Wednesday, December 05, 2007

"HillaryCare For Housing"

From the Sacramento Bee [updated link]:

The Elk Grove Unified School District may experience declining enrollment next year, said Richard Odegaard, the district's chief financial officer, at Tuesday night's board meeting..."It looks like we might have a double whammy: a declining enrollment district with declining state funds," Odegaard said.
...
[Updated] School officials, who sounded the warning bell at Tuesday night's board meeting, blame the housing slump for the potential decline – the district's first since it formed in 1959. "It's the first time anyone of us can remember 'declining enrollment' being in our vocabulary in this district," board member Priscilla Cox said Tuesday.
From the Modesto Bee:
While the economy sputters along amid falling home prices, higher unemployment and tight credit, one sector of retail is reporting a surge in consumer interest. Employees at thrift stores and secondhand shops say they're seeing more customers these days, as the regular bargain hunters are joined by people who have become more cost conscious.
...
Bob Van Hoffwegen, store manager of Priceless Treasures thrift store in Modesto, says he noticed an uptick in business that has mirrored the surge in home foreclosures and the drop in home sales. "There's been quite a rise since midsummer," Van Hoffwegen said of the store....
From the Stockton Record:
Joe Anfuso, president and chief executive officer of Stockton-based Florsheim Homes, said that although lower interest rates will be a positive force when the residential market settles down, they aren't affecting the new home-sales market at all now. Actually, pricing isn't either, he said. It's "buyers' psychology," which continues to be negative about home buying so long as prices continue to drop, he said. "It's really more the fear of: If I'm buying today, are prices going down tomorrow?" Anfuso said. "There's no sense of urgency."
From the Irvine Housing Blog (hat tip patrick.net):
Once the pool of buyers is exhausted and the volume of buying declines, prices stop rising, and the belief in future price increases diminishes. When the remaining potential buyers no longer believe in future price increases, the primary motivating factor to purchase is eliminated; Prices fall. The temporary rise and fall of asset prices is the defining characteristic of a bubble.
From National Review:
If you thought Hillary Clinton’s government takeover plan for health care was bad, wait ‘til you see what she has in store for the housing sector. As always with the Clintons, the market is the problem and Big Nanny is the solution. Unfortunately for taxpayers, Hillary has bipartisan company in the Bush administration on this issue. Their election season prescription? Rewarding bad behavior. Punishing responsible behavior. Doing more harm than good.
...
Instead of letting lenders and subprime mortgage-holders suffer the consequences of their actions, politicians and grievance-mongers are riding to the supposed rescue. In a supreme irony, the very same champions of the needy in the Democrat party who complain constantly about the lack of “affordable housing” are now fighting tooth and nail to keep housing prices high.
...
Fiscal conservatives ought to be balking at HillaryCare for housing. But President Bush’s treasury secretary, Hank Paulson, is singing a similar tune...Lawmakers on both sides of the aisle are colluding to protect the reckless and keep home prices high on the backs of prudent taxpayers. Who’ll bail us out from this perversion of the American Dream?
From the L.A. Land blog:
A poll by the LATimes and Bloomberg reports that 58% of those surveyed say sub-prime lenders should freeze interest rates for sub-prime borrowers.

29 comments:

rocklin renter said...

Is anyone seriously voting for Clinton?

I mean, when you are put in front of that ballot, could anyone really pull the lever for her?

I am neither D or R but she is so damn abrasive you'd think she was made out of 40 grit.

Diggin Deeper said...

As usual the Govt is late to the party and is handing out party favors to a crowd that's already hungover to begin with. If this bailout moves forward, I'm taking full advantage all the cheap resources that I can. I'm not getting left behind when there's a gift waiting for me at the end of this rainbow...

Diggin Deeper said...

If she does get elected, I just hope we don't have to spend taxpayer's money trying to define the word "it" again.

Gwynster said...

I watched the senate hearing during lunch. There was talk about using the bankruptcy court hearing platform as a model for determining affordability. I'm assuming there were also talking about payment structure requirements like Ch 13 as well - no cell phone, no cable TV, sell the lexus and drive a beater car, etc.

This is looking like something I could almost get behind! J6P will walk long before he ever agrees to that >; )

Diggin Deeper said...

Gwyn, do you really want the courts to get involved? Maybe there was talk about streamlining, but can you imagine over a million hearings? What about appeals for those that get turned down? Damn, Who gets the bill?

Gwynster said...

Digg,

I don't ever think it would get to that point. People are thinking this will be easy money and it will be a complete nightmare.

It's a non-starter. It's almost as if Paulson wants to scare them into walking away.

alba said...

When government had their hand in creating the problem, they're hardly late to the game. They are forever late to fix their mistakes though. And which mistakes they attempt to fix will clearly come at a price to those impacted the most...homeowners.

Government IS involved. Its a just a matter of degree, and who they're helping, and when.

Whether its Hillary or whomever, the paying constituent (financial institutions) will get the help they need...not you/us schmucks.

Patient Renter said...

That LA Times poll leads me to believe that "58%" of those polled seem to be unaware that a freeze will have a net negative effect on them, and a positive effect for lenders. Or maybe they think lenders are just really nice people and are offering up a freeze out of the kindness of their hearts? lol.

Cmyst said...

1. No one I've talked to supports Clinton. I find it just as suspicious that she is the presumptive next Prez as I did that Bush won in Ohio and Florida.
2. That being said, the National Review should worry about their own political miscreants before taking shots at Clinton. She AIN'T the Prez, and it isn't her administration attempting a bailout currently. The pot isn't only calling the kettle black, here, but it's ignoring the fact that the kettle is sitting on the counter and the pot is hanging over the cookfire.
3. This is not going to help much. As Gwyn pointed out, people are not going to give up all their toys and perks in order to keep their houses. As Ditech reminds us, people are smart (greedy bastiches). It's clear that housing prices will only be lower in 5 years, they still won't have equity, and they're not likely to be making more money. A lot of this whining and crying in the media is only so they can deflect the blame for "losing" onto someone else and save face.

Perfect Storm said...

Citys that make loans to low income individuals use funds allocated to them from the federal government to make bridge loans so that these people can qualify for some other crappy loan. So the City basically is in second position and only charges 3% on the loan and the kicker is that most people do not even have to make a payment until they sell the home, yep that is your tax money at work. Now they want Cities to issue muni debt and charge what interest rate to the borrower 3% again and pay 6% or more to the dumb ass who actually buys the muni debt. WHO DO YOU THINK WILL MAKE UP THE DIFFERENCE THE TAXPAYER SHMUCK LIKE YOU AND I HATE BUSH AND THAT FREAK TREASURY PUNK PAULSON!

alba said...

the beginning of the end...and don't forget, W and Paulson are the implementers, not Dems nor Hillary.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a6kfa.n46Obo&refer=home

wrong moves said...

The bailout plan also assumes that the debtor wants to keep paying some percent on an interest only debt or what ever other nefarious term they hold. They may see their "investment" tanking and decide just to walk.

The administration of any bailout could very well cost us more than any benefit to the debtors.

Diggin Deeper said...

It will be interesting to see just how many subprime holders qualify for the bailout. Reports I've read recently state that 30% of all subprime loans are in some stage of foreclosure, today. I maintain that YTD non-discretionary costs for food and energy, rising 7% and 16% respectively, will take out a good portion of those in the 650 FICO and below target group.

Those that do get bailed out will become part of a pool of high risk notes that get carved up and repackaged for sale to investors. Hmmmmm...haven't we just gone through this recently? Everyone just assumes that investors will be lining up to buy this debt. I'm not so sure. How many times can you fool them before they turn a blind eye to your offer? The only way it works is if Fannie and Freddie step in and buy up all the junk. Trouble is they're as close to broke as the rest of the financials.

alba said...

The acknowledgement is the key. The real chess match begins when a few pawns have left the board. The financial institutions now have a target, or an identified fault, to leverage when exposing their true risky (bad) debt. If you can't buy/sell your investments (who'd want them?), and they are frozen assets, then you have grounds to expose your liabilities and blame the government. Paulson is not watching out for those few bad loans, he's forging a path for the financial institutions.

ralphk said...

This requires "proof" that you can't afford the adjusted payment. How many will be willing to come forward on their liar loans??

This is feel good legislation. Notice the time span...5 years. One year of Bush and 4 years for the new administration (Dem or Rep) and possibly into the next term.

It's also a way to keep these "performing" loans from being marked down to true market value. A continuation of the cover up. A small bandaid on a wind sucking chest wound.

They currently use the fed government (IRS) cost of living
guidelines. That's why so few people in California are forced into Chapter 13 BK. The cost of living is so high in California that the revised BK Code had little effect on filers.

I think when they look at the income, mortgage payments, food and other necessary living expenses we'll find that most of these people shouldn't have bought in the first place. Regardless of the interest rate.

aggiealum said...

Here's an interesting read about housing and CDO's, Goldman Sachs and Hank...


http://www.nytimes.com/2007/12/02/business/02every.html?ei=5088&en=cb27663f771ef3d3&ex=1354251600&adxnnl=1&partner=rssnyt&emc=rss&adxnnlx=1196962349-axR1cb8T7MyR9TJiixxBxw

Diggin Deeper said...

"The financial institutions now have a target, or an identified fault, to leverage when exposing their true risky (bad) debt."

Interesting point... Let me see if I get where you're going here.

If true, then the off balance sheet tier 3 crap could be recast with this new debt. No major financial has tried to sell their CDO's and SIV's for fear buyers would establish a market price so low, that it would force them to take losses they can't afford to take.

Is that what you're saying?

ralphk...exactly. I kind of doubt any more than 20% of applicants will get bailed out, and of those, many will be pressured to opt out due to influences beyond their control.

aggiealum said...

Sorry, don't know how to do links correctly, but if you go to NYTimes.com and search "the long and short of it at goldman sachs," by Ben Stein, that's the article I was trying to link.

Diggin Deeper said...

Quite the interesting article...Goldman Sachs, while Paulson was CEO, crafted most of the junk that was marked to model, sold it, knowing full well, it was a bad product, then shorted the product to make money on the backs of the fools that went broke. What a way to get the last dime out of your clients...

Diggin Deeper said...

Bush Subprime Plan: Too Much or Too Little?

http://www.thestreet.com/_yahoo/markets/marketfeatures/10393249.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

Probably the best article I've read so far on the "plan"

Some exerpts:

"Andrew Laperriere of Washington's ISI Group commented in The Wall Street Journal that any bailout would be misguided: "The primary reason for the spike in subprime delinquencies so far is that many subprime borrowers have taken on more debt than they can pay back using any reasonable interest rate."

"Thus, the plan appears to be no plan at all. It would at best place the onus on mortgage lenders to create greater flexibility in the short term, but it provides no solution at all to the long term problem. Speculative mortgages need to be reworked into safer vehicles"

"Given that mortgages are a contract, there's a larger problem here. How do we get the two parties together to agree to these modifications? Mortgages are often repackaged and then sold off to investors. How would the government get all of these investors into a room to make this decision?"

aggiealum said...

Here's my thought on the "Freeze."

1) buys time for distressed homeowners to sell for a loss

2) "they" know something we don't (ie housing will turn to the upside within 5 years allowing refis into more conservative loans)

3) smoke and mirrors b/c it's election year

#1 is highly unlikely b/c these "victims" will not see this as a chance for them to sell at a loss, rather than lose their home. They will sit in their home celebrating by buying another plasma or Caddy.

#2 is just a conspiracy theory of course

#3 is my pick for the most likely case.

SacramentoCrash said...
This comment has been removed by a blog administrator.
SacramentoCrash said...

This administration is like a bunch of fools rearranging the deck chairs on the Titanic

ralphk said...

From an industry e-letter:

Auto loan delinquencies are on the rise – explosively so, according to some sources -- The Wall Street Journal reported today.

The Journal reported that 4.5 percent of all auto loans made in 2006 to prime borrowers were delinquent in September, up more than 55 percent from the end of August, according to an analysis from Lehman Brothers. The rise was the largest monthly increase in eight years.

Note it says PRIME borrowers. Folks, this isn't contained. What are the politicians going to do about this? Free gas for 5 years?

Diggin Deeper said...

Just wait until the commercial real estate paper starts to crack...we don't hear much about it but it's layered with the same toxic koolaid the majors are forced to drink. Most of the damage will hit the smaller regional banks that do not have the cushion money center banks do.

Stay tuned...

alba said...

Diggin,
I'm not knowledgeable enough to understand how this small set of loans will impact the tier 3 crap.

The administration had to make a move. They fixed very little, for a small subset of mortgages. This in itself doesn't provide any transparency to the bad paper the financials institutions hold. The administration acknowledged foreclosures produce the largest losses for INVESTORS. And W said we should not bail out the lenders.
Paulson said this was just the first step.

The outcome of opt ARMs can't sink our economy. But we have officially entered into a period where the overall health of our economy is at stake.

Rather than analyze this first move, and the implications or consequences of this move, what comes next?

Diggin Deeper said...

"This in itself doesn't provide any transparency to the bad paper the financials institutions hold."

There's no such thing as transparency with this s**t. You can't value it, no one will buy it, and you don't even know that it's not performing until the cashflow stops and it fails overnight. I'd rather take my chances in an Iraqi minefield.

Isn't it interesting that not one bank publically balked, questioned, argued, or queried how this bailout would work? Hell, they're the ones holding the poison. Not one bit of arm twisting was openly noted. Isn't it odd that the banks just rolled over and took whatever was shot out of the govt cannon?

It ought to raise a red flag...

I think what it's telling us is the severity of the problem has forced the financial system to either capitulate or suffer the consequences...and I'm not so sure that failure won't occur because of it. As you said, the subset is so small it's not likely to amount to much.

I agree that Opt Arms will not sink the economy. By itself and contained within the context of subprime, it doesn't seem likely. However, wall street tinkered, magnified, and reconcentrated the problem, then packaged it for worldwide distribtuion. That opened the scope and upped the anty.

Let's not forget there were "too big to fail" companies in the last bubble, and some of those went down because they had no choice.

alba said...

I'm with you all the way. I just meant to say we need to worry about altA, piggy-backs, and prime loans; and not OptARMS to folks who should not have them in the first place.

norcaljeff said...

What a joke? So all those subprimers in Lincoln Crossing, Natomas, EG, Laguna, Vegas, Florida, Stockton, Detroit, etc who purchased SUVs, cars, vacations and boats with their fake equity and are underwater with their mortgage now get to keep all their toys plus get their teaser rates frozen? What a joke. Kinda like putting your kid on time out. How will they learn? The rest of us got f'd. Oh well, they will pay evenually, or at least we'll pay again in a few years when their POS house is still worthless. They are only delaying the problem. We just won't have the crash we needed to correct this problem.