppie bimbo, talk'in to another stupid yuppie bimbo.  The conver. would go like this.  "John And I bought a house in Whoppie-do-we-are-hot-shit in Big Time, USA.  Our escrow has not closed yet, but we made $60,000 since the property already went up in value".  Don't yea just love it!  Remember mortgage burning parties?  Does anybody have those anymore?  With the rentals I own, the goal was to get the banks out of the picture ASAP.  Many people I talk to today say, "it is going to come back".  Most of these are living in "underwater homes".  What they are longing for is a "come back of the bubble economy".

Mon, 03/19/2012 - 14:33 | 2270435 holdingontomypants
holdingontomypants's picture

You must be talking about the good ole days of the 50' era I just missed out on by about 10 years. My Mother still talks fondly of those years when life was pretty simple and straightforward, life before the technology onslaught that brought us to where we are today.

People have to live somewhere so they must either be renters or mortgaged homeowners or for some inbetween while living with family or homeless.

While easy to remain a home renter you trade off being able to ever own that what you live in. A debt slave to a landlord (lord) because he can decide how you live and at his whim decide to kick you out. You of course as a renter are always free to rid yourself of that landlord by moving to another landlord who may treat you better.

You purchase a home even one with a mortgage you ultimately have a date of partial freedom and a party to burn the note.

You are never 100% free on your home as long as the tax man has his say. He leverages your home against you to collect from you your sweat of labor. This debt he calls taxes is one you never escape unless you choose to live completely free by the name called homeless.

We are all debt slaves!!! 

Mon, 03/19/2012 - 14:28 | 2270419 dontgoforit
dontgoforit's picture

Because as smart as they think they are - they're stupid MF'ers.  But the scary part is the people who voted them in and who continue to support their policies.....we're goin' down!

Mon, 03/19/2012 - 14:31 | 2270426 q99x2
q99x2's picture

Hell no they don't care. They do the same thing with every country they take over. With the US though they'll have to send some chinese nukes our way to make sure there ae no remaining constitutional issues. The Iran thing is just a cover..

Mon, 03/19/2012 - 15:27 | 2270613 Getting Old Sucks
Getting Old Sucks's picture

I'm no expert, just my opinion...

I'm beginning to think that the way everything was packaged and sold in MBS, nobody actually knows who really owns these houses.  Are the bond holders getting paid from the servicers or some clearing house that just calculates what they should get on the bond?  Do the trusts know which mortgages in their bond is non performing?  Do the trusts even know which mortgages they own?  Why aren't they forclosing.  They're the only ones with that right.  So much paperwork has been destroyed that no one seems to be able to produce a wet signature note.  I guess if I sold the same mortgage to three different people and they just assumed I have the note on file, guess what I'm going to do with that note.  And that's what they seem to have done. 

Now we have millions of properties with no clear title.  Who wants to buy any property that someone else can someday claim they own?  The least the banks will have to do is repair county land records.  Don'y hold your breath cause it ain't happening if they don't know who owns it.


Just adding that this may be reason #6 because word is getting out there about cloudy titles.  Pretty soon we'll see real estate agencies touting "Clear Titla" in their advertisements

Mon, 03/19/2012 - 18:24 | 2271113 Catullus
Catullus's picture

If you believe what some libertarians and marxists propose that property is the key feature to capitalism, and securitization (the process by which the title to streams of payments to complete property transfers are pooled) is obfuscation of clear rights to title by its very nature, then securitiztion is a subversive method of destroying capitalism.

Basically, they're out to destroy society whether they know it or not. 

Mon, 03/19/2012 - 18:48 | 2271182 blunderdog
blunderdog's picture

Good reminder. 

Never attribute to malice any behavior that can be adequately explained by stupidity.

Mon, 03/19/2012 - 19:54 | 2271213 chunga
chunga's picture

They got paid by insurance companies that got bailed out because they were too big to fail.

In the Real Estate hay day, back when they weren't making any more Real Estate, money started looking for people. To this day, some remain stubbornly reliant on an obtuse and incomplete interpretation of the "Community Reinvestment Act" as a convenient neon red-herring on which to affix blame. To suggest (over and over again) that any politician, regardless of spot or stripe, would give a fig, lift a finger, bat a lash, or make anything more affordable for anyone other than themselves is mere cacophony.

Some will even put forth the equally absurd notion that lenders were strong-armed into making loans for fear of lawsuits from powerhouse organizations like ACORN. (Banks afraid of cute)

The money was looking for people for one reason and one reason only.

I've said this before (aided by the clarity of hindsight) but the sociopaths had the vision to see this coming and acted accordingly. Presently, there isn't anything left to steal except debt.

How do you steal money from those who don't have any?

Simple. Just give it to them.

This seemingly chivalrous and selfless act of making the "American Dream" of home ownership more affordable to minorities or the otherwise disenfranchised was actually anything but chivalrous and selfless.

It was the perfect crime.

While keenly focusing on the fact that no one was making more Real Estate, it was triple A safe to assume the value of Real Estate would never do anything but go up. This "conventional wisdom", often called "speculative", was repeatedly and professionally affirmed by experts in the form of property appraisals.

The zenith of all this chivalry is the appraisal and exemplifies the brilliance of the perfect crime.

Precisely at that moment, the vaporous, phantom, wealth of debt is born. Hold on to your hats all you disenfranchised minorities, you will soon be disemboweled. The money has found you and welcomes you aboard the "American Dream".

Fast forward...

There is actually plenty of Real Estate and it never does anything but go down in value. In keeping with the state of affairs we find ourselves in; we are forced to re-examine the definition of "value".

Once upon a time, the value of something was a direct corollary to what someone would pay for it.

Not anymore. Value is defined in a cell on a spreadsheet[s] and that never budges.

Enter the Credit Default Swap.

As chivalrous as the lenders were, way back when they weren't making more Real Estate, they had a sneaky suspicion the disenfranchized minorities they tried to help were secretly chiseling deadbeats. They had to buy insurance in case they didn't pay back the captured amount in all those spreadsheet cell[s].

Buying and selling this insurance was especially lucrative and worked like a charm for a few, but was really bad for many. You see, there was never any intention by these insurance companies to actually pay, much less have the ability to pay any of these claims. The only logical and prudent thing to do, absent any other possible option, was to once again foist this on the sap of last resort, the taxpayer. And fortunately for TBTF, the taxpayers are busy pointing fingers at each other while TBTF laughs at us. Just as they correctly predicted.

Mon, 03/19/2012 - 15:23 | 2270624 HungrySeagull
HungrySeagull's picture

Step number 6

Condemn the house after it starts to rot.

The property will do much economic service after the Demo is finished.

Nuclear Demo of Fukushima in the early days would have capped the horrorshow unfolding a year later into today.

Mon, 03/19/2012 - 18:20 | 2271104 I am Jobe
I am Jobe's picture

Sheeples fools are still in ah over the fucking dream. Inbred at best in the USSA.

Mon, 03/19/2012 - 18:26 | 2271118 bugs_
bugs_'s picture

6) completely corrupt the title law underpinning so that nobody can be sure who owns what

Mon, 03/19/2012 - 18:30 | 2271131 bob_dabolina
bob_dabolina's picture


Guest Post: How To Cripple The Real-Estate Market In One Easy Step

Step One - Have the government force banks to provide loans to minorities who can't pay back the loans. Have the Federal Reserve buy those loans by printing money. Have the Federal Reserve lower interest rates to artifically low levels which will impair the incomes of people who were responsible and saved. The economy remains stagnant and inflation destroys the middle to lower classes.

Oh wait. This shit already happened.

Mon, 03/19/2012 - 18:32 | 2271137 trying to make ...
trying to make sense of it all's picture

My husband and I are in the "property and preservation" business in Florida - a glorified term for maintaining foreclosed homes in Florida. We change locks, board windows and pools, clean outs, and mow about 2000 lawns twice a month. We started our business in 2007 and were told by our client to expect 5 years of insane growth and then it will fall off.  We are now in the 5th year and we see no end in sight. Some neighborhoods are 90% bank owned. I just keep buying gold because I see first-hand how really messed up this all is.

Mon, 03/19/2012 - 18:40 | 2271158 kill switch
kill switch's picture

America when it was ??????

Mon, 03/19/2012 - 18:57 | 2271205 keep the bastar...
keep the bastards honest's picture




"Seems the U.K. didn't like the bad taste that slavery left in its mouth...."  Wish it had been so,  Flak.

The Vatican sold the Irish to england as slaves in 1110, and the english slavers went thru in the 1600's, running the irish down on horseback, roping them othether and sold shiploads... a third of them. All sold to americans  for use in the US and the islands. Lifetime slaves, irish slaves before the the english sold the longer lasting negroes. English went thru and took a 100 thousand irish kids from their families.. sold them to americans.. sex  slave anyone? The english love slavery. The irish had the legal rights of a dog in the 1890's.


Mon, 03/19/2012 - 19:00 | 2271218 The Alarmist
The Alarmist's picture

The Soviet Union had nothing on the USA ... They had massive shortages of housing because they adopted communism before building all the houses.

The overhang will clear after 70 years or so of this wave ....

Mon, 03/19/2012 - 19:10 | 2271242 California 1
California 1's picture

it's surprising how when property values were moving up and everyone was so positive that they were going to make money – – that these same people who later defaulted, made a payment like clockwork. Once the musical chairs stopped and somebody told another person that value were heading down and that their "investment" was now just costing them money – – and the federal government considered them "victims"– – they walked from their property.  Equally unusual, but typical today, is the ever fashionable strategic defaults. This ever so wonderful tactic is typically sponsored by loan modification attorneys advising their clients to stop making payments and "get noticed by the banks". Call me a cynic, but isn't it also very convenient that these folks can provide legal advice that destroys our economy, the neighborhoods that you and I live in, the valuation of all of our homes (and for those who are renting – – your rents will go up as demand for rentals are at their highest level) goes down. No slap on the hand, no scolding, no jail time, no disbarment, just plain acceptable. In other words, there is zero accountability for attorneys providing what most would consider illegal advice.  Meanwhile, these same people are now living their homes for upwards of 3 to 4 years for free. No property taxes, no insurance, very little maintenance (except the gardener) and of course no mortgage payments. Think about the person that bought the house for $500,000 put 5% down, or $25,000, later takes out a home equity line of credit for $200,000 and defaults. Just how quickly can you recoup that $25,000 that you put down by not making any payments for 3 to 4 years? Well, actually they are $175,000 the day the default (home equity line of credit).  But it's okay, they're a victim of bad banks.  Yes, for the record, the banks were stupid and greedy. But our federal government had a big part to play in why these loans were made. Of course today a selective memory is a beautiful thing. Let's immediately point fingers at everyone; appraisers, mortgage brokers, Wall Street, banks, – – not politicians. I believe they call that a red herring.

Mon, 03/19/2012 - 19:12 | 2271257 The Alarmist
The Alarmist's picture

Don't forget all the Greedy real-estate agents. Maybe they should return the commissions they pocketed.

Mon, 03/19/2012 - 22:47 | 2271901 Seasmoke
Seasmoke's picture

yes 6% commission is always better at $500,000 than $200,000

Mon, 03/19/2012 - 23:41 | 2272082 David Fiderer
David Fiderer's picture

Why was there no mention of fraud or holding those, who either  committed and enabled fraud, legally liable? Capitalism is, after all, based on the  rule of law. 

But to do that, you would need to hire lots of investigators, lawyers and judges to flesh out and remedy the problem. But those who like to whitewash criminality are so quick to holler: Socialism! Liberal bureaucrats want to destroy the free markets!

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