Saturday, May 14, 2005

Lending Standards Fall At FHA

This blog has long maintained that the lowering of lending standards is a desperate attempt to stave off a correction. Case in point; the FHA is aggressively going after the subprime market. "Secretary Alphonso Jackson has a request for potential first-time home buyers, especially those with limited or imperfect credit histories: When you shop for a home this spring or summer, take a hard look at the new, consumer-friendly breed of FHA mortgages now rolling into the marketplace."

The packages are crazy, of course, as the money guys push more cash at borrowers. Still, a few downsides to subprime loans are mentioned.

"Be wary of the higher rates, fees and penalties that often come with loans in the subprime market..Some subprime servicers have little or no financial or legal incentives to step in and work with delinquent borrowers..Subprime loans often impose heavy early-payoff fees."

31 Comments:

At 6:51 PM, Blogger Melody said...

http://www.siliconinvestor.com/readmsg.aspx?msgid=21323527


Great read!!!

 
At 6:53 PM, Blogger Melody said...

Two interesting statistics from Bill Fleckenstein.

1.) In 2001 only 2% of new mortgages in California were Interest-Only. In 2004 this rose to 49%.

2.) In 2004 proceeds from Cash-out refinancing, and Home-equity line-of-credit, accounted for 77% of total U.S. consumption.

 
At 6:57 PM, Blogger Melody said...

Investigators: Greed and lies in the housing market
11:37 AM PDT on Tuesday, May 3, 2005

By SUSANNAH FRAME / KING 5 News

SEATTLE - Ekram Almussa and Josh Kebede are successful real estate investors. Perhaps too successful.

After a seven-month investigation, the KING 5 Investigators uncovered a home selling scheme that Almussa and Kebede are at the center of.

They made hundreds of thousands of dollars, sometimes in a matter of hours, in a scheme that may only have added to already soaring property values in Western Washington.

Almussa and Kebede bought and sold homes in Seattle and on the Eastside for unbelievable profits.

In 2003 realtor Tracy Setzer sold them a home in Kirkland for $240,000. They re-sold it the next day for $280,000, pocketing a quick $40,000.

We showed Setzer what happened.

"I'm boggled! I can't believe that it is just sitting here in front of me. I was so shocked when you called me, how do you do that?! … He had to have someone working with him," she said.

In fact, the KING 5 Investigators found 15 of their deals in the last year, where the money kept getting better.

Ekram Almussa and Josh Kebede made hundreds of thousands of dollars, sometimes in a matter of hours, in a scheme that may only have added to already soaring property values in Western Washington.

The pair bought another home in Kenmore for $383,000. They immediately re-sold it for $483,000, a $100,000 profit in one day.

And after snapping a home on 83rd Place Northeast in Kirkland, they re-sold it the same day for $182,500 more.

What's their secret? How do you make that kind of money so fast?

The KING 5 Investigators found lies, payoffs, and falsified documents helped get them to the top.

Here's how the scheme works:

Almussa or Kebede buy a home like one they bought in Bellevue for $315,000.

They hire an appraiser -- the same person in nearly every case -- who suspiciously finds the property is worth much more, $415,000.

To keep their names off the deed, Almussa and Kebede need a buyer, but not just anyone, a person known as a "straw buyer" who's paid to pretend to be the new owner.

The manipulated information is sent to the bank, where they sign off.

The difference between the purchase and sale price, in this case $100,000, goes right from the bank into the pockets of the two that started it all.

On paper, the homes all belong to the straw buyers, but they're at the mercy of Kebede and Almussa, who promise to pay the mortgage.

We've found many payments are coming in late, hurting the credit of these straw buyers. And two of them are being threatened with foreclosure.

Dan Nelson spent weeks fixing up a home in Central Seattle, in a neighborhood in need of improvement.

"We put all new copper plumbing in it.The kitchen drain didn't even hook up to plumbing, it just went into the ground underneath," Nelson said. "It was just a mess."

A buyer who called himself Alex, who was actually Ekram Almussa, offered $154,000.

Nelson thought it was a fair price.

"He was really kind of secretive about it and said, 'hey, don't tell anyone what we paid for it'," he remembers.

Why the need for secrecy? Almussa re-sold that property seven days later to a straw buyer for $305,000, nearly double what he'd paid.

We hired respected home appraiser Jim Irish to give us an accurate value.

Could the appraiser hired by Almussa possibly have been right? After all, the appraisal report says the property is worth more than $305,000.

After weeks of research, Irish concluded the property is worth no more than $190,000.

A separate market analysis done for us by Windermere Real Estate came up with the exact same figure.

That means the bank that lent the money, New Century Mortgage in Bellevue, invested far too much in the house. And it happened to them over and over.

New Century is the lender on nearly every deal we investigated.

Every application submitted to get all that money was packed with lies to make sure the loans went through.

Each loan application indicated the home would be the buyer's primary residence, a promise that gets you a better interest rate.

We went to all 15 properties. None was owner occupied.

An underwriter at New Century has since been fired for allegedly being in on the deal.

We showed our findings to officials at the Department of Financial Institutions, the state agency that investigates mortgage and bank fraud.

"This looks like a very serious case to me," said lead investigator Chuck Cross.

Cross said it looks like a well-orchestrated scheme that may break state and federal laws.

"It's this type of … activity that overall drives up the prices that we pay for mortgage loans. It drives up the rates and the fees because there's greater risk for the lenders."

By our calculations, Ekram Almussa and Josh Kebede made nearly $1.7 million in a matter of months.

And it took us months to track them down. When we did, we asked Almussa how he was able to buy so many properties in the last year for cheap and then sell in the same day for so much money.

"I don't want to talk about this, I didn't, I don't know what you're talking about," he said.

When we asked Kebede whether he'd been lying to banks to buy properties to flip them, he had no response.

Since we started asking questions, Ekram Almussa's been fired from his job. The Department of Financial Institutions is planning to launch an investigation based on our findings. The FBI is also asking us about our information.

In the meantime, Dan Nelson, the man who sold Almussa that house in Seattle's Central District, said he's disgusted as a seller, and a consumer.

"It does bother me, of course, any fraud in the system is going to increase the costs for the rest of the people who are using the system, just like other systems...shoplifting drives up ever

 
At 7:06 PM, Blogger Melody said...

Attention: Deficit Disorder
By ROBERT E. RUBIN

THE United States has tremendous economic strengths but it also faces great challenges: the need to ensure national security; a newly competitive China and India; serious shortcomings in public education, basic research, infrastructure and other requisites for meeting that competition; and much else. An immediate and critical imperative is to redress fiscal imbalances.

Most pressing is the 10-year federal deficit, which most independent analysts project at $4.5 trillion to $5 trillion, assuming that the tax cuts passed in 2001 and 2003 are made permanent and that the alternative minimum tax is adjusted to avoid unintended effects on middle-income taxpayers. And while 10-year numbers can be highly unreliable, deficits are as likely to be higher as to be lower. Over the longer term, Social Security has a 75-year estimated deficit of $4 trillion, while the different components of Medicare, including its new prescription drug benefit, represent a fiscal problem of roughly $20 trillion.

Virtually all mainstream economists agree that, over time, sustained deficits crowd out private investment, increase interest rates, and reduce productivity and economic growth. But, far more dangerously, if markets here and abroad begin to fear long-term fiscal disarray and our related trade imbalances, those markets could then demand sharply higher interest rates for providing long-term debt capital and could put abrupt and sharp downward pressure on the dollar. These market effects, plus the adverse impact of continuing fiscal imbalances on business and consumer confidence, could seriously undermine our economy.

We have managed to avoid these market effects so far because private demand for capital has been relatively limited, and because the central banks of Japan, China and other countries have provided large inflows of foreign capital. A change in either of those circumstances, or simply a change of market psychology for whatever reason, could, however, turn these interest rate and currency risks into a reality.

The tough decisions needed on both spending and revenues will probably require some process whereby the president and leaders of the Senate and the House of Representatives and both parties assume joint responsibility for painful political choices. Tax revenues are approximately 16.5 percent of gross domestic product, the lowest level since 1960, and spending is roughly 20 percent. We must have serious spending discipline and entitlement reform - though any entitlement reforms likely to be proposed would have little immediate effect.

But, as BusinessWeek, not an advocate of activist government, said in a recent editorial, "the deficit morass is due as much to a revenue shortfall as to excessive spending." (The 2001 and 2003 tax cuts, for example, are estimated to have a 75-year cost of $11 trillion, almost three times the entire Social Security deficit.) And that shortfall is especially pressing given the rapid increases in entitlement costs and the need to finance national security, investments in education and infrastructure and other critical programs. At the same time, revenue-increasing measures must reverse the recent trend of disproportionately favoring upper-income taxpayers.

The first priority should be to tackle the 10-year fiscal imbalances, which would also be the best way to promote economic growth and minimize the risks I have outlined. Using structural measures to address the 10-year deficits would address our long-term imbalances as well.

For example, if the tax cuts for those earning above $200,000 were repealed and the inheritance tax as reformed were continued rather than eliminated, the 10-year projected deficit would be reduced by roughly $1.1 trillion, or almost 25 percent, and the 75-year fiscal reduction would be roughly $3.9 trillion, or approximately equal to the Social Security shortfall. This course of action would be similar to the income tax increases that were combined with spending cuts in the 1993 deficit reduction program, which some predicted would lead to recession but which, instead, was followed by the longest economic expansion in our nation's history.

We should also begin a serious bipartisan process on Medicare to identify possible solutions and create public support for action, because doing so is absolutely key to our long-run fiscal health. Despite the focus in Washington today on Social Security, it is a smaller and less pressing problem, and our political system can bear only so much traffic at one time.

If we were to address Social Security now, whatever we do must not increase federal deficits and borrowing but instead must improve fiscal conditions and increase national savings in both the short and long terms. The proposal that the administration has embraced - private accounts plus progressive price indexing of benefits - would result in additional deficits and borrowing of more than $1 trillion in the first 10 years, more than $3 trillion in the second 10 years, and so on for roughly 50 years.

That's because this approach - which would eliminate only about one-third of the projected 75-year Social Security deficit - calls for private accounts that would involve immediate and large continuing costs while the savings begin only in the second decade and would grow slowly. While some estimate that after 50-plus years those savings will exceed costs on a cumulative basis, projected savings 50 years out will do nothing to offset the impact of increased deficits on interest rates. After all, if markets took into account 50-year projections of fiscal conditions, interest rates would already be through the roof.

Of course, we can continue to close our eyes and hope for the best. There's no way to predict whether that will work for another few months or for many more years. But the odds are extremely low that our fiscal imbalances will solve themselves, and we place ourselves at great peril by not facing these realities. Conversely, if we do address these challenges, then with our flexible labor and capital markets, and our historic embrace of change and willingness to take risks, our prospects over time should be very favorable.

Robert E. Rubin, Treasury secretary from 1995 to 1999, is a director of Citigroup.

 
At 7:08 PM, Blogger Melody said...

List of Recommended Base Closings
By THE ASSOCIATED PRESS
A list obtained by The Associated Press of military facilities the Defense Department recommended for closure Friday:

Alabama

Abbott U.S. Army Reserve Center, Tuskegee

Anderson U.S. Army Reserve Center, Troy

Armed Forces Reserve Center, Mobile

BG William P. Screws U.S. Army Reserve Center, Montgomery

Fort Ganey Army National Guard Reserve Center, Mobile

Fort Hanna Army National Guard Reserve Center, Birmingham

Gary U.S. Army Reserve Center, Enterprise

Navy Recruiting District Headquarters, Montgomery

Navy Reserve Center, Tuscaloosa

The Adjutant General Bldg, AL Army National Guard, Montgomery

Wright U.S. Army Reserve Center

Alaska

Kulis Air Guard Station

Arizona

Air Force Research Lab, Mesa

Allen Hall Armed Forces Reserve Center, Tucson

Arkansas

El Dorado Armed Forces Reserve Center

Stone U.S. Army Reserve Center, Pine Bluff

California

Armed Forces Reserve Center Bell

Defense Finance and Accounting Service, Oakland

Defense Finance and Accounting Service, San Bernardino

Defense Finance and Accounting Service, San Diego

Defense Finance and Accounting Service, Seaside

Naval Support Activity Corona

Naval Weapons Station Seal Beach, Detachment Concord

Navy-Marine Corps Reserve Center, Encino

Navy-Marine Corps Reserve Center, Los Angeles

Onizuka Air Force Station

Riverbank Army Ammunition Plant

Connecticut

Sgt. Libby U.S. Army Reserve Center, New Haven

Submarine Base New London

Turner U.S. Army Reserve Center, Fairfield

U.S. Army Reserve Center Maintenance Support Facility, Middletown

Delaware

Kirkwood U.S. Army Reserve Center, Newark

Florida

Defense Finance and Accounting Service, Orlando

Navy Reserve Center, St. Petersburg

Georgia

Fort Gillem

Fort McPherson

Inspector/Instructor, Rome

Naval Air Station Atlanta

Naval Supply Corps School, Athens

U.S. Army Reserve Center, Columbus

Hawaii

Army National Guard Reserve Center, Honokaa

Idaho

Navy Reserve Center, Pocatello

Illinois

Armed Forces Reserve Center, Carbondale

Navy Reserve Center, Forest Park

Indiana

Navy Marine Corps Reserve Center, Grissom Air Reserve Base, Bunker Hill

Navy Recruiting District Headquarters, Indianapolis

Navy Reserve Center, Evansville

Newport Chemical Depot

U.S. Army Reserve Center, Lafayette

U.S. Army Reserve Center, Seston

Iowa

Navy Reserve Center, Cedar Rapids

Navy Reserve Center, Sioux City

Navy-Marine Corps Reserve Center, Dubuque

Kansas

Kansas Army Ammunition Plant

Kentucky

Army National Guard Reserve Center, Paducah

Defense Finance and Accounting Service, Lexington

Navy Reserve Center, Lexington

U.S. Army Reserve Center, Louisville

U.S. Army Reserve Center, Maysville

Louisiana

Baton Rouge Army National Guard Reserve Center

Naval Support Activity, New Orleans

Navy-Marine Corps Reserve Center, Baton Rouge

Roberts U.S. Army Reserve Center, Baton Rouge

Maine

Defense Finance and Accounting Service, Limestone

Naval Reserve Center, Bangor

Naval Shipyard Portsmouth

Maryland

Defense Finance and Accounting Service, Patuxent River

Navy Reserve Center, Adelphi

Pfc. Flair U.S. Army Reserve Center, Frederick

Massachusetts

Malony U.S. Army Reserve Center

Otis Air Guard Base

Westover U.S. Army Reserve Center, Citopee

Michigan

Navy Reserve Center Marquette

Parisan U.S. Army Reserve Center, Lansing

Selfridge Army Activity

W.K. Kellogg Airport Air Guard Station

Minnesota

Navy Reserve Center Duluth

Mississippi

Mississippi Army Ammunition Plant

Naval Station, Pascagoula

U.S. Army Reserve Center, Vicksburg

Missour

Army National Guard Reserve Center, Jefferson Barracks

Defense Finance and Accounting Service, Kansas City

Defense Finance and Accounting Service, St. Louis

Marine Corps Support Center, Kansas City

Navy Recruiting District Headquarters, Kansas

Navy Reserve Center, Cape Girardeau

Montana

Galt Hall U.S. Army Reserve Center, Great Falls

Nebraska

Army National Guard Reserve Center, Columbus

Army National Guard Reserve Center, Grand Island

Army National Guard Reserve Center, Kearny

Naval Recruiting District Headquarters, Omaha

Navy Reserve Center, Lincoln

Nevada

Hawthorne Army Depot

New Hampshire

Doble U.S. Army Reserve Center, Portsmouth

Naval Shipyard Portsmouth

New Jersey
Fort Monmouth

Inspector/Instructor Center, West Trenton

Kilmer U.S. Army Reserve Center, Edison

New Mexico

Cannon Air Force Base

Jenkins Armed Forces Reserve Center, Albuquerque

New York

Armed Forces Reserve Center, Amityville

Army National Guard Reserve Center, Niagra Falls

Carpenter U.S. Army Reserve Center, Poughkeepsie

Defense Finance and Accounting Service, Rome

Navy Recruiting District Headquarters, Buffalo

Navy Reserve Center Glenn Falls

Navy Reserve Center Horsehead

Navy Reserve Center Watertown

Niagra Falls International Airport Air Guard Station

North Carolina

Navy Reserve Center, Asheville

Niven U.S. Army Reserve Center, Albermarle

Ohio

Army National Guard Reserve Center, Mansfield

Army National Guard Reserve Center, Westerville

Defense Finance and Accounting Service, Dayton

Mansfield Lahm Municipal Airport Air Guard Station

Navy-Marine Corps Reserve Center, Akron

Navy-Marine Corps Reserve Center, Cleveland

Parrott U.S. Army Reserve Center, Kenton

U.S. Army Reserve Center, Whitehall

Oklahoma

Armed Forces Reserve Center Broken Arrow

Armed Forces Reserve Center Muskogee

Army National Guard Reserve Center Tishomingo

Krowse U.S. Army Reserve Center, Oklahoma City

Navy-Marine Corps Reserve Center, Tulsa

Oklahoma City (95th)

Pennsylvania

Bristol Engineering Field Activity Northeast

Kelly Support Center

Naval Air Station Willow Grove

Navy-Marine Corps Reserve Center, Reading

North Penn U.S. Army Reserve Center, Morristown

Pittsburgh International Airport Air Reserve Station

Serrenti U.S. Army Reserve Center, Scranton

U.S. Army Reserve Center Bloomsburg

U.S. Army Reserve Center Lewisburg

U.S. Army Reserve Center Williamsport

W. Reese U.S. Army Reserve Center/OMS, Chester

Puerto Rico

Army National Guard Reserve Center, Humacao

Lavergne U.S. Army Reserve Center, Bayamon

Rhode Island

Harwood U.S. Army Reserve Center, Providence

USARC Bristol

South Carolina

Defense Finance and Accounting Service, Charleston

South Naval Facilities Engineering Command

South Dakota

Ellsworth Air Force Base

Tennessee

U.S. Army Reserve Area Maintenance Support Facility, Kingsport

Texas
Army National Guard Reserve Center No. 2, Dallas

Army National Guard Reserve Center (Hondo Pass), El Paso

Army National Guard Reserve Center, California Crossing

Army National Guard Reserve Center, Ellington

Army National Guard Reserve Center, Lufkin

Army National Guard Reserve Center, Marshall

Army National Guard Reserve Center, New Braunfels

Brooks City Base

Defense Finance and Accounting Service, San Antonio

Lone Star Army Ammunition Plant

Naval Station, Ingleside

Navy Reserve Center, Lubbock

Navy Reserve Center, Orange

Red River Army Depot

U.S. Army Reserve Center No. 2, Houston

Utah

Deseret Chemical Depot

Virginia

Fort Moore

Washington

1LT Richard H. Walker U.S. Army Reserve Center

Army National Guard Reserve Center, Everett

Navy-Marine Corps Reserve Center, Tacoma

U.S. Army Reserve Center, Fort Lawton

Vancouver Barracks

West Virginia

Bias U.S. Army Reserve Center, Huntington

Fairmont U.S. Army Reserve Center

Navy-Marine Corps Reserve Center, Moundsville

Wisconsin

Gen. Mitchell International Airport ARS

Navy Reserve Center, La Crosse

Navy-Marine Corps Reserve Center, Madison

Olson U.S. Army Reserve Center, Madison

U.S. Army Reserve Center, O'Connell

Wyoming

Army Aviation Support Facility, Cheyenne

Army National Guard Reserve Center, Thermopolis

 
At 7:08 PM, Blogger Melody said...

Am I boring you yet?

 
At 7:21 PM, Blogger Melody said...

This resume appears to be posted all over the internet. I thought I would post it here so it could get some Xenox News treatment from the wild and wacked writers that post here.

Resume of GEORGE W. BUSH
DOB – July 6, 1946
Drivers License - Yes
The White House
Washington, USA.
Degree from Yale University 1964-68
Major in History.

PAST WORK EXPERIENCE

I ran for U.S. Congress and lost.

I produced a Hollywood slasher B movie.

I bought an oil company, but couldn't find any oil in Texas; the company went bankrupt shortly after I sold all my stock.

I bought the Texas Rangers baseball team in a sweetheart deal that took land using taxpayer money.

With my father's help and name, I was elected Governor of Texas.

HIGHLIGHTS OF ACHEIVEMENTS
WHILST GOVERNOR OF TEXAS, USA.

I changed pollution laws in favor of the power and oil companies and made Texas the most polluted state in the Union.

I replaced Los Angeles with Houston as the most smog-ridden city in America.

I cut taxes and bankrupted Texas government to the tune of billions in borrowed money.

I set the record for the most executions by any Governor in American history.

I became U.S. President after losing the popular vote by over 500,000 votes with the help of major Enron money and my father's appointments to the Supreme Court.

HIGHLIGHTS OF CURRENT ACHEIVEMENTS

I am the first president in U.S. history to enter office with a criminal record.

I appointed more convicted criminals to administration than any president in U.S. history.

I set the record for least amount of press conferences than any president since the advent of television.

In my first year in office over 2-million Americans lost their jobs and that trend continues every month.

I set the all-time record for most foreclosures in a 12-month period.

I'm proud that the members of my cabinet are the richest of any administration in U.S. history.

My "poorest millionaire," Condoleeza Rice, has a Chevron oil tanker named after her.

I am the first president in U.S. history to have almost all 50 states of the Union simultaneously suffer massive financial crisis.

I presided over the biggest corporate stock market fraud of any market in any country in history.

I set the all-time record for biggest annual budget spending increases, more than any president in history.

I am the first president in U.S. history to have the United Nations remove the U.S. from the Human Rights Commission.

I am the all-time U.S. and world record-holder for receiving the most corporate campaign donations.

I changed the U.S. policy to allow convicted criminals to be awarded government contracts.

My largest lifetime campaign contributor, and one of my best friends, (Kenneth Lay, former CEO of Enron Corporation) presided over the largest corporate bankruptcy fraud in U.S. history. My political party used the Enron private jets and corporate attorneys to assure my success with the U.S. Supreme Court during my election decision.

I have spent more money on polls and focus groups than any president in U.S. history.

I attacked and overtook two countries.

I spent the U.S. surplus and effectively bankrupted the U.S. Treasury.

I shattered the record for the largest annual deficit in U.S. history.

I set an economic record for most private bankruptcies filed in any 12-month period.

I set the all-time record for the biggest drop in the history of the U.S. stock market.

My record for environmental issues is the least of my concerns.

I set the the all-time record for most days on vacation in any one year period.

After taking-off the entire month of August 2001, I then presided over the worst security failure in U.S. history.

I am supporting development of a "Tactical Bunker Buster" nuke, a Weapon of Mass Destruction.

I am getting our troops killed, under the lie of Sadam's procurement of Yellow Cake Nuke WMD components, then blaming the lie on our British friends.

I set the record for most campaign fund-raising trips by a U.S. president.

I signed more laws and executive orders effectively amending or ignoring the Constitution than any president in history.

I presided over the biggest energy crisis in U.S. history and refused to intervene when corruption involving the oil industry was revealed.

I presided over the highest gasoline prices in U.S. history and refused to use national reserves as past presidents have done.

I have cut health care benefits for war veterans and support a cut in duty benefits for active duty troops and their families -- in war time.

I have set the all-time record for most people worldwide to simultaneously protest me in public venues (15 million people) shattering the record for protest against any person in the history of mankind.

I've made my presidency the most secretive and unaccountable of any in U.S. history.

I am the first president in U.S. history to order a pre-emptive attack and the military occupation of a sovereign nation, and I did so against the will of the United Nations and the world community.

I created the largest government department bureaucracy in the history of the United States.

I am the first president in U.S. history to have the United Nations remove the U.S. from the Elections Monitoring Board.

I removed more checks and balances, and have the least amount of congressional oversight than any presidential administration in U.S. history.

I rendered the entire United Nations viewpoints irrelevant.

I withdrew the U.S. from the World Court of Law.

I refused to allow inspectors access to U.S. "prisoners of war" (detainees) and thereby have refused to abide by the Geneva Convention.

I garnered the most sympathy for the U.S. after the World Trade Center attacks and less than a year later made the U.S. the most resented country in the world, possibly the largest failure of diplomacy in World history.

I am actively working on a policy of "disengagement" creating the most hostile of Israel-Palestine relations in at least 30 years.
I am first president in history to have a majority of Europeans (71%) view my presidency as the biggest threat to world peace and security.

I am the first U.S. president in history to have the people of South Korea more threatened by the U.S. than by their immediate neighbour, North Korea.

I set an all-time record for the number of administration appointees who violated U.S. law by not selling their huge personal investments in corporations bidding for U.S. contracts.

I failed to fulfill my pledge to capture Osama Bin Laden, dead or alive.

I failed to capture the anthrax killer who tried to murder the leaders of our country at the U.S. Capitol Building. Even after 18 months I have no leads and no credible suspects.

In the past 18 months following the World Trade Center attack I have successfully prevented any public investigation into the biggest security failure in the history of the United States.

I removed more freedoms and civil liberties for Americans than any president in U.S. history.

In a little over two years, I created the most divided country in decades, possibly the most divided since the Civil War.

I entered my office with the strongest economy in U.S. history and have turned every single economic category downward -- all in less than two years.

RECORDS AND REFERENCES

I have at least one conviction for drunk driving in Maine. My Texas driving record has been erased and is not available.

I was AWOL from the National Guard.

I refuse to take a drug test or even answer any questions about drug use.

All records of my tenure as Governor of Texas are now in my father's library, sealed, and unavailable for public view.

All records of SEC investigations into insider trading or bankrupt companies are sealed in secrecy and unavailable for public view.

All records or minutes from meetings that I, or my Vice-President, attended regarding public energy policy are sealed in secrecy and unavailable for public review.

I am great buddies with John Howard. (Surely the surest sign that there is a BG problem. A US president trying to buddy up to an Australian Prime Minister! Sheesh)

OVERVIEW

Best known for: Governor of Texas who emerged as the Republican front-runner in the 2000 presidential campaign. In his first four months of fund-raising, he collected record-setting contributions of $37 million. His early platform included “compassionate conservatism,” the definition of which was intentionally vague.

Born: July 6, 1946 in New Haven, Connecticut, while his father, former U.S. President George H.W. Bush, was a student at Yale.

Family: Parents: George and Barbara Bush.
Brothers: Neil, Jeb, Marvin. Sisters: Dorothy, Robin, (Robin died of leukemia at age three). Bush's father graduated from Yale in June 1948. His parents then moved the family to Odessa, Texas, and his father began work in the oil business. During the summer of 1977, Bush met Laura Welch in Midland at a dinner at the home of their mutual friends Joe and Jan O’Neill. They married just over three months later, on November 5, 1977. It was small service attended by their close friends and family. In 1981 their twin daughters, Barbara and Jenna, were born. They are named after their grandmothers. Their grandfather was the Vice-President of the United States at the time. The new Bush family lived in Midland, later moved to Dallas, and then Washington for a year when President Bush ran for President in 1988. Barbara and Jenna attend public school in Austin.

Education: Attended Phillips Academy prep school at Andover, then Yale from 1964 until 1968 and graduated with a major in history; played baseball during freshman year and rugby during junior and senior years; became a member of the super-secret Skull and Bones society, following in the footsteps of his father and grandfather; later attended Harvard and earned a Masters of Business Administration in 1975. Bush was such a mediocre student that the dean of students at Andover was pessimistic about his chances of getting into Yale. The suggested that he have a backup option. Harvard Business school was a backup option that he had to take advantage of after the University of Texas law school turned him down. Harvard alums say the admissions process was somewhat mysterious. One of Bush's Harvard classmates was a circus barker.

Profession: In the West Texas energy business, George W. Bush started out researching who owned mineral rights. He later traded mineral and royalty interests and invested in drilling prospects. He had started his own oil and gas company by 1978, taking $17,000 from his education trust fund to set up Arbusto Energy (arbusto means Bush in Spanish). The company fell on hard times when oil prices fell. He made several attempts to revive the business, first by changing the company's name and later by merging with other companies. In 1983, Bush’s company was rescued from failure when Spectrum 7 Energy Corporation, a small oil firm owned by William DeWitt and Mercer Reynolds, bought it. Bush became chief executive officer. Harken Energy Corporation acquired Spectrum 7 in 1986, after Spectrum had lost $400,000. In the buyout deal, Bush and his partners were given more than $2 million worth of Harken stock for the 180-well operation. Bush became a director and was hired as a "consultant" to Harken. He received another $600,000 of Harken stock, and has been paid between $42,000 and $120,000 a year. By the spring of 1987, Harken was in need of cash. So Bush and his fellow Harken officials met with Jackson Stephens, head of Stephens, Inc., an investment bank in Little Rock, Arkansas (Stephens contributed $100,000 to the Reagan-Bush campaign in 1980 and gave another $100,000 to the Bush dinner committee in 1990.) Stephens arranged for Union Bank of Switzerland (UBS) to provide $25 million to Bush’s company in return for a stock interest in Harken. As part of the deal, Sheikh Abdullah Bakhsh, a Saudi real estate tycoon and financier, joined Harken's board as a major investor. Stephens, UBS, and Bakhsh each had ties to the infamous, scandal-ridden Bank of Credit and Commerce International (BCCI). In 1990, Bush sold his remaining stock options and left the oil business. Writer Jack Colhoun revealed some details of that stock sale, referring to Bush by his childhood nickname “Junior”:
On June 22, 1990, George Jr. sold two-thirds of his Harken stock for $848,560-a cool 200 percent profit. The move was well timed. One week after Junior sold his stock, Harken announced a $23.2 million loss in quarterly earnings and Harken stock dropped sharply, losing 60 percent of its value over the next six months. On August 2, 1990, Iraqi troops moved into Kuwait and 541,000 U.S. forces were deployed to the Gulf.
"There is substantial evidence to suggest that Bush knew Harken was in dire straits in the weeks before he sold the $848,560 of Harken stock," asserted U.S. News & World Report. The magazine noted Harken appointed Junior to a 'fairness committee' to study possible economic restructuring of the company. Junior worked closely with financial advisers from Smith Barney, Harris Upham & Company, who concluded "only drastic action could save Harken."
A year earlier, in 1989, Bush prepared for his move from the oil business to the sports business when he helped assemble a group who purchased the Texas Rangers baseball team from Eddie Chiles. He and Rusty Rose served as managing general partners until Bush was elected Governor of Texas in 1994.


Career: Pilot in the Texas Air National Guard from 1968 until 1973. Attended flight school and flew F-102 aircraft with the 147th Fighter Wing, 111th Fighter Squadron of the Texas Air National Guard. Campaigned for U.S. Congress in 1978 in a large West Texas district that included his hometown of Midland. He defeated two opponents in the Republican primary, but lost in the general election to Democrat Kent Hance. After the election he went back to the energy business and built his oil company.
Bush was among the earliest financial contributors to the senate campaign of Phil Gramm in 1984. In 1986 and 1987, Bush worked on his father's presidential campaign as an adviser and speechwriter, moving to Washington in 1987 to work full time on the campaign. After the election he returned to Texas, then moved back to Washington in 1991 to work as an adviser on his father's re-election campaign. In 1994 George W. Bush defeated Democratic incumbent Ann Richards to become the 46th Governor of the State of Texas.
During his second four-year term as governor, Bush announced he was running for U.S. president. He had already been given the status of Republican front-runner in the 2000 presidential campaign. In his first four months of fund-raising, he collected record-setting contributions of $37 million.
Bush's first defeat came early in the campaign, however, with a big loss to Senator John McCain of Arizona in the New Hampshire Primary. After the sound defeat was clear in the state of New Hampshire, Karl Rove, Bush's chief strategist, was quoted congratulating McCain for winning, then oddly adding that the Bush campaign was prepared to win and beat McCain in all 50 states, although only 47 state contests remained. McCain skipped the Iowa Caucuses a week earlier, conceding that state to Bush. The razor-thin Bush win in the Alaska GOP Caucus was by a mere five votes over publisher Steve Forbes.


Sources: GEORGE W. BUSH FOR PRESIDENT 2000 web site (http://geocities.com/CapitolHill/Senate/4124/issues.html); Dick Stanley, "Bush dodges debris during jog," Austin American-Statesman, Nov. 2, 1999, p. A1; George W. Bush for President web site (http://www.georgewbush.com) Beth Rowen, “George W. Bush: Like Presidential father, like Presidential son?” (http://www.infoplease.com/ipa/A0779295.html); Kevin Merida, "Shades of Gray Matter," The Washington Post, January 19, 2000, pp. C1, C9; Jack Colhoun, “The Family That Preys Together,” Covert Action Information Quarterly, No.41 (Summer 1992) (http://mediafilter.org/caq/BushFamilyPreys.html); Richard N. Draheim, Jr., "The Bush Nazi Connection," The Dallas Libertarian Post, December 1999; Ken Herman and Scott S GreenBerger, "For Bush, a retreat to a haven for favorites: South Carolina," Austin American-Statesman, February 2, 2000, pp. A1, A11 (http://www.austin360.com/news/features/national/0202nhanalysis.html); Presidency 2000, "Alaska Caucus Results," (http://www.politics1.com/vote-ak.htm).

 
At 7:28 PM, Blogger Melody said...

I have just completed another round of data gathering for the old Department of the Interior and this is a summary of my findings.

1. There are plenty of housings in Southern California. There are fewer affordable housings being built because of greedy home builders. People do not want to spend out of their limits for overpriced homes.

2. The new home builder foot traffic for homes that are:

$300K - $380K is up 20% to about 300 visiting family units a day on weekends only. Week days average 25 family units a day.

$380K - $450K is down 60% to about 90 visiting family units a day on weekends only. Week days average approximately 18 family units a day.

$450K - $600K is down 87% to about 60 visiting family units a day on weekends only. Week days average 7 family units a day.

$600K - $800K is down 95% to about 30 visiting family units a day on weekends only. Week days average 4 family units a day.

To increase foot traffic, builders have solicited Real Estate Brokers as Co-Ops in order to attempt to sell new homes that are not selling. Truly the new home sales have dramatically slowed to a crawl.

This makes new home builders such as Centex to be dramatically a RISK rather than long term stability and high earnings stock as a personal opinion based upon many years of professional experience.

 
At 7:32 PM, Blogger Melody said...

It was bound to happen. Cycles of fear and greed are as old as financial markets themselves. When asset prices go to excess, we always hear the same refrain, “This time it’s different.” That was the spin on tulips in the 17th century, equities in the summer of 1987, the Nikkei in 1989, fixed income markets in 1993, and, of course, Nasdaq in 2000. Chastened by the inevitable post-bubble carnage, speculators, regulators, and policy makers always promise, “Never again.” Yet memories are short, and as day follows night, so do cycles of greed and fear — and the proverbial next time.

 
At 7:34 PM, Blogger Melody said...

Here's an interesting anectdote.


Washington Mutual has been ordered to rehire a whistle blowing loan executive based in California. The Department of Labor ruled she was improperly fired because she,

"raised concerns that the bank was not following its written policies as required by law and therefore loans were being funded and underwritten without proper documentation or other safeguards,"

 
At 7:39 PM, Blogger Melody said...

Do they know something we don't know?

http://finance.yahoo.com/q/it?s=KBH

 
At 7:47 PM, Blogger Melody said...

Clear signs....the end is near, dumb money is entering the market, last stage of the cycle. I read stories of people in South Florida cleaning their saving accounts to invest in real estate...is going to get painful for some folks down here.......

 
At 7:50 PM, Blogger Melody said...

The Other Shoe Drops at Fannie Mae,

Tough Legislative Action Needed



(Washington, D.C.)  The Council for Citizens Against Government Waste (CCAGW) today called upon Congress to protect taxpayers by instituting tough new oversight rules for the nation’s largest housing government-sponsored enterprises (GSE) Fannie Mae, Freddie Mac and the Federal Home Loan Bank Systems. The statement comes in the wake of news that the Office of Federal Housing Enterprise Oversight (OFHEO), in the course of its ongoing review of Fannie Mae, has uncovered evidence of improper accounting practices, lax corporate governance, and manipulation of earnings reports in order to maximize bonus packages for Fannie Mae executives. Based upon those findings, the Securities and Exchange Commission has also announced that it will begin an informal inquiry into Fannie Mae’s accounting practices.



“This should come as absolutely no surprise to anyone,” said CCAGW President Tom Schatz. “The GSEs have been operating in the shadows for years, fighting even the most sensible reforms tooth and nail. Fannie Mae and Freddie Mac have been engaging in increasingly risky hedging activities, pursuing excessive profits at the expense of their congressional mandate to support low and middle income homebuyers, and lining the pockets of their executives, all while putting taxpayers at greater and greater risk for a bailout. Even in the face of an accounting scandal at Freddie Mac last year, most members of Congress have stubbornly turned a blind eye.”



Fannie Mae’s woes appear to mimic similar accounting troubles at its sister GSE, Freddie Mac, which was forced to make a $5.3 billion earnings restatement, fire several key executives, and pay a $125 million fine to OFHEO after the company admitted it had manipulated its earnings. However, reports indicate that Fannie Mae’s trouble may be worse. Although Freddie was manipulating its earnings to hide profits, Fannie Mae appears to have smoothed earnings in order to mask losses it sustained in its risky derivatives portfolio and to guarantee bonus compensation levels for its executives. “Several members of Congress have asked for a full accounting of Fannie Mae’s executive compensation packages,” said Schatz. “Fannie Mae has consistently snubbed Congress’ requests. It is now time to find out exactly how much Fannie Mae executives are being paid and how their compensation packages and bonuses are structured.”



The most comprehensive legislative reform package to date, crafted by Senate Banking Committee Chairman Richard Shelby (R-Ala.), was aimed at creating a single, independent bank-like regulator with the authority to require changes in both minimum and risk-based capital standards, providing approval authority over new home mortgage products introduced by the GSEs in order to curb their mission creep into the private sector, and establishing specific rules in case of a GSE bankruptcy. “President Bush and Treasury Secretary John Snow have made no secret of their intent to enact strong GSE reform to protect taxpayers. These latest revelations ought to light a fire under Congress,” concluded Schatz. “Together, the housing giants hold $1.6 trillion worth of mortgages or mortgage-backed securities. Without reform, taxpayers could potentially be on the hook for a massive GSE bailout.”



The Council for Citizens Against Government Waste is the lobbying arm of Citizens Against Government Waste, the nation's largest nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government.

 
At 7:52 PM, Blogger Melody said...

UPDATE 2-Sen. Shelby backs GSE reform only if regulator strong
Wed May 4, 2005 06:41 PM ET

(Recasts; adds quotes, details)
NEW YORK, May 4 (Reuters) - U.S. Senate Banking Committee Chairman Richard Shelby on Wednesday said he will only support a bill to stiffen oversight of government-sponsored housing enterprises that gives a regulator capital authority and enforcement powers.

Shelby, an Alabama Republican, said the ability to place a failed GSE into receivership is a key component of any legislation.

"This is a power that is key if we are to foreclose the possibility of a potential taxpayer bailout, and is an essential component of any bill that would have my support," the senator said in a speech hosted by Market News International.

"Congress is not the best forum to set such standards, such decisions are best left to the discretion of the regulator to act when the risks warrant such action or the link to housing mission is unclear," he said.

The GSEs' massive mortgage portfolios, which, combined, total nearly $1.5 trillion, have been at the heart of legislative debates.

Some critics say the sheer size of the portfolios pose a risk to the financial system by aggregating too much interest rate and prepayment risk within two companies.

Congress is weighing proposals to establish a new regulator for Fannie Mae (FNM.N: Quote, Profile, Research) , Freddie Mac (FRE.N: Quote, Profile, Research) and the Federal Home Loan Banks with stronger powers over the mortgage finance giants' business.

The more involved Congress is, the less meaningful a regulator will be, Shelby said, adding: "We should keep Congress out of the accounting and regulation fields."

No date has been set for a bill to be introduced in the U.S. Senate, but senate aides say they are close to an agreement on legislation.

The U.S. House Financial Services Committee will likely schedule a markup by Memorial Day, according to the chairman of the House Committee, Ohio Republican Rep. Michael Oxley.

While no date has been set for the markup, Shelby said the Senate Banking Committee is scheduled to meet on Tuesday to discuss the bill.

The push to increase oversight of Fannie and Freddie follows accounting scandals that have led or will lead to multibillion-dollar profit restatements.

A new independent regulator should have combined safety and soundness authority, while being funded outside of the appropriations process, Shelby said.

"I've never known a financial institution going belly up that was well-capitalized and regulated," he said in response to a question on capital levels.

The regulator should have full discretion over risk-based and minimum capital levels of the GSEs, and enhanced enforcement and prompt corrective action authority, he added.

"None of the regulatory powers that I have outlined are novel or excessive," Shelby said. "Indeed, these powers are crucial to the regulator's ability to effectively supervise the safe and sound operation of the institutions that they regulate."

 
At 7:53 PM, Blogger Melody said...

Fannie Mae and Freddie Mac Threaten Critics with Retaliation


In addition to investigating Fannie Mae and Freddie Mac for illegal
campaign contributions to Bush, "Lawmakers also are looking into
allegations that Fannie and Freddie have threatened major banks with
retaliation for criticizing the mortgage-market giants," reports the
Moonie Insight Mag. " Critics continue to express concern that, soon,
Fannie Mae and Freddie Mac will have assumed the risk of more than half
of all U.S. home mortgages, putting taxpayers on the hook for an
astronomical bailout should there be a real-estate bust. According to
recent reports, Fannie's and Freddie's combined debt is greater than $1
trillion and stands to surpass publicly held Treasury debt by 2005.
While Treasury securities are guaranteed by the full faith and credit of
the U.S. government, GSE debt is not, although capital markets behave as
if it were."
http://www.insightmag.com/news­/2001/05/14/Nation/HomeMortgag­e.Giants.Fan
nie.Freddie.In.The.Hot.Seat-21­3532.shtml

 
At 7:59 PM, Blogger Melody said...

Ole Bear, Editor, Commentary

A Farewell to ARMs, the Ship of Fools, and the FDIC

Well, Folks, if you read between the lines of these linked essays, you probably will want to just break down in tears and cry. The other response is to begin laughing so hard you rupture a kidney or spleen. Why? No, it is not that folks are dumb economically and monetarily speaking and are trying their best for the American Dream working hard and raising their families and paying their bills. It is the fact that they have been mis-educated about illegal aliens, loans, real estate, money, money systems, and real money at the hands of the GSEs, the Federal Reserve, and our bloated spurious politicians [DemoPublicans] under a corrupt tax system, implemented at the same time in 1914 as the Federal Reserve Fraud of the private banking cartel, which currently runs, rules, and rigs the realty valuation industry pumping all these real estate prices. Illegal aliens whether from Mexico or Mars, are still illegal -- why should Big Brother house these rascals and give 'em 100% home loans [free lunch] and to encourage illegal banking practices -- when these folks should be sent back home -- which means deported in plain American English. If I want to learn Spanish, I will go take a class.

The other thing about the FDIC is that it is under-funded in a major banking crisis, and their guarantee of insuring accounts and deposits up to $100,000 is a big joke. Who's kidding whom, here? I laugh every time I walk into a bank, S&L, or credit unit and see this FDIC propaganda. That brings us back to FDR who somehow has achieved Sainthood in Legend and Lore of American History. FDR did more to destroy private property rights [that includes real estate and Constitutional money systems] than General Sherman burning Atlanta and marching to Savannah destroying everything in the Federal Army's path.

When you drive around on the streets of Columbia, Missouri and see real estate for sale signs on properties that also have Wells Fargo signs advertising 100% Financing on the properties for sale, the next thing these rascals will be doing is putting these signs in both English and Spanish. With the way the mortgage industry and realty valuation gig has gone, Wells Fargo will probably start making home loans from lemonade stands on the streets of Columbia.

Real estate bubble? Nahhhhhhh!

Yours Truly,

Ole Bear, Editor
Columbia, Missouri

 
At 8:01 PM, Blogger Melody said...

Little Pieces of Ice Keep Falling Off this Sucker

Falsified records at Fannie Mae as far back as 1998? Gee, why am I not surprised? Higher mortgage rates to bite? Yep, like a pack of Great White Sharks. Surging foreclosure listings? That surely couldn't impact the regular sales of real estate properties also on the market could it? Nahhhhhhh! Treasury Secretary Snow wanting to put blinders and new bridles on the GSEs fast ponies! Giddy Up! -- Trigger! and Hi Ho! Silver!

Everyone has been lulled into having lots of debt on their real estate, and it so cool because you get to deduct the mortgage interest on your income taxes. What a deal! The above news and essay links remind me of bits and pieces of ice that fell on the decks of the RMS Titanic way back in April 1912 late one night when this supposedly unsinkable Royal Mail Ship tried to make a hairpin turn knocking the brittle plates off the hull for about a 300' stretch. It is no stretch of the imagination that the bulk of the big ice is below the waterline -- and cannot be seen by the naked eye.

Speaking of naked, as Mr. Buffett says, when the tide goes out, we'll all learn who's been swimming that way.

Yours truly,

Ole Bear, Editor
Columbia, Missouri

 
At 8:16 PM, Anonymous Anonymous said...

This site is not "melody.com"

If you want to read your own writing, Melody, perhaps you'd enjoy having your own site.

When I started reading this thread, there were some good points. Then it became tedious. Then you posted blather about the President with no editing to include only that information specifically relevant to housing bubbles.

As my sister would have said, "I'm going to tell Daddy on you!" Please stop hogging the site.

 
At 8:22 PM, Anonymous Anonymous said...

( 2. In 2004 proceeds from Cash-out refinancing, and Home-equity line-of-credit, accounted for 77% of total U.S. consumption.)

Where can I see this item? 77% brings many four letter words to mind.

How best to use Ever Bank to put some money outside of the dollar?

 
At 10:00 PM, Blogger Melody said...

http://www.mortgagebankers.org/briefs/2000/0223e.html

 
At 10:12 PM, Blogger Melody said...

It's not my blog. Sorry for the mass information. I had a hard day and got carried away with information. I can hardly afford my rent for God's sake. It's hard for me to understand where we are going and drinking wine does not help.

 
At 11:46 PM, Anonymous Anonymous said...

Melody, chill out. Life is not all bad.

 
At 11:54 PM, Anonymous Anonymous said...

( 2. In 2004 proceeds from Cash-out refinancing, and Home-equity line-of-credit, accounted for 77% of total U.S. consumption. http://www.mortgagebankers.org/briefs/2000/0223e.html )

Ah.. the link says 77% of mortgages took out equity; that is different than 77% of total U.S. consumption (i.e., some measure of consumer spending/GDP)

 
At 3:46 AM, Anonymous katie said...

I liked Melody's posts on this thread. The "Bush resume" is a bit off-topic and bear in mind we seem to have quite a few Bush-boosters among us reading this blog. I honestly don't know what they see in him but while we're all getting along so well I hate to antagonize them :)

I can relate to Melody's anxiety and sense of insecurity about where the world is heading, at least economically speaking.

 
At 5:49 AM, Anonymous Melissa said...

Melody,

The foot traffic information was the most useful for me.

I'm not here at Ben's blog to read any Bush-bashing. I can go to political web sites for that. I don't really think Presidents have much to do with economic cycles. They last longer than presidencies.

I think the housing bubble clearly started in 1997.

 
At 7:59 AM, Blogger Melody said...

Thanks for being kind to me. It's morning now and the wine has worn off.... coffee time. I don't think I'm the only one that is scared about our country. I keep hearing Hillary when she said if Bush wins we won't recognize our country. I would just like to see honest people being forward and upfront with us....like the guy who said America, we failed you. If they were honest we would all be in the same frame of mind and we could "fix" whatever needs fixing. But when they don't mania's happen. I can see why the mania is happening. Social security is a mess, pensions may not be there when you need it. Where is the money? Right now in real estate. People are looking out for their future the best way they can hurting others along the way. Happy Sunday :)

 
At 8:19 AM, Anonymous Chuck Schuyler said...

I agree with other posters, Melody, in that you have some pretty cool points, but let's leave the Bush-bashing to different sites. The coming housing crash has it's roots much deeper than the four years or so that the Bush administration policies have held reign.

 
At 8:31 AM, Blogger Melody said...

More are buying a home with an interest-only loan on stated income with the intent of using the 6 to 12 months of price inflation to refinance to a long-term fixed mortgage...

http://www.gilroydispatch.com/news/contentview.asp?c=158362

“Most of the loans that are going through now are ‘stated,’” explained Peter Casper, a loan officer at Diversified Capital in Gilroy. “Stated” loans, as they are known, do not require verification of actual income, leaving applicants free to pad their earnings on paper and qualify for larger amounts.

“It has to be reasonable,” Casper said, explaining that lenders know, for instance, that a software engineer in Silicon Valley likely earns between $125,000 and $200,000 annually.

Even more prevalent than overstating earnings is the reliance on zero-down payment and “interest-only” loans, meaning monthly payments never go toward reducing actual debt.

“Nobody even thinks about paying a loan off anymore when housing is concerned,” Casper said. “By increasing equity, they end up borrowing to replace the initial loans. You don’t get the greatest interest rates, but you don’t have anything to lose. What’s happening is that the values of the properties are going up so quick and so high, buyers come back sometimes in a couple months and want to do a 30-year fixed loan.”

 
At 8:33 AM, Blogger Melody said...

Political Gateway and Atlas Homes (May 13th, 2005)- We at Atlas Homes in Florida say it is time to sell if you own investments. Huge condo complexes are being built everywhere (just like before in the late 80s before the condo market crashed). Apartment complexes are converting to condos/townhomes which tells you what the corporate investors are thinking "time to sell and get out".

Updates and links to news items are at bottom of article

In the 1980s, Gold went crazy and hit 800 an ounce on the markets. Everyone started buying at the high rates while smart investors dropped out quickly. Gold fell so quick it broke many small investors. Real Estate is going crazy, bidding wars are all the frenzy for even run down homes. People are jumping in to get rich quick on what may be the tail end of the bubble.

Let's look at the information.

Bankruptcy: Your wonderful lawmakers, bowing to special interests who know the crash is coming, have changed the bankruptcy laws. Your home is not safe in a bankruptcy now. You cannot walk away from your debt (especially the debt of a foreclosure) anymore. Chapter 7 is almost impossible, you will be forced into a payemnt plan and not be allowed to start over. To make such a huge change in the bankruptcy laws at the behest of credit card companies and lenders at this time can only be looked at as an indicator of what is going to happen. These companies and special interests are not stupid and they plan for the future. Only the most dense cannot see this as a 'pre-emptive strike' against defaults that are on the way.

Interest-Only loans: In the 1920s these type of loans became popular so people could free up money to buy stocks. After many lost their homes and fortunes in the market crash bankers only allowed their rich clients to obtain these loans.
Currently interest-only loans are one of the hottest loans out there. It allows people to buy homes and investments they could usually never afford. Interest-only loans become adjustable rate loans after a few years (1 to 5) with the obvious devastating effect of causing a need for a homeowner to sell when the payments become to much.

Rates are rising: Rates have gone up for seven straight quarters and the 'Fed' has said they will continue to go up aggressively to stave off inflation. Low rates allowed people to buy more home for the same monthly payment; thus homes shot up in value. When rates go high enough even an adjustable or an interest-only loan will not allow people to afford a home at these prices. The sellers market is over when that happens.

Home Equity loans: Home Equity loans in the last few years have been great for homeowners. Equity lines are second mortgages they can write checks from. Many used these loans to upgrade their home or to buy second, even third homes. These equity lines are 'adjustable' mortgages that do not exactly amortize as you think when figuring out a payment. Since they are adjustable they will go up with rate increases. Since they are not a first mortgage the regulations keeping them at a low 'maximum' rate cap' are not as strong. We talked to a lady who did not know what her cap was so we made her take a look. It turned out to be 18% and she almost had a heart attack.

Re-financing will not help: So you went a bit crazy and have adjustable mortgages and some equity lines of credit. "Hey, I will just refinance when the rates come back down," you say. These are the lowest rates in 40 years.40 years ago someone said they would wait for them to come back down and was an old man when they finally did. Rates are rising for adjustable and fixed. Re-financing at a fixed rate will be much higher than your current adjustable and it will cost you to make that financial move. So like many you will wait and hope the rates will not rise too high. Trouble is, some 80% of all loans written this year were 3 year adjustable mortgages and interest only loans. That is a lot of people who are 'hoping' to not be in financial trouble.

What to do?

If you are a property owner I say sell now and put the money in the bank. All of it. Rent a house for a year or so and get ready for some super bargains to be had as people unload their 2nd, 3rd, and other investment properties. Those who need to sell will sell and sell low. Prices will probably stagnate as they did in the 90s after the last Real Estate bust, so deals will be everywhere as people try to save themselves financially.

What if we are wrong? What if home prices just keep rising 'to the moon' and you miss out on buying new home? The worst that can happen if you rent right now is you lose a little increase of what could have been your equity. And your rent will be cheaper than a new mortgage right now at these prices.

What if we are right? Renting after selling your home could keep you from losing a ton of equity (remember, you sold your property) and possibly not being able to afford your home as rates make re-financing impossible.

In Florida we at Atlas Homes are offering savvy investors and selling home owners a 'One Week Listing' and almost guaranteeing a bidding war before the week is over. If ever there is a time to sell it is now. Do not wait 40 years to get your equity out. Home prices can and do fall after a real estate bust. Sell high, rent and wait, then buy low next year or the year after.


Updates May 13th:

Washtenaw Mortgage Introduces 40-Year Mortgage
To lower monthly costs and keep prices high they are pulling out all the stops.
http://biz.yahoo.com/prnews/050511/dew013.html?.v=9

US real wages fall at fastest rate in 14 years
( it was 1991, the last real estate bust)
http://news.ft.com/cms/s/f269a8f4-c173-11d9-943f-00000e2511c8.html

Developer tactics to avoid housing bust
Developers have figured out how to stop flipping of properties while still building.
http://www.csmonitor.com/2005/0512/p01s04-usec.html

Vultures smell drop in hot Florida condo market
"real estate entrepreneurs are forming "vulture capital" funds to pounce on what they call an inevitable downturn in an exploding south Florida real estate market"
Investors are getting inline to pick up foreclosures
http://news.yahoo.com/s/nm/life_condos_dc

Foreclosures galore
This worked fine so long as the houses didn't lose value. However, the drop in real estate values during the Depression pushed a large proportion of interest-only loans into foreclosure. Lenders switched entirely to fully amortizing loans, and that has been the standard mortgage loan since.
http://www.bankrate.com/brm/news/mortgages/20050512a1.asp

 
At 9:24 AM, Anonymous Anonymous said...

"I agree with other posters, Melody, in that you have some pretty cool points, but let's leave the Bush-bashing to different sites. The coming housing crash has it's roots much deeper than the four years or so that the Bush administration policies have held reign."

I agree with Chuck on this. The main culprit in all of this bubble creation is Alan Greenspan and his band of inflating Merry Men. AG has been head of the Fed since Reagan - far too long for a egomaniacal idealouge(IMHO).

The only thing I can criticize Bush on as far as this bubble goes, is his idiotic comments about "The American Dream" of home ownership and how an almost 70% ownership level is a great thing and we should try to make the number even higher.

Luckily he's been laying off of this recently, probably because the GSE's are going south and he realizes this whole thing could turn into a gigantic bailout soon.

I doubt presidents will give the future Fed chairman so much latitude once people figure out how bad AG screwed up the job.

 
At 8:45 AM, Anonymous Anonymous said...

They should turn those military barracks that are shut down into "condo conversions" It would probably more than cover the cost of shutting these bases down :)

 

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