Wednesday, July 9, 2008

Barn door finally closing

In the finally closing the barn door after the cows are long gone department, the LA Times reported today:

On Monday, the Federal Reserve is expected to require lenders to document borrowers' incomes and verify that they can afford their mortgage payments -- including the higher payments that come when adjustable-rate loans reset.

"These new rules, which will apply to all lenders and not just banks, will address some of the problems that have surfaced in recent years in mortgage lending, especially high-cost mortgage lending," Federal Reserve Chairman Ben S. Bernanke said at a conference Tuesday.

Think of the wreckage that would have been avoided had the Fed done this, say, three years ago. And whose fault it was that they didn't.

Also, quoted widely but worth repeating:

"Many of today's unusually high number of foreclosures are not preventable," Treasury Secretary Henry M. Paulson Jr. said in a speech Tuesday. "Due to the lax credit and underwriting standards of the past years, some people took out mortgages they can't possibly afford and they will lose their homes. There is little public policymakers can, or should, do to compensate for untenable financial decisions."

33 comments:

Anonymous said...

Gee, knock me over with a feather! I would have never guessed that people were taking out loans that they actually could not afford!!!!!!

Holy ShaZZZAAMMMM, Batman!

I'm sure that this phenomenon had nothing to do with the skyrocketing RE prices of the Westside.

It's different here, you know--they aren't making anymore land.

Anonymous said...

Dudes, this door was closed long ago by the market. The Fed's proposal will just keep it shut. But the bears can't credibly point to this as a change that will affect the Westside above and beyond the effects of the credit crisis over the past 6 to 9 months.

Anonymous said...

"But the bears can't credibly point to this as a change that will affect the Westside above and beyond the effects of the credit crisis over the past 6 to 9 months."

How are sales volumes on the westside over the past 6-9 months compared with the previous year, dude? And remind me again, what happens shortly after sales volume falls off a cliff?

Anonymous said...

Dude, inventory has not ramped like it has in areas where prices have dropped.

Anonymous said...

Stuff like this just further hits the affordability issue in the nuts. It'll help pull the market south.

Anonymous said...

Try answering the question next time, dude.

Anonymous said...

Hey DUDE, you're a dumb@ss--like man, it's obvious that the market has tanked.

Over 1 TRILLION dollars has gone POOF in just the financial industry--that's like a lot more money than a million dollars!

Like, you know, that's more money than I get for my allowance each week.

Anonymous said...

And in related news, the Fed never had and still doesn't possess any legal authority to regulate loans.

The basic point is still true, it's just that Congress that should have closed that door long, long ago.

Anonymous said...

It's a bit off topic but saw an interesting foreclosure stats for SM on the MB Confidential blog:

http://tinyurl.com/56k9vb

tbgpalisades said...

Fortunately, on the west side, everyone can easily afford their mortgages - most of the buyers in the last few years have been paying cash, and have been up against multiple bids. Still lots of pent-up demand, to boot. 8% - 10% gain is in the bag for this year alone. A realtor told me so.

Anonymous said...

Everyone, don't take the bait.

Genius said...

"And in related news, the Fed never had and still doesn't possess any legal authority to regulate loans."

THANK YOU. Not that they don't still own the country, but I don't know who they think granted them legislative powers.

Anonymous said...

"the Fed never had and still doesn't possess any legal authority to regulate loans."

i think the bigger question is whether the local council has the power to regulate the homeless.

why is everybody afraid of this topic. if the homeless are allowed to go on with the killing and crime what will happen then?

who cares about the fed when the police can't ever protect us in our homes.

Anonymous said...

i think that last poster was a troll . don't respond

Anonymous said...

it seems to me, looking at the foreclosure stats that there are plenty of foreclosures in the canyon 90402 but almost none in the "flat" part of the 90402

anyone know the reason for this ? i always heard that the canyon had more entertainment industry types and the flat part had more business people

Westside Bubble said...

i think the bigger question is whether the local council has the power to regulate the homeless.

i think that last poster was a troll . don't respond

To bring this blog back on topic, and not crowd out everyone who is here to talk about Westside real estate, comments about homelessness have been closed. (Can't be anything still unsaid anyway.)

Mr.Mortgage said...

When the Power Goes Out and Other Lessons.
http://thegreatloanblog.blogspot.com

Keep up the great work! Daily read for me.

Anonymous said...

Fannie Mae and Freddie Mac are doomed and it seems that this ship might sink faster than the Titanic:

NYT:
"...The companies are by far the biggest providers of financing for domestic home loans. If they are unable to borrow, they will not be able to buy mortgages from commercial lenders. In turn, that would make it more expensive and difficult, if not impossible, for home buyers to obtain credit, freezing the United States housing market. Even healthy banks are reluctant to tie up scarce capital by offering mortgages to low-risk home buyers without Fannie and Freddie taking the loans off their books.

Together the two companies touch more than half of the nation’s $12 trillion in mortgages by either owning them or backing them. They hold more than $1.5 trillion of the mortgages as securities. Others are sold to investors in the form of mortgage-backed bonds"...

This could get real ugly really fast.

Of course 90402 will not be affected because everyone who buys there uses cash!

Considering the fact that a lot of people were saying rather recently that there was NO HOUSING BUBBLE, I think that any RE bull today is full of BULL.

Come on everyone, what's the big deal if FANNIE MAE and FREDDIE MAC go insolvent? I'm sure that all of the high paying paper pusher jobs all around America won't be affected. There's plenty of available credit to buy overpriced real estate in SM without Fannie and Freddie!

Anonymous said...

How many loans on 90402 houses do you think involve Fannie or Freddie?

Anonymous said...

--"How many loans on 90402 houses do you think involve Fannie or Freddie?"--

How many banks rely on Fannie or Freddie?

Do 90402 loans come from banks that could less whether Fannie or Freddie went insolvent?

Anonymous said...

Could future buyers of 90402 houses find lenders for jumbo mortgages? Seems so, even if the lenders are not the same lenders as yesterday. The Fannie/Freddie problems will affect some banks more than others. The surviving banks will make loans to credit-worthy buyers in 90402. Just as it always was.

Anonymous said...

Well I guess the opinion here is that even after the entire housing market collapses, 90402 will emerge with its inflated values intact.

It's like Wile E Coyote in the Roadrunner cartoons--Wile E's gigantic house is being held up with one toothpick high above the desert after all the land around him has washed away.

And then the roadrunner comes by and takes the toothpick out.....

Who said a sucker wasn't born every minute.

Anonymous said...

Ridicule if you must, but so far so good in 90402, while remote locations see 40%+ declines, SFRs in 90405 show some weakness, and condos in 90403 edge back a bit. As time goes on and 90402 holds despite damage elsewhere, it becomes more a more likely that the decrease you are looking for will not happen.

Anonymous said...

"As time goes on and 90402 holds despite damage elsewhere, it becomes more a more likely that the decrease you are looking for will not happen."

You're kidding right... the entire US finacial system is coming apart at the seams. Better start building a wall around 90402. And you might want to start your own economy as well. Oh, Hope noone had too much money at IndyMac bank. Gone. On deck... WAMU?

Anonymous said...

Well, other high end areas like Manhattan are doing just fine

look, some demographic groups are doing just fine right now

not all areas will be impacted the same way.

if you think north of montana is going to go down, then don't buy there right now. wait

Anonymous said...

>>>"LOS ANGELES -- IndyMac Bank's assets were seized by federal regulators on Friday after the mortgage lender succumbed to the pressures of tighter credit, tumbling home prices and rising foreclosures.

The bank is the largest regulated thrift to fail and the second largest financial institution to close in U.S. history, regulators said.

The Office of Thrift Supervision said it transferred IndyMac's operations to the Federal Deposit Insurance Corporation because it did not think the lender could meet its depositors' demands.
IndyMac customers with funds in the bank were limited to taking out money via automated teller machines over the weekend, debit card transactions or checks, regulators said. "<<<<

This is really bad news. Good grief! Things are beginning to spiral out of control.

I think that the question about how much RE prices will fall is completely irrelevant now.

The issue is how bad will the damage be to the U.S. economy. If energy prices continue at anywhere near the present levels, you will see an acceleration of the crash.

The airline industry is on life support. Travel related businesses are going to feel more heat--I'd hate to be in the cruise line business right now.

You idiots that think that the HYPERINFLATED prices of S.M., particularly 90402, will withstand this crash are completely delusional.

The hyperinflated prices of 90402 were the result of the bubble--the bubble was built on a house of cards. There is NO confidence in the value of RE anymore.

It's gone POOF!

All the cheap credit is gone. The pyramid scheme has collapsed because there isn't any money and there are no speculators entering at the bottom.

Now, the folks who bought homes in 90402 recently can just sit out this mess--they'd better be prepared to wait a LONG time.

Prices are going to fall to pre-bubble levels.

Anonymous said...

Stop hyperventilating and look around you. Buyers are still hunting in 90402 and are still making offers. Your prediction is just that, a guess at the future. But the bears have been wrong so far on 90402.

Anonymous said...

Hahhahahhhhaaa....I love the 'stop hyperventilating part'

ilovewestsidebubbleguy said...

Whose fault is the mortgage crisis?

NEWS: Years before Phil Gramm was a McCain campaign adviser and a lobbyist for a Swiss bank at the center of the housing credit crisis, he pulled a sly maneuver in the Senate that helped create today's subprime meltdown.

http://www.motherjones.com/news/feature/2008/07/foreclosure-phil.html

Who's to blame for the biggest financial catastrophe of our time? There are plenty of culprits, but one candidate for lead perp is former Sen. Phil Gramm. Eight years ago, as part of a decades-long anti-regulatory crusade, Gramm pulled a sly legislative maneuver that greased the way to the multibillion-dollar subprime meltdown. Yet has Gramm been banished from the corridors of power? Reviled as the villain who bankrupted Middle America? Hardly. Now a well-paid executive at a Swiss bank, Gramm cochairs Sen. John McCain's presidential campaign and advises the Republican candidate on economic matters. He's been mentioned as a possible Treasury secretary should McCain win. That's right: A guy who helped screw up the global financial system could end up in charge of US economic policy. Talk about a market failure.

Anonymous said...

if 90402 teardowns come down in price then buyers will just buy two next to each other

lower prices in 90402 mean more lot combinations

and bigger houses

bernard n. shull said...
This comment has been removed by a blog administrator.
Anonymous said...

what does canadian pharmaceutical products have to do with the rush of people to buy multiple lots in 90402?

Anonymous said...

it's Canadin, not Canadian. Totally different.