Tag Archives: housing bubble

Obama wants banks to make home loans to people with poor credit

my work here is done
If you need more evidence of Obama being a psychopath, here it is.
Recall the Great Recession that began in 2008 was in large part due to the bursting of the housing bubble. That bubble, in turn, was caused by risky mortgage lending to too many people whose financial profiles make them poor candidates for loans.
Today, five years after the collapse of the housing market and contrary to the insistence that the market is “recovering,” the U.S. landscape is still littered with 301,874 “zombie” properties in which homeowners in foreclosure have moved out, leaving vacant  property susceptible to vandalism and degradation. The number of U.S. homes in foreclosure or bank-owned actually increased by 9% to 1.5 million properties nationally in the first quarter of 2013 compared to a year ago, while another 10.9 million homeowners nationwide are “under water” because they owe more than their property is worth. (See DCG’s post of March 28, “Obama’s New America….“)

houses-underwaterNearly 11 million U.S. homes are still under water

And yet the POS is pushing to make more home loans available to people with weak credit, which was exactly what had created the housing bubble and its subsequent bursting!
What if those people default on their mortgages?
Why, the 49% of hard-working Americans suckers who still pay income taxes will make up the difference! That’s wealth redistribution socialism, bro!
Zachary A. Goldfarb reports for The Washington Post, April 2, 2013, that Obama pledged in his State of the Union address to do more to make sure more Americans can enjoy the benefits of the housing recovery. His  economic advisers say the housing rebound is leaving too many people behind, including young people looking to buy their first homes and individuals with credit records weakened by the recession.

In response, the Obama administration wants banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administrationthat insure home loans against default.Housing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default.Deciding which borrowers get loans might seem like something that should be left up to the private market. But since the financial crisis in 2008, the government has shaped most of the housing market, insuring between 80% and 90% of all new loans, according to the industry publication Inside Mortgage Finance. It has done so primarily through the Federal Housing Administration, which is part of the executive branch, and taxpayer-backed mortgage giants Fannie Mae and Freddie Mac, run by an independent regulator.The FHA historically has been dedicated to making homeownership affordable for people of moderate means. Under FHA terms, a borrower can get a home loan with a credit score as low as 500 or a down payment as small as 3.5%. If borrowers with FHA loans default on their payments, taxpayers are on the line — a guarantee that should provide confidence to banks to lend.
But banks are largely rejecting the lower end of the scale, and the average credit score on FHA loans has stood at about 700. After years of intensifying investigations into wrongdoing in mortgage lending, banks are concerned that they will be held responsible if borrowers cannot pay. Under some circumstances, the FHA can retract its insurance or take other legal action to penalize banks when loans default.
“The financial risk of just one mistake has just become so high that lenders are playing it very, very safe, and many qualified borrowers are paying the price,” said David Stevens, Obama’s former FHA commissioner and now the chief executive of the Mortgage Bankers Association.
But critics say encouraging banks to lend as broadly as the administration hopes will sow the seeds of another housing disaster and endanger taxpayer dollars. “If that were to come to pass, that would open the floodgates to highly excessive risk and would send us right back on the same path we were just trying to recover from,” said Ed Pinto, a resident fellow at the American Enterprise Institute and former top executive at mortgage giant Fannie Mae.
But Administration officials say they are looking only to allay unnecessary hesi­ta­tion among banks and encourage safe lending to borrowers who have the financial wherewithal to pay. An unnamed senior administration official who was not authorized to speak on the record said, “There’s always a tension that you have to take seriously between providing clarity and rules of the road and not giving any opportunity to restart the kind of irresponsible lending that we saw in the mid-2000s.”
Blah, blah, blah.
H/t FOTM’s Christy.
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Ode to Barney Frank

November 28, 2011, was a sad day for America.
After 16 terms and 30 years in the U.S. House of Representatives, Massachusetts Democrat Congressman Barney Frank announced he’s retiring and won’t be seeking reelection next year.
As the ranking minority member and then Chairman (2007-2011) of the powerful House Financial Services Committee, Frank not only was lax in overseeing the liberal lending policies of Fannie Mae and Freddie Mac — policies that led to the bursting of the housing bubble and the subprime mortgage crisis that began in 2007. Frank actively encouraged Fannie and Freddie’s loose lending policy, insisting in 2003 that: “These two entities …are not facing any kind of financial crisis … The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”
As a modest token of our gratitude for his service to America, We the Taxpayers sing this song of praise to Barney Frank:
H/t our beloved Miss May.

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U.S. Housing Prices Heading for a Third Dip

Homes under water

America’s battered housing market is heading for a triple-dip and has even further to fall before home prices really hit rock bottom, reports Les Christie for CNNMoney, Oct. 31, 2011.
According to Fiserv (FISV), a financial analytics company, home values are expected to fall another 3.6% by next June, pushing them to a new low of 35% below the peak reached in early 2006. That means if you had bought a house in 2006 for $300,000, your house will be worth only $195,000 next year.
Several factors will be working against the housing market in the upcoming months, including an increase in foreclosure activity and sustained high unemployment, explained David Stiff, Fiserv’s chief economist.
Should home values meet Fiserv’s expectations, it would make it the third (and lowest) trough for home prices since the housing bubble burst.
The first post-bubble bottom was hit in 2009, when prices fell to 31% below peak. The First-Time Homebuyer Credit helped perk prices up by mid-2010, but by the time the credit expired, prices fell again.
In the second dip, which was reached last winter, prices were down 33% before staging a mild rally that was artificially spurred as banks slowed the processing of foreclosures following the robo-signing scandal, which found that loan servicers were rapidly signing foreclosures without properly vetting them.
Now that the scandal is mostly resolved, lenders are speeding more cases through the foreclosure pipeline and back onto the market, weighing on home prices even further.
Earlier this month, RealtyTrac reported the first quarterly increase in foreclosure filings in three quarters. Even more discouraging: new default notices were up 14%.
There’s also a “shadow inventory” of homes in foreclosure that have yet to go back onto the market.
The specter that those foreclosed homes could flood the market at any time and drive prices significantly lower is a huge concern, said Mark Dotzour, an economist for Texas A&M University. “That’s the elephant in the room,” he said, noting that there are 6 million home currently in shadow inventory.
Many of the regions that will be hardest hit were already beaten up during the previous two dips:

  • Naples, Fla., for example, is expected to take the biggest hit of any metro area, a price drop of another 18.9% by the end of next June, according to Fiserv. Home prices in the area have already fallen 61% from the peak.
  • Las Vegas is expected to see home prices fall another 15.9% for a total loss of 66%; Riverside, Calif., is projected to fall another 14.8% (for a total decline of 61%); Miami is expected to decline by 13.2% (total loss: 57%), and Salinas, Calif. could drop by another 13% (for a total loss of 66%).

There will be some winners, however, led by Madera, Calif. and Carson City, Nev., which will each gain 15.5%. That’s some consolation for hard-hit residents: The average home in each of these metro areas has lost more than half its value. Other metro areas Fiserv expects to recover nicely are Yuma, Ariz. (up 9.5%), Yuba City, Calif. (9.2%) and Farmington, N.M. (8.3%).
Even after the housing market begins its comeback in mid-2012, the recovery is predicted to be modest at best. Nationwide, Fiserv is projecting that home prices will climb just 2.4% between June 2012 and June 2013.
The biggest winners are expected to be:

  • Ocala, Fla., with a 22.4% spike for the 12 months ending June 30, 2013. Ocala was one of the hardest hit communities in the U.S. over the past several years, with home prices falling some 50%.
  • Napa, Calif., which Fiserv projects will improve by 20.9% over that same period.
  • Panama City, Fla. (an estimated 18.2% jump).
  • Bremerton, Wash. and Carson City, Nev. (both expected to see home prices climb 17.9%).

Some cities will continue to fade:

  • Fort Lauderdale, Fla.’s forecast is for a 9.2% drop through next June and another 6.7% the 12 months after that.
  • Miami will endure 13.5% and 5.2% declines, respectively


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Global Debt – Cancer That's Metastasized

Metastasis [mətas′təsis] pl. metastases:

An active process by which tumor cells move from the primary location of a cancer by severing connections from the original cell group and establishing remote colonies. Because malignant tumors have no enclosing capsule, cells may escape, become emboli, and be transported by the lymphatic circulation or the bloodstream to implant in lymph nodes and other organs far from the primary tumor.

From “When Debt Levels Turn Cancerous,” an op-ed in the UK’s Telegraph, by Ambrose Evans-Pritchard, August 31, 2011.

Now we know where the tipping point lies. Debt becomes poisonous once it reaches 80% to 100% of GDP for governments, 90% of GDP for companies, and 85% of GDP for households. From then on, extra debt chokes growth.

Stephen Cecchetti and his team at the Bank for International Settlements [BIS] have written the definitive paper rebutting the pied pipers of ever-escalating credit. “The debt problems facing advanced economies are even worse than we thought.”

The basic facts are that combined debt in the rich club has risen from 165% of GDP thirty years ago to 310% today, led by Japan at 456% and Portugal at 363%.

“Debt is rising to points that are above anything we have seen, except during major wars. Public debt ratios are currently on an explosive path in a number of countries. These countries will need to implement drastic policy changes. Stabilization might not be enough.”

Demographic atrophy and aging costs will make this even nastier. “Rising dependency ratios put further downward pressure on trend growth, over and above the negative effects of debt.” […]

Below is a downright frightening table of debt-as-%-of-GDP of the OECD (Organization for Economic Cooperation & Development) countries:

While the United States has one of the lower combined debts at 268% of GDP, our debt level still exceeds the 80-100% level when debt becomes a metastasized cancer, choking off economic growth. The latest Labor Dept statistics for the month of August are evidence of the metastasis: Employers added no net jobs and the jobless rate remains stuck at an official 9.1% (the unofficial unemployment rate is much higher, in double digits).
Evans-Pritchard concludes that not all debt should be demonized: “Used wisely and in moderation, it clearly improves welfare. But, when it is used imprudently and in excess, the result can be disaster. And disaster we have. We must prepare for a long hard slog, for the rest of my life and yours.”
Read the full op-ed, here.
Read the BIS report on the global debt problem, here.

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11% of U.S. Houses Sit Empty

Sure doesn’t look at an economic recovery to me!
But then I don’t work for the Fraud’s administration.  😉

Nearly 11 Percent of US Houses Empty
By Diana Olick – CNBC – Jan 31, 2011

America’s home ownership rate, after holding steady for a while, took a pretty big plunge in Q4, from 66.9 percent to 66.5 percent. That’s down from the 2004 peak of 69.2 percent and the lowest level since 1998.
Homeownership is falling at an alarming pace, despite the fact that home prices have fallen, affordability is much improved and inventories of new and existing homes are still running quite high.
Bargains abound, but few are interested or eligible to take advantage.
More concerning than the home ownership rate is the vacancy rate. The Census tables don’t tell the entire story, but they tell a lot of it. Of the nearly 131 million housing units in this country, 112.5 million are occupied. 74.8 million are owned, and that’s only dropped by about 30 thousand in the past year. 38 million are rented, but that’s up by over a million year over year. That means more new households are choosing to rent.
Now to vacancies. There were 18.4 million vacant homes in the U.S. in Q4 ’10 (11 percent of all housing units vacant all year round), which is actually an improvement of 427,000 from a year ago, but not for the reasons you’d think.
The number of vacant homes for rent fell by 493 thousand, as rental demand rose. 471,000 homes are listed as “Held off Market” about half for temporary use, but the other half are likely foreclosures. And no, the shadow inventory isn’t just 200,000, it’s far higher than that.
So think about it. Eleven percent of the houses in America are empty. This as builders start to get more bullish, and renting apartments becomes ever more popular. Vacancies in the apartment sector have been falling steadily and dramatically, why? Because we’re still recovering emotionally from the toll of the housing crash.
Younger Americans have seen what home ownership has done to their friends and families, and many want no part of it. Credit has become very nearly elitist. Home prices, whatever your particular data provider preference might be, are still falling.

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