HaloScan.com - Comments

blogenfreude writes:
Jingle mail?
blogenfreude | Homepage | 03.17.08 - 11:13 am | #

Max writes:
What?! You didn't read through 1500 comments to give me a hat tip?!

I feel so slighted. :)
Max | Homepage | 03.17.08 - 11:15 am | #

Tanta writes:
What?! You didn't read through 1500 comments to give me a hat tip?!

I am like so lazy. It's a wonder y'all put up with me.
Tanta | 03.17.08 - 11:17 am | #

Jill writes:
I thought they were just burning the places down now?
Jill | 03.17.08 - 11:17 am | #

Elvis writes:
I think, given the choice, California would pick a 7.5 earthquake versus the impending real estate disaster that is unfolding. This one will not be a happy ending...
Elvis | 03.17.08 - 11:18 am | #

MadJock writes:
Hey, Discovery Bay guy just looked at the Fed giving someone $30billion to take BS - why shouldn't he get his piece too?

It's wrong, of course, but as someone who has always played by the rules and still gets stiffed, I have to say that next opportunity I get to screw to big guys so I can get a chunk of free money, I'll probably take it.
MadJock | 03.17.08 - 11:18 am | #

MadJock writes:
Who am I kidding - I'll always be a sucker.
MadJock | 03.17.08 - 11:18 am | #

ndk writes:
It doesn't make me feel vastly better about the situation that this recourse loan had some chance of becoming the Fed's non-recourse loan.
ndk | 03.17.08 - 11:19 am | #

Dr. Wu writes:
Great Bear Stearns Two-Buck Upchuck

Classic.
Dr. Wu | 03.17.08 - 11:20 am | #

energyecon writes:
Tanta you are a national treasure - "Two Buck Upchuck" damn near cost mea keyboard!
energyecon | 03.17.08 - 11:20 am | #

Tanta writes:
next opportunity I get to screw to big guys so I can get a chunk of free money, I'll probably take it.

Let me get this straight. You now believe that the big guys will be bailed out by us little guys.

This makes you so angry that you decide to stick it to the big guys, who will forward the invoice to the rest of us.

Thanks, I guess.
Tanta | 03.17.08 - 11:21 am | #

Tom Stone writes:
Tanta,this guy in Discovery Bay is just asking for pain.These types are just the perfect people to make an example of if you are a lender...
Tom Stone | 03.17.08 - 11:21 am | #

blackhat writes:
Because right there in the constitution it says you have not only the right to own rapidly appreciating assets that you paid for with other peoples money, but if they don't rapidly appreciate, other people will have to pay you compensation...right, the American way? geesh...
blackhat | Homepage | 03.17.08 - 11:21 am | #

Greg Weston writes:
Tanta, not everyone who walks away wants to be interviewed about it.

I have many more than two clients who have retained me for advice on walking away and to defend them in case of a deficiency action, and many more who have called me and I gave some informal advice too.

Most are quite able to make payments from labor income, which I think meets your classic "walking away" definition.

As for the Discovery Bay buyer, if his mortgage is purchase money, there can be no deficiency action.
Greg Weston | Homepage | 03.17.08 - 11:21 am | #

Rob Dawg writes:
Casey Serin is still free. Screwing lenders is still without consequences. At least they aren't repeating the story about students buying Helocing and paying off full recourse student loans and then walking away.
Until a few notorious borrowers do the perp walk things won't change.
Rob Dawg | Homepage | 03.17.08 - 11:22 am | #

M-F writes:
The guy is acting VERY rationally. Why will the lender go to the trouble of going after the guy when the government will pick up whatever they lose?

This is just the beginning of the bailout... these bonds are going to end up in some newly formed National corporation which will write off the losses and bill the taxpayer.
M-F | Homepage | 03.17.08 - 11:22 am | #

Greg Weston writes:
Here is my post on California's antideficiency law, CCP 580B

http://gweston.wordpress.com/200...ck-to-the-bank/
Greg Weston | Homepage | 03.17.08 - 11:23 am | #

Andrew Foland writes:
I believe Tanta was looking at this line from the post:

"I refinanced a couple of years ago and pulled out $100,000 and put in a fabulous pool,"
Andrew Foland | Homepage | 03.17.08 - 11:24 am | #

w writes:
It will all end soon with interest rates rising as the world rejects our debt. Welcome to Hell. I am soooo close to buying a bunch more gold even though it is so expensive now. I figure it is hedged by what I bought at much better prices.
w | 03.17.08 - 11:25 am | #

DC in LBV writes:
Greg, the Discovery Bay owner made his loan recourse by doing the $100k cash-out refi.
DC in LBV | 03.17.08 - 11:26 am | #

bacon dreamz writes:
now that's ruthiness.
bacon dreamz | 03.17.08 - 11:27 am | #

Interesting Times writes:
To Banks:

Remember, the present value of future cashflows from a reduced principle on a mortage is much higher than the current value of a foreclosed house that has been gutted.
-- Paraphrasing our buddy Ben.
Interesting Times | 03.17.08 - 11:32 am | #

Elaine writes:
Tanta got a nod from Krugman in his blog:

http://krugman.blogs.nytimes.com...ixed-metaphors/
Elaine | 03.17.08 - 11:34 am | #

Meltdown Man writes:
Stop me, oh, stop me
Stop me if you think that youve
Heard this one before
Stop me, oh, stop me
Stop me if you think that youve heard this one before

Nothings changed
I still love you, oh, I still love you
...only slightly, only slightly less than I used to, my love

-The Smith's

...must have been upside down in a mortgage when he wrote it.
Meltdown Man | 03.17.08 - 11:41 am | #

Tanta writes:
Prediction:

Eventually we will be treated to heart-rending stories of borrowers who were pursued to the ends of the earth with deficiencies, garnishment, etc., ruining their lives for decades to come--poor victims don't even have fabulous pools to enjoy any more. Everybody who encouraged people to walk away from recourse loans will not be around to say, ooops, maybe we gave you some bad advice.
Tanta | 03.17.08 - 11:41 am | #

Greg Weston writes:
Sorry, I missed that line.

My view is that the loss of anti-deficiency protection for a purchase money mortgage is something that has to be clearly disclosed during a refinance of such a mortgage, and if it isn't clearly disclosed then the protections of 580b extend to refinanced mortgage.

Otherwise we get the arbitrary result that two people who bought the same house for the same price and have roughly the same mortgage are in much different financial positions simply because one refinanced.
Greg Weston | Homepage | 03.17.08 - 11:42 am | #

mock turtle writes:
the two buck upchuck's not what makes me want to puke.

the fed move to open the lending window directly to primary dealers has market manipulation written all over it

is there anybody out there that seriously doubts the existence of the plunge protection team???

last night asian and euro markets got clobbered.

but what happened on wall street today matches what Greenspan, Gerry Corrigan (pres of ny fed in 80s) and John Phelan (NYSE) did in the crash of 87 and again in 89.

let's face it the broker dealers can manipulate the market if they have access to cash...and they do.

http://www.time.com/time/ magazin...promoid=googlep

anybody who "plays" the stock market during major market reversals better have access to inside information or be a genius AND one heck of a soothsayer

nearly a year ago i argued this point, here, with banker...i stand by my belief... form time to time,it's a rigged game, until the bottom falls out.

at some point the ppt either relents or we go weimar.
mock turtle | 03.17.08 - 11:42 am | #

byzantine_ruins writes:
This makes you so angry that you decide to stick it to the big guys, who will forward the invoice to the rest of us.

Bank run situation. Gonna get invoiced anyway, why not cash out? If they're parting out the American Republic, it seems like you can either get a slice or not -- there won't be a compensatory award for good behavior after all the nation's wealth has been handed out.
byzantine_ruins | Homepage | 03.17.08 - 11:44 am | #

saul writes:
Guatanteed to win if you play the market like she did

http://www.bloomberg.com/apps/ne...Gwu8& refer=home
saul | 03.17.08 - 11:44 am | #

ken melvin writes:
If one makes a distinction between sub-prime and refinancing, what's the size of each relative the other?
ken melvin | 03.17.08 - 11:44 am | #

vader writes:
Tanta

You are so 90s, what will happen is that the Big Guys will think they are sticking it to the poor guys, the poor guys will stick it to the rich who will smile and try to put the invoice out to average joe who will simply smile and speak of turnips and blood. Then all the fancy financial instruments will collapse bankrupting the now formally rich.

A new bankruptcy law will be enacted allowing banks and such to claim joe sixpacks virgin daughters to become 'working girls' for the new growth industry. J6P will laugh again at anyone thinking his daughters are virgins.
vader | 03.17.08 - 11:44 am | #

Bb writes:
The government issues a ruling that all loans are reassessed at the "current market price" and the big boys just loose. The banks get their money, we create a floor for the housing market and maybe things would stabilize a bit.

what do you all think?
Bb | 03.17.08 - 11:54 am | #

Outsider writes:
Thank you Tanta for further popping a hole in that walkaway theory. Keep them pinned to the wall.

And I ditto, the Two Buck Upchuck was phenomenal.
Outsider | 03.17.08 - 11:55 am | #

Phoenix Woman writes:
Everybody who encouraged people to walk away from recourse loans will not be around to say, ooops, maybe we gave you some bad advice.

Oh, they'll be around, but they're going to be the ones preaching the virtues of 'moral hazard' for Joe and Jane Sixpack while explaining why the concept of 'moral hazard' should never be applied to big banks.
Phoenix Woman | Homepage | 03.17.08 - 11:56 am | #

Tanta writes:
Tanta, not everyone who walks away wants to be interviewed about it.

No. Really?

That doesn't excuse recycling anecdotes in the name of calling a "trend."
Tanta | 03.17.08 - 11:57 am | #

Malaclypse writes:
GW: "My view is that the loss of anti-deficiency protection for a purchase money mortgage is something that has to be clearly disclosed during a refinance of such a mortgage, and if it isn't clearly disclosed then the protections of 580b extend to refinanced mortgage."

Is your view shared by judges?
Malaclypse | 03.17.08 - 11:58 am | #

Barley writes:
I think this chap should call Ben and ask to approach the Fed's window. Then he can pay back the Bank and will be on a level playing field with all the other investors. After all its just about greed and hedonism.

I wonder, will the Fed open another Agency for folks to go to in a distressed stake and offer loans at current market T rates - 1.6%
Barley | 03.17.08 - 12:00 pm | #

5 Foot 3 Pablo Picasso writes:
"Is your view shared by judges?"

Very nice. Six words, right to the heart.
5 Foot 3 Pablo Picasso | 03.17.08 - 12:02 pm | #

Barley writes:
Lets do some math:

30B divided by the US average house price = X number of homes saved
Barley | 03.17.08 - 12:02 pm | #

Anonymous writes:
Elvis-

Prediction:
CA will experience The Big One before the end of this decade that will take this housing bust to another level entirely.
Anonymous | 03.17.08 - 12:03 pm | #

blowncue writes:
Oh dear, Joe Granville's on the wire and used the word "crash."

That's it! B o t t o m !

(thud)

Oh, props to the analyst from CS who asked JPM, "BSC does own the building, doesn't it!" Dotting those i's, and crossing those t's.

Of course, she didn't ask if BSC owned it free and clear.
blowncue | 03.17.08 - 12:03 pm | #

M-F writes:
Never mind any of this, most people are far more interested in what Barack Obama's minister said in church 6 or 7 years ago.

We get the government we deserve I guess.
M-F | Homepage | 03.17.08 - 12:04 pm | #

will writes:
Walk away or not it is just a matter of time before we have price discovery based on incomes in the local of the real estate.

It is also a matter of time before we discover our economy is f===ed with no more funny money b/c:

1- outsourced industry
2- destroyed banking
3- underfunded education
4- destroyed the dollar
5- no energy policy
6- major section of the population has insane debt
7- neglecticted our infrastructure
8- huge deficit
9- unwinnable expensive war, that if we stop paying for oil will go through the roof

did I miss anything?

expect more pain.
will | 03.17.08 - 12:06 pm | #

blackhat writes:
I think there is intellectual laziness on the part of many journalist...the implication from the lendor's unique spin is that the crisis is in fact consequence because of this mythical bipedal fast walking creature, the ruthless borrower; but of course, the borrower and the lendor may have made an equally poor long-term business decision, or circustances overcame the borrower's ability to pay, like circumstances overcame the lendor's ability to lend intelligently. But now that it is in the media, we will have real fast-walking pidal creatures walking away and that in turn will create "problems", not symptoms, and causes, not effects. Next step is legislation protecting lendor's from ruthless borrowers, like recourse...oh, wait.
blackhat | Homepage | 03.17.08 - 12:07 pm | #

Bob_in_MA writes:
The market was almost even for a while, looks like the U.S. has decoupled from the U.S.

I've been reading Galbraith's The Great Crash. Somewhat analogous to the walking away stories were the stories of suicides in 1929. He shows there was no real increase at all, numbers at the end of 1929 were actually smaller than when the market was going up a few months earlier.

But they did jump up over the next few years.
Bob_in_MA | 03.17.08 - 12:07 pm | #

Douglas Watts writes:
I remember, doo doot.
I remember, doo doot.
They had a swimming pool.
And they said it couldn't happen here.

"Return of the Son of Monster Magnet."
From the Mothers' album, Freak Out.
Douglas Watts | Homepage | 03.17.08 - 12:07 pm | #

AlanY writes:
Greg, if you know of any case law supporting that position, I'd be interested in seeing it.

Strictly speaking, the two individuals in your example are not in the same position... the one who was able to refinance enjoyed quite a different aggregate risk. Less risk is worth money and can be priced.
AlanY | 03.17.08 - 12:09 pm | #

ron writes:
Latin stocks are taking a good hit this morning along with Oil, Silver, combined with buying YEN all show signs of carry trade unwind and margin calls. Hedge funds are a proxy for Pension funds and other money pools, interesting times.
ron | Homepage | 03.17.08 - 12:10 pm | #

Tanta writes:
I've been reading Galbraith's The Great Crash. Somewhat analogous to the walking away stories were the stories of suicides in 1929. He shows there was no real increase at all, numbers at the end of 1929 were actually smaller than when the market was going up a few months earlier.

Thanks for bringing that up, Bob, I thought about that "suicide myth" this morning and couldn't remember where I had read about it. (Duh.)

I'll dig out my copy--I believe I own one--and maybe post some exerpts.
Tanta | 03.17.08 - 12:11 pm | #

Cal writes:
What is up with NCC?
Cal | 03.17.08 - 12:11 pm | #

Canuck writes:
Down 170, up 40, now down 120...

As Atrios likes to say, "WHEEEEEEEEEEEE!"
Canuck | 03.17.08 - 12:12 pm | #

blackhat writes:
I like the way cnn.com puts it "DOW down but off lows", you know low like zero and stuff. We're not at zero. We exceeded analysts expectations. Hurray!
blackhat | Homepage | 03.17.08 - 12:14 pm | #

Bob Dobbs writes:
I read the Nor-Cal walkaway story yesterday but didn't pick up on the reuse-of-sources; I guess an upright military couple makes a nice poster child. But it's not the media's job to create poster children. Thanks for researching that, Tanta.

The question the media should be asking is, what happens to the housing market if interest rates rise, oh three percent. Anyone care to bet that they won't?
Bob Dobbs | Homepage | 03.17.08 - 12:14 pm | #

Greg Weston writes:
I don't know a case where my theory has been tested, but here is some support for a broad reading of 580b

--The antideficiency statutes are to be construed liberally to effectuate the legislative purposes underlying them, including the policies " '(1) to prevent a multiplicity of actions, (2) to prevent an overvaluation of the security, (3) to prevent the aggravation of an economic recession which would result if creditors lost their property and were also burdened with personal liability, and (4) to prevent the creditor from making an unreasonably low bid at the foreclosure sale, acquire the asset below its value, and also recover a personal judgment against the debtor.'--

Bank of Am. v. Graves, 51 Cal. App. 4th 607, 611 (Cal. Ct. App. 1996)

A broad reading of 580b would strongly support purposes #2 and #3.
Greg Weston | Homepage | 03.17.08 - 12:14 pm | #

Markel writes:
Why have Bernanke, Paulson, and several lender CEOs recited the Tale of the Ruthless Borrower?

Either, a) they have access to as-yet-unpublished data or b) they are simply following the same stories repeated over and over, and are idiots.
Markel | 03.17.08 - 12:15 pm | #

cd writes:
Cal-NCC chart
http://finance.yahoo.com/q/bc?s=...l=on&z=m&q=l& c=

Looks like trouble..
cd | 03.17.08 - 12:15 pm | #

Tanta writes:
There were rumors last week that NCC was trying to sell itself to JPM. Therefore, the current theory is that since JPM just did its rescue duty for the week, NCC is "running out of options."
Tanta | 03.17.08 - 12:17 pm | #

Anonymous writes:
This clown needs to be put in a cell with the Booty Bandit and let them work it out.
Anonymous | 03.17.08 - 12:18 pm | #

Crispy&Cole writes:
pER ncc - "this is ridiculous, absolutely ridiculous.."
Crispy&Cole | Homepage | 03.17.08 - 12:19 pm | #

germansausages writes:
It could be total BS but when WS says subprime loans can it be that they mean something other than subprime mortages, for example subprime loans for WS(hedge funds,lbo's,PE) or is that the wrong question
germansausages | 03.17.08 - 12:19 pm | #

ac writes:

I think people should honestly ask themselves the question -- "If I'd bought an $800,000 house in California in 2005 that I could now maybe sell for $500,000, would I walk away?"

I hate to say it, but for me the answer would probably be yes if I could get a similar rental for far less than my mortgage payment.

That said, I'm not in a position where I'm heavily reliant on credit to pay the bills, so the credit rating means less to me.

ac | 03.17.08 - 12:21 pm | #

Cal writes:
Ty Tanta
Cal | 03.17.08 - 12:21 pm | #

Bob_in_MA writes:
My favorite depression book is titled, Oh, Yeah! and is filled with bullish/reassuring quotes from people in government and business. Someone is almost certainly working on a similar title now. If so, I have this to contribute, from Sunday's NYT: Look Deeper. You’ll See a Bright Side

Sure, the title alone is worth inclusion, but halfway down, there's a gem of a subhead: THE MELTDOWN IS LARGELY CONTAINED

I just about died laughing when I saw that.
Bob_in_MA | 03.17.08 - 12:21 pm | #

zaleriana writes:
"to prevent the aggravation of an economic recession which would result if creditors lost their property and were also burdened with personal liability"

Is that really what the case says? If so, the court did a very poor editing job--saying the opposite of what it meant.
zaleriana | 03.17.08 - 12:22 pm | #

Eric writes:
OT

What I find bizarre is that BSC is trading at > $2. Based on chances that someone steps in to buy the co at more than $2 / share?
Eric | 03.17.08 - 12:22 pm | #

FFDIC writes:
GOOD NEWS! GOOD NEWS! GOOD NEWS!
********************************
Goldman Sachs Says Abby Cohen to Stop Making S&P 500 Forecasts
http://www.bloomberg.com/apps/ne...HG9g& refer=home
FFDIC | 03.17.08 - 12:22 pm | #

energyecon writes:
Not sure if this is a "Whocoodanode?" or a "Whodathunk?" tag...

Goldman Sachs Says Abby Cohen to Stop Making S&P 500 Forecasts
By Lynn Thomasson

March 17 (Bloomberg) -- Abby Joseph Cohen, the most bullish investment strategist on Wall Street this year, will stop making Standard & Poor's 500 Index forecasts for Goldman Sachs Group Inc.

She was succeeded in the role by David Kostin, Goldman's U.S. investment strategist, spokesman Ed Canaday said in a telephone interview. Kostin today predicted the S&P 500 may fall 10 percent to 1,160 before rebounding to 1,380 by year's end. Cohen, as chief investment strategist, last predicted the benchmark for American equities would end 2008 at 1,675, representing a 32 percent rally from its current level.

[snip]
energyecon | 03.17.08 - 12:23 pm | #

energyecon writes:
Curse you FFDIC! ;-)
energyecon | 03.17.08 - 12:23 pm | #

REBanker writes:
Ok, take it from someone on the front lines on this...peopel are walking away in droves. Why? Because everywhere they look, read and hear, the media is suggesting that these loans should not have been made, the borrowers were duped and as such, these notes are dubious and are not credible. They always have been folks who were more or less numbers driven like the chap in the article, but the diffrence now is so many mor people feel justified by taking the same position because it's obviously someone elses fault; originator, lender, investor, wall street, rating agency, government, the man,...
REBanker | 03.17.08 - 12:24 pm | #

Greg Weston writes:
Yes that is a typo in the opinion, it should say debtor rather than creditor.
Greg Weston | Homepage | 03.17.08 - 12:25 pm | #

Bob_in_MA writes:
ac writes:
I think people should honestly ask themselves the question -- "If I'd bought an $800,000 house in California in 2005 that I could now maybe sell for $500,000, would I walk away?"

I think my answer would be somewhat dependent on how much I had in other assets that they could possibly go after. If had less than $50,000 outside of retirement funds, I would probably walk. The ethics/morality wouldn't mean a thing to me. We live in a world where the big guys make the rules and stack the deck. Screw 'em.
Bob_in_MA | 03.17.08 - 12:25 pm | #

bacon dreamz writes:
Ok, take it from someone on the front lines on this...peopel are walking away in droves.

yes, we've heard that reasoning before. we need DATA!
bacon dreamz | 03.17.08 - 12:26 pm | #

Crispy&Cole writes:
We are all Abbey now!
Crispy&Cole | Homepage | 03.17.08 - 12:26 pm | #

Binko writes:
The PPT can pump away at the toilet plunger all they like. Sure it may buy the bigshots a little time to escape with their personal stash of loot. But it won't change the big picture. The mother ship is gonna crash and there's only enough lifeboats for first class!!

It will take a couple more years of bubble deflation for the dumb and the dumber to finally realize that a house is for living in. I love the guy who wants to dump his overpriced albatross and start build equity in someplace new. Building equity? Now?

But the next big story is going to be about rising food prices. It's the next bubble. The rich are still plenty rich and they have to park their dough somewhere. Real Estate is out and commodities are in! Watch for food prices to soar just as tons of office drones, fast food workers and retail clerks start losing their jobs.

I wish I would have gone to UC Davis and majored in agriculture rather than reading Classics at Berkeley. Farmers should do very well indeed for the next decade or more.
Binko | 03.17.08 - 12:26 pm | #

MadJock writes:
As Byzantine said - I'm going to get stuck with the invoice anyway, why be the only honest person in the crowd and pay for the sins of others? And if I'm thinking that, I guarantee you a lot of others are too.

The analogy is the airplane that catches fire on the runway. The survivors are those who climbed over grandmothers and threw children out of the way to get to the exits. The nice people who were polite and waited their turn are dead. Sure, most feel guilty as hell afterward, but they are alive.

Anyway, you will note my follow up post indicates that I am one of those mugs that always pays his debts, but I am fed up with the situation. So fed up, I'm prepared to have things get a lot worse for me than they need to as long as it gets a lot worse for others who need to be taught a lesson.

Hence the 'We have to bail out the banks/owners because otherwise it will be disastrous for the economy' argument fails to chime with me. I don't care, I'm prepared to pay for the pleasure of watching the people who deserve it get thrown in the poorhouse.
MadJock | 03.17.08 - 12:27 pm | #

Bob Dobbs writes:
"Ok, take it from someone on the front lines on this...peopel are walking away in droves. "

Where are you, REBanker? Are you talking regionally, or in a position to talk nationally. And what's your data source?

I only ask because I care....
Bob Dobbs | Homepage | 03.17.08 - 12:27 pm | #

REBanker writes:
"I would probably walk. The ethics/morality wouldn't mean a thing to me. We live in a world where the big guys make the rules and stack the deck. Screw 'em."

My point.
REBanker | 03.17.08 - 12:27 pm | #

cd writes:
great scene from the Natural-
"My father always said I should be a farmer" Redford-Nothing like the farm, the chickens, smell of fresh cut wheat etcc

Note to myself-Buy farm soon..
cd | 03.17.08 - 12:29 pm | #

Bob Dobbs writes:
"I wish I would have gone to UC Davis and majored in agriculture rather than reading Classics at Berkeley. Farmers should do very well indeed for the next decade or more."

Binko, come on down to UC Santa Cruz and apprentice on the organic farm. It's only three or six months, room and board included (well, granola and a tent, anyway)....

"The Farm" sells shares of its produce to the community for weekly pickup. And you can bet I renewed my share this year.
Bob Dobbs | Homepage | 03.17.08 - 12:29 pm | #

the_economist writes:
Orgasmic farming?...sounds good to me!! Where do I sign up?
the_economist | 03.17.08 - 12:31 pm | #

zaleriana writes:
"I'm prepared to pay for the pleasure of watching the people who deserve it get thrown in the poorhouse."

Who fits that category? Eveyone involved in a new mortgage in the past 3 years? Only those who wanted to "make money"? Where's the line?

And, I'm willing to pay and I'd like to see the culpable suffer, but I'm not in for a global economic meltdown. Nor should you be. Letting things collapse would be much worse for all of us than you seem to think.
zaleriana | 03.17.08 - 12:31 pm | #

Crispy&Cole writes:
LEH shareholders are walking away, that much I know!
Crispy&Cole | Homepage | 03.17.08 - 12:31 pm | #

zaleriana writes:
"Farmers should do very well indeed for the next decade or more."

Hey, maybe some good can come of it--the end of farm subsidies and ill-advised protectionism?
zaleriana | 03.17.08 - 12:33 pm | #

REBanker writes:
"I only ask because I care...."

Thanks. My data source is my contacts with servicers, loss mit folk, buyers and sellers of distressed assets and my own bank. Someone on this blog would call this anecdotal evidence, but would be similar evidence used same to predict much of the turmoil that has happened around the mortgage industry.
REBanker | 03.17.08 - 12:33 pm | #

Bob Dobbs writes:
"the_economist writes:
Orgasmic farming?...sounds good to me!! Where do I sign up?"

Not unless you give it up for a basket of ripe blueberries.... though some do :-).

Just fyi:

http://casfs.ucsc.edu/
Bob Dobbs | Homepage | 03.17.08 - 12:34 pm | #

ac writes:

"I would probably walk. The ethics/morality wouldn't mean a thing to me. We live in a world where the big guys make the rules and stack the deck. Screw 'em."

Doesn't the mortgage contract basically give you the legal right to walk away? Or do I misunderstand? (I don't know much about mortgages.)

If I'm abiding by the contract, that sounds relatively moral and ethical to me.

ac | 03.17.08 - 12:35 pm | #

prufrock writes:
"the borrower and the lendor may have made an equally poor long-term business decision"

Absolutely, Blackhat. This type of borrower should never have been qualified for a mtg and the lender should never have lent.

I cannot believe the stupidity of these transactions.

I used to hear about these "no income verification" mortgages and I thunk to myself, They can't really mean that there's NO income verification, but, apparently, that's what happened.

Now, these people are walking away!!!?? Just goes to show that they never should have been lent to in the first place.

And, giving these low grade borrowers zero $ down loans 90/10 and then putting them into horrible ARMS. The stupidity is daunting and now, we all pay.
prufrock | 03.17.08 - 12:36 pm | #

Clyde writes:
The JPM takeout premium has vaporized for CIT and National City, CIT down 25% and NCC 34%.
Clyde | 03.17.08 - 12:36 pm | #

Sebastian writes:
energyecon posted: "...She was succeeded in the role by David Kostin, Goldman's U.S. investment strategist, spokesman Ed Canaday said in a telephone interview. Kostin today predicted the S&P 500 may fall 10 percent to 1,160 before rebounding to 1,380 by year's end. Cohen, as chief investment strategist, last predicted the benchmark for American equities would end 2008 at 1,675, representing a 32 percent rally from its current level."

Sounds like even Wall Street has embraced the bear market.:) Pretty much leaves me as the only investor in denial left in America.:)

S.
Sebastian | 03.17.08 - 12:37 pm | #

Shnaps writes:
Why do I feel youwalkaway handed this article to Caroyln Said on a silver platter?
Shnaps | Homepage | 03.17.08 - 12:38 pm | #

lama writes:
Madjock,
I have a relative who is attempting to negotiate with her bank in good faith. She has even borrowed money from relatives to make payments (I'm a relative). She has been met with nothing but arrogance. The bank's servicer would not budge one bit on the interest rate (8.9% and on the rise) or terms.
That makes me wonder if the servicing company's software has the category "Sucker" on one of its drop down menus.
lama | 03.17.08 - 12:38 pm | #

cd writes:
c&c-Leh? buy end of day-take profit after rate cut?
cd | 03.17.08 - 12:39 pm | #

Clyde writes:
ac, knowing what we know now, knowing that our tax dollars are bailing out incompetent greedy management teams, yes I will consider walking. Abby Cohen, pfffftt...must pack a lot of sizzle and move a lot product..
Clyde | 03.17.08 - 12:40 pm | #

ugh writes:
Jingle mail doesn't bother me.

Here's what bothers me. I read investment groups are buying large pools or mortgages for 50% of value.

I wouldn't be surprised in the least to learn banks/ibs are using the investment groups as straw buyers to maintain control of the property at a discovered price and the banks/ibs are still getting the losses subsidized.

Rinse, repeat. Remember, these are pigmen.
ugh | 03.17.08 - 12:40 pm | #

Douglas Watts writes:
Hey, maybe some good can come of it--the end of farm subsidies and ill-advised protectionism?
zaleriana | 03.17.08 - 12:33 pm | #
--

And then we can all work for 7 days a week for 25 cents an hour and still have to beg for food.

Yippee.
Douglas Watts | Homepage | 03.17.08 - 12:40 pm | #

Marcus Aurelius writes:
People will be walking away from all kinds of trouble, shortly. The recently revised bankruptcy laws indicate that the banks knew how bad this would end up, so they took the opportunity to skew the laws in their favor while everybody was drunk on Kool-aid.

Fortunately, the public is reawakening from the Kool-aid induced stupor to reexamine the power and value of the ballot box. When critical mass of people get hungry, or even think they will be hungry, the law will quickly be revised to favor those in the majority.

Unless the powerful can very quickly make bankruptcy a felony.
Marcus Aurelius | 03.17.08 - 12:41 pm | #

borkafatty writes:
I bet the shredders are working over time at B-S as we speak....And we are not talking small office shredders...the truck mounted type.
borkafatty | 03.17.08 - 12:41 pm | #

w writes:
I figure that there will be a difference between farmers who grow commodity crops and those who grow specialty crops and fresh produce. Commodities can be stored and shipped worldwide. Costs of production will be more easily passed along. If you grow fresh produce you have a much higher cost of production and are dealing with the huge increases in fuel, fertilizer and labor costs it is much harder to pass those costs on to the consumer until the supply drops. So until other farmers go out of business or cut back to reduce supply profits will be elusive. I am assuming that hotels and restaurants will need less blueberries and organic baby lettuce for a while.
w | 03.17.08 - 12:42 pm | #

Tanta writes:
Someone on this blog would call this anecdotal evidence

Someone on this blog does not object to anecdotal evidence as such, as long as we're all clear about what the anecdotes actually seem to be telling us.

I still think there's a meaningful distinction to be made between people who let the house go to FC because they can no longer afford the payments and have no other option--they can't sell it--and people like Mr. Discovery Bay who just don't believe in losing a bet.

When the former become tarred with the same brush as the latter, we get the Welfare Cadillac Syndrome.

So excuse me for not being terribly impressed by your "front line" stories, since I've never disputed that people are giving up and going to FC all over the place.

Did you read the whole Chronicle story? Even this youwalkaway.com outfit claims that 70% of its customers are there because they can't afford their mortgage payments.

You Walk Away has served slightly more than 500 people in its 2 1/2 months of operation, Maddox said.

Maddox said 70 percent of his customers are financially floundering, while 30 percent made an economic decision to walk away.

The current administration is obviously seriously invested in making us all ignore financial distress and focus instead on "abusers" like Mr. Discovery Bay. I therefore remain interested in responsibly-reported data that helps us break down this "walk away" category a bit.

Some people's definition of "walking away" seems indistinguishable from any other foreclosure.
Tanta | 03.17.08 - 12:42 pm | #

SGV writes:
http://tiny.cc/uYDyQ

March 17 (Bloomberg) -- U.S. stocks are on the brink of the broadest bear market in four decades as investors ignore the strongest buy signals in almost 20 years.
SGV | 03.17.08 - 12:43 pm | #

prufrock writes:
Marcus,

McCain, Hillary, Obama: Who's best able to captain the economic ship?

I'd say none of them.
prufrock | 03.17.08 - 12:44 pm | #

ghostwriter writes:
Goldman Sachs Says Abby Cohen to Stop Making S&P 500 Forecasts (Bloomberg)

``She will continue to meet with our clients around the world and provide commentary on financial markets focusing more on longer-term market activity,'' Canaday said in an e-mailed statement.

Longer-term, eh, like around 2025.
ghostwriter | 03.17.08 - 12:44 pm | #

Tanta writes:
Doesn't the mortgage contract basically give you the legal right to walk away? Or do I misunderstand? (I don't know much about mortgages.)

No. Yes. (After all this time reading this blog???)

http://calculatedrisk.blogspot.c...ge- pricing.html
Tanta | 03.17.08 - 12:46 pm | #

Average Joe writes:
For all you longterm investors:

Go back 10 years ago today and buy the S&P500. You acheived a roughly 3.4% return, including dividends.

So you got in in 1998. You were in during the stock boom, you also were in during the DOW 14,000 last summer. Nice work.

Going forward the next 10 years. Do you anticipate that a buy-and hold strategy will do better or worse?

Now consider dollar cost averaging. My guess is you did much worse than 3.4% since you were buying above trendline more often than below.

(Hint: pray for a market crash so you can spend time buying cheap stocks. If it werent for cheap buying in 2002,2003, your returns would have been even uglier.)
Average Joe | 03.17.08 - 12:47 pm | #

Marcus Aurelius writes:
prufrock | 03.17.08 - 12:44 pm

____

You can't "captain" a ship that is floundering on the rocks.

The best manager of the lot: Clinton.

The best statesman of the lot: Obama

The most likely to abandon reality at the drop of a political hat: McCain.

You choose.
Marcus Aurelius | 03.17.08 - 12:49 pm | #

other Jim writes:
The guy is acting VERY rationally

uh, no. by his own words, "Now I've got this fabulous pool and fabulous house, but it's not worth anything...."

I remember a time, maybe three months ago, when a fabulous house and pool were , well, fabulous, and the envy of everyone on the block.

Contrary to what we are being led to believe, money is not the only measure of value, some folks think a roof and warm rooms in the winter is a thing of value in and of itself.

From the tone of the article, this guy is able to pay for shelter but has discovered a scam to get it for free. I suppose in a few more months, we will be paying the cost of his shelter via the budget line item for prisoner maintenance at Folsom.
other Jim | 03.17.08 - 12:49 pm | #

blackhat writes:
Sebastion,

We're all in da Nile.

You're not alone. Sorry. Couldn't resist.

But I'm bullish on utilities...
blackhat | Homepage | 03.17.08 - 12:49 pm | #

prufrock writes:
Did you read the whole Chronicle story? Even this youwalkaway.com outfit claims that 70% of its customers are there because they can't afford their mortgage payments.

But, why can't they afford it? Because they could never afford it to begin with and they took funky 90/10 ARMS, not understanding what an ARM was. And, these mtgs should never have been given to them because they bought at inflated prices. These borrowers were duped with their eyes wide open.

No?
prufrock | 03.17.08 - 12:49 pm | #

M.Z. Forrest writes:
At some point we will have to recognize the fiction for what it is. Not a single mortgage was offered on the personal faith and credit of the borrower, not a one. If they had been, the interest rate would have been around 17%. Borrowers aren't idiots either. They know the only reason they go the money is that the bank thought they could afford the housing cost or they could transfer the housing cost to a renter. Well, the borrower was wrong, and they are defaulting. There are plenty of homebuilders doing the same right now on undeveloped lands they have no hope of developing. No one is accusing them of being ruthless. Ruthless is taking a loan on a car, not making a payment on it, and returning it with a 100,000 miles on it. Refusing to continue to stick money in a non-productive asset is just business.
M.Z. Forrest | 03.17.08 - 12:50 pm | #

Interesting Times writes:
prufrock - there should be some pre-qualification exam before anyone is allowed to sign a mortage contract.
Interesting Times | 03.17.08 - 12:50 pm | #

KnotRP writes:
It takes a ruthless lender, to make a ruthless borrow.

WC Fields said it best: you cannot cheat an honest man.

A pox has apparently arrived on both their houses...

two buck upchuck...tanta, you have a gift.
KnotRP | 03.17.08 - 12:51 pm | #

Windowdog writes:
I feel so unhip, just paying my fixed rate 6%ish mortgage month after month. Maybe if I stop paying long enough the bank will let me have the house for free.
Windowdog | 03.17.08 - 12:51 pm | #

Windowdog writes:
Don't pools actually decrease, or at most don't effect, the price of a house in many cases? Not a broker but I wasn't a fan of most of the pools I saw when buying. Seemed like a waste of a perfectly good yard.

Of course none of them were "fabulous".
Windowdog | 03.17.08 - 12:54 pm | #

Sebastian writes:
blackhat said: "But I'm bullish on utilities..."

True story. I have a wealthy uncle who made most of his money from stock investing. He started out buying utility stocks in late 1974.

I'm not as cautious as that (I prefer more growth), but I always keep that story in mind.

S.
Sebastian | 03.17.08 - 12:55 pm | #

Rob Dawg writes:
"I wish I would have gone to UC Davis and majored in agriculture rather than reading Classics at Berkeley. Farmers should do very well indeed for the next decade or more."

[Personal note: My kid got her UCD (crop science) acceptance on Friday.] The industry is hurting. The "green revolution" generation is retiring and there is almost no one in the gap between them and the newfound popularity of the subject. The new generation are more like doctors and engineers than anything. Microclimate engineering, hybrid differentials on the same field using precision GPS and satellite data, diagnostic lab work to identify problems in chemistry or biology. We may have them to thank for growing family vegetables on McMansion lots.

Regards, walking away. There might be a greater national good in encouraging walking away. When borrowers are too far underwater their staying and repaying is going to be anti-consumptive. With 2/3rds of the economy consumer derived this may not be the most productive use of their efforts.
Rob Dawg | Homepage | 03.17.08 - 12:56 pm | #

Tanta writes:
But, why can't they afford it? Because they could never afford it to begin with and they took funky 90/10 ARMS, not understanding what an ARM was. And, these mtgs should never have been given to them because they bought at inflated prices. These borrowers were duped with their eyes wide open.

There is no purpose to be served by responding to a request for facts by throwing out more generalizations.

Nobody here is or has ever argued that those ridiculous mortgages should ever have been made.

So we're foreclosing them, which some of us predicted a long time ago we'd have to do.

How is this "walking away"? My point was that any foreclosure at all is being interpreted as "walking away." What purpose is served by that rhetorical sleight of hand?
Tanta | 03.17.08 - 12:56 pm | #

Bob_in_MA writes:
"The Farm" sells shares of its produce to the community for weekly pickup. And you can bet I renewed my share this year.
Bob Dobbs

There are a lot of farms here that do that too. The problem is, we're in western Massachusetts. So you get lettuce, broccoli for a couple months, than some beans, etc, for a couple, than 40lbs of tomatoes during August and the first part of September, then some more lettuce and squash. Either you have to can (lots of fun) or have a huge freezer.
Bob_in_MA | 03.17.08 - 12:57 pm | #

BrantW writes:
I rent a house in Disco Bay! It's sort of like Mayberry. I could probably find out who that is....

By the way ....$1850/Mo. A number of houses just like the one I rent are listed at $620+.
BrantW | 03.17.08 - 12:58 pm | #

Marcus Aurelius writes:
I'm on the phone with a gold dealer a few minutes ago, and he's trying to talk me out of a straight purchase by telling me that I can leverage up to 400%. I keep telling him that right now, I don't do leverage. He thinks I'm an idiot. I think he used to be a mortgage broker/condo salesman.

Basically, it comes down to this: I'd rather be broke and free than broke and owned.
Marcus Aurelius | 03.17.08 - 12:58 pm | #

Bob Mologna writes:
Can anyone explain this to me? Apparently lenders are falling over each other to finance recreational boats. My father in law just bought a $40,000 bass boat with 10% down at 6% interest over 15 years and the lenders were in competition for his business. As soon as he put it in the lake the value dropped $10,000. Makes no sense to me.
Bob Mologna | 03.17.08 - 12:58 pm | #

RacerX writes:
Just for clarification the ruthless borrower has to

a)Be able to afford the mortgage

b)Home must be primary residence

In many of these "walk aways" you don't have both conditions.
RacerX | 03.17.08 - 1:00 pm | #

Tanta writes:
Don't pools actually decrease, or at most don't effect, the price of a house in many cases?

There are some areas and some properties in which a pool can add value. (There are areas in which it's an overimprovment and areas in which it's basically a requirement.)

I'm still trying to figure out how one can cost you 100 grand. That's truly a fabulous pool.
Tanta | 03.17.08 - 1:00 pm | #

blackhat writes:
Tanta,

Thanks for critical mind. I want data as well, not popular tear-jerker collages. I'm sure people are walking in greater numbers than before, but if only because they are being forclosed...in which case they are not really walking but being processed by foreclosure. It's a confederacy of dunces...
blackhat | Homepage | 03.17.08 - 1:01 pm | #

Average Joe writes:
"I have a wealthy uncle who made most of his money from stock investing. He started out buying utility stocks in late 1974."

I have no doubt this is true, but with a caveat.

I bet it would be more accurate to say that he "kept" most of his wealth by buying utilities.

For someone to "buy" enough to have alot, they first had to have the means to earn alot of money in the first place.

Buying utilities probably meant that someone who earned or had alot of money ended up with more because he invested rather than spent.
Average Joe | 03.17.08 - 1:01 pm | #

Bill in IL writes:
OT, but this was hilarious: AEI using Cato report to blame overregulation instead of fraud.
From Bloomberg:

"As Congress and the Fed administer aid to financial institutions that ignored the history of past cycles, policy makers around the country must change regulations that are targeted at aesthetically displeasing urban sprawl, but create harmful price volatility.

Getting us out of this mess requires short-term solutions, and the Fed is probably taking steps in the right direction by loosening liquidity constraints. For the long term, draconian land-use regulations must be reconsidered by local and state governments.

If not, it will only be a matter of time before we experience this all over again."

(Kevin Hassett, director of economic-policy studies at the American Enterprise Institute, is a Bloomberg News columnist. He is an adviser to Republican Senator John McCain of Arizona in his bid for the 2008 presidential nomination. The opinions expressed are his own.)
Bill in IL | 03.17.08 - 1:02 pm | #

Marcus Aurelius writes:
He must have filled it with Pellegrino.
Marcus Aurelius | 03.17.08 - 1:02 pm | #

other Jim writes:
These borrowers were duped with their eyes wide open.

No?

no. Lazy maybe but not duped.

having signed a mortgage contract oncer or twice, I sat there while the loan officer went through each piece of paper (I get my loans from my local bank branch, same loan officer the last 18 years). No, I didn't understand what each piece of paper really meant at that time, but I had the opportunity to take the package home and study it. I had the three day right of rescission paper explained to me. I had three days from the time of signing the papers to study the whole stack and decide if I really wanted to do this. In my humble opinion, most people, if given three days to study a contract, can come to a good decision about risking the next 30 years of monthly payments.

Now, if they are lazy like me, they don't bother, trust that nice person on the other side of the desk, and go buy an ice cream cone, thinking the sun will come up tomorrow.
other Jim | 03.17.08 - 1:03 pm | #

Sol writes:
This is a guy with a wife diagnosised with lupus, and two young children to support. The the scope of his 'delusion of grandure' is breathtaking. Besides walking away without consequences, he intends -

"After he retires from the Army, they hope to buy a house in his hometown of Louisville, Ky. In preparation for that shift, he's studying for a bachelor's degree via correspondence school and then plans to pursue an MBA.

With no housing expenses during the eight-month-plus foreclosure process, they can save for a down payment, they said. Since so many people are now swept up in foreclosures, they hope that lenders will extend some grace to people like them, they said."
Sol | 03.17.08 - 1:04 pm | #

prufrock writes:
My point was that any foreclosure at all is being interpreted as "walking away." What purpose is served by that rhetorical sleight of hand?

I guess I missed your point.

Yes, there can be "legit" reasons for a foreclosure. I suppose you mean foreclosures that normally occur in the course of business. But, I suppose those are not the foreclosures that are bringing down the economy.

As far as all foreclosures being painted with the same brush, I think that's the media's spin. Media is not differentiating reasons for foreclosure, & instead glomps everything together.
prufrock | 03.17.08 - 1:04 pm | #

Rob Dawg writes:
The problem is, we're in western Massachusetts. So you get lettuce, broccoli for a couple months, than some beans, etc, for a couple, than 40lbs of tomatoes during August and the first part of September, then some more lettuce and squash. Either you have to can (lots of fun) or have a huge freezer.
Bob_in_MA

Come September leaving zuchinni squashes on your neighbor's doorstep is considered littering. Lapinski Farms in West Springfield is for sale for $1m. Not too far from Derby's cider mill.
Rob Dawg | Homepage | 03.17.08 - 1:04 pm | #

Not so optimistic Joe writes:
Holy crap.

MF Global Shares Plunge on Concern Customers Are Pulling Funds

By Matthew Leising and Jeff Kearns

March 17 (Bloomberg) -- MF Global Ltd., the largest broker of exchange-traded futures and options, fell as much as 80 percent in New York trading on speculation clients are pulling money and as financial shares dropped to their lowest level in almost five years.

``There are concerns that their commodities prime brokerage group customers are pulling money out,'' said Michael Nasto, senior trader at U.S. Global Investors Inc., which manages $5 billion in San Antonio. ``The customers have concerns about the financial stability of the firm.''

Spokeswoman Diana DeSocio didn't immediately return a call for comment.

MF Global, based in Hamilton, Bermuda, fell $11.85 to $5.50 as of 11:55 a.m. in New York Stock Exchange composite trading, after falling as low as $3.64. The shares are down more than 80 percent this year.

The stock dropped 45 percent over two days last month after one of the company's traders lost $141.5 million on what the company said were unauthorized wheat futures trades. The plunge today came after Bear Stearns Cos. agreed to be acquired by JPMorgan Chase & Co. for $2 a share because a cash shortage threatened to bankrupt the company.

Other brokers also declined today. Interactive Brokers Group Inc., the securities firm that handles about a fifth of options bought and sold in the U.S., fell 26 percent. New York-based derivatives broker GFI Group Inc. fell 41 percent.
Not so optimistic Joe | Homepage | 03.17.08 - 1:05 pm | #

sdtfs writes:
I rent a house in Disco Bay! It's sort of like Mayberry. I could probably find out who that is....

I'm still trying to figure out how one can cost you 100 grand. That's truly a fabulous pool.

Really nice granite tile of imported Italian tile and distinctive brass work. I worked for a pool plumber for about a year in the 80's, the starter was about 30K, add double jacuzzi, waterfall, whatever gimmicks, could easily get there.

BrantW, satellite google map and look for the pool!
sdtfs | 03.17.08 - 1:06 pm | #

borkafatty writes:
Funny thing related to this...I just read Argentina, Brazil to drop U.S. dollar in bilateral commercial transactions....
so when does China take notice?...if this happens ....game over there is not a PPT in the world that could save us if China sends back our trillion plus...

Got Popcorn........My bad :) Actually let me rephrase that China comment....they have noticed.

http://news.xinhuanet.com/ englis...ent_7800121.htm
borkafatty | 03.17.08 - 1:06 pm | #

doom writes:
There are companies who are cancelling out consumers when the consumers aren't profitable for them. Phone companies who go back on their word to provide a service. Credit card companies who cancel your cards because you are smart enough to pay in full.

There are companies that promise to buy each other out and then back out because market conditions have worsened.

Oh, I get it. Only the corporations should have the right to cut there loses. That's OK. But if an individual decides that it may be in their best financial interest to not pay their mortgage......That's just wrong!

I see. They made a deal and they should stick to it. Even if they won't get back to even for a decade and a half and not save any money from now till then. But heck, they must pay their mortgage. It is their duty for America.
doom | 03.17.08 - 1:06 pm | #

Yalt writes:
Tanta writes:

I'm still trying to figure out how one can cost you 100 grand.

Well, to be precise he said he "pulled out $100,000 and put in a fabulous pool." He didn't quite say that's where the entire $100k went....
Yalt | 03.17.08 - 1:07 pm | #

Average Joe writes:
Back on Topic,

I have argued what Tanta seems to be hinting at: That people who can afford their mortgage will pay on an underwater property, much like we do on cars that devalue the moment you drive them off the lot.

I know of hundreds of homes in my city, if not thousands, who have empty houses, exact same models, selling for 200 grand less. They continue to plug on.

This is worse for the economy.

CR seems to suggest that many are in fact walking. I think, as Tanta suggests, that the vast majority of forclosures are due to inability to afford the home.

Anyone who bought a home they could afford seriously underbought in relation to their future buying ability. They will want to move up into a much nicer place, but will be stuck upsidedown. This will affect the housing market for much longer than most appreciate.
Average Joe | 03.17.08 - 1:07 pm | #

Sebastian writes:
Marcus Aurelius said: "I'm on the phone with a gold dealer a few minutes ago, and he's trying to talk me out of a straight purchase by telling me that I can leverage up to 400%. I keep telling him that right now, I don't do leverage. He thinks I'm an idiot. I think he used to be a mortgage broker/condo salesman."

A gold dealer, anxious to have you buy a lot of it? Sounds like a gold bubble, to me, if housing was any indicator.

S.
Sebastian | 03.17.08 - 1:08 pm | #

Douglas Watts writes:
There are a lot of farms here that do that too. The problem is, we're in western Massachusetts. So you get lettuce, broccoli for a couple months, than some beans, etc, for a couple, than 40lbs of tomatoes during August and the first part of September, then some more lettuce and squash. Either you have to can (lots of fun) or have a huge freezer.
Bob_in_MA | 03.17.08 - 12:57 pm | #
---

Same in Maine.

I won't be even planting until early May (peas) and Memorial Day (everything else).

What I decided on for seeds and vegetables this year was:

a) Varieties that do well in Maine's short season.
b) Varieties that store and freeze well and can be used in soups, stews and sauces.
c) Heirloom varieties that were bred for flavor and growing climate, rather than for being shipped in trucks across the United States.
Douglas Watts | Homepage | 03.17.08 - 1:10 pm | #

rich writes:
Dylan Rattigan said that the Fed went into Bear on Friday and told them that they were taking over their liabilities, and basically they had no choice.

This is what the FDIC does with a failed bank.

So, now the Fed is doing for failed investment banks what the FDIC does for failed commercial banks.

Who gave the Fed this authority?
rich | 03.17.08 - 1:10 pm | #

prufrock writes:
Now, if they are lazy like me, they don't bother, trust that nice person on the other side of the desk, and go buy an ice cream cone, thinking the sun will come up tomorrow.

Yes, other Jim, that's my point. The 3 day recission right is a caveat emptor.
prufrock | 03.17.08 - 1:10 pm | #

blackhat writes:
Most people will probably stay in the underwater property. Not important. It's the number of foreclosures where people couldn't or can no longer pay and the MBS crap linked to them, and the leverage of leverage and the unwinding of leverage--and the fact that in a 70% service-sector economy, we are all asking each other if we want fries with that...the answer of course is No, potatos cost too damn much!
blackhat | Homepage | 03.17.08 - 1:11 pm | #

Elaine writes:
New post about builder confidence.
Elaine | 03.17.08 - 1:12 pm | #

Tanta writes:
Yes, there can be "legit" reasons for a foreclosure.

No, I am not talking in terms of "legitimate" or "illegitimate."

I am talking about "You Walk Away" versus "The Bank Throws Your Ass Out."

Those thrown out by the bank will be a big mixed bag of hardship and foolishness and fraud and speculation and heart-breakers. Welcome to the Real Goddam World, where things are complicated.

But they all still got chased to the curb by the bank.
Tanta | 03.17.08 - 1:13 pm | #

KRISHNAN writes:
Why are the CNBC commentators repeatedly saying that commodities are getting "routed" today?.Really?With gold and oil at near record levels!!
KRISHNAN | 03.17.08 - 1:13 pm | #

other Jim writes:
prufrock - there should be some pre-qualification exam before anyone is allowed to sign a mortgage contract.

Seems like Tanta has mentioned a bizarre ritual that used to be done in some cases, a...what was it called...underwriting process?...where skilled practitioners examined ability to repay?..., some ancient task no doubt replaced by much more efficient automated software.
other Jim | 03.17.08 - 1:14 pm | #

Mook writes:
Just for clarification the ruthless borrower has to
a)Be able to afford the mortgage
b)Home must be primary residence

Yeah, but "afford" by whose definition? That of historical norms? The very phrase would make current holders of those mortgages hyperventilate. How many of those in CA who bought in the past half-decade are (or would be) paying 35% DTI or less based on a fully-amortizing loan at current market rates, do you suppose? One percent? Maybe 2%?

Or based on the mortgage companies' mid-2000s definitions of "afford" - basically, "can you make the first 3 months' worth of payments at a 1% teaser rate and negative am?" In which case just about everyone who's up for foreclosure today would be considered "ruthless".

There's millions of borrowers out there in that grey area between columns A and B. Whom do you let slide, whom do you pursue with some vigor, whom do you throw the book at? Good luck with a "one-size-fits-all" approach to that question.
Mook | 03.17.08 - 1:16 pm | #

doom writes:
Ok, the peak of subprime resets is coming soon. Lis Pendens filings should be spiking by end of summer and fall. Foreclosures to follow by winter and spring of next year.

Oh crap, another real estate selling season down the tubes.

Well there's always 2010. Oh wait, the interest only alt-a's are turning to full P&I payments.

Ok, there's always 2011. Oh wait, the option arms are now adjusting to full amortization (option 3 or 4)with the "real" interest rate being charged.

Ok, never mind, we got a while to go.
doom | 03.17.08 - 1:18 pm | #

bacon dreamz writes:
one interesting thing to note is that performance deterioration for 2006 vintage high CLTV borrowers (so far, anyway) is linear with HPA. all else equal, you would expect performance deterioration to accelerate as HPA becomes negative if borrowers were walking away in droves just because they were in a negative equity position.
bacon dreamz | 03.17.08 - 1:20 pm | #

prufrock writes:
Hi Tanta,

I am talking about "You Walk Away" versus "The Bank Throws Your Ass Out."

I'm new here and I understand that this is your board. I'm not looking to pick a fight with you.

I'm an atty, but I don't handle foreclosures, so to me, if one was faced with walking v. being thrown, I'd say it's best to go to the lender and try to settle as much as one can.
prufrock | 03.17.08 - 1:20 pm | #

Marcus Aurelius writes:
Sebastian | 03.17.08 - 1:08 pm

A hot commodity does not a bubble make (although it might. Gold is fungible . Houses and tech stock - not so much.

The post was about leverage. The dude wanted me to leverage - he couldn't give a damn about the nature of the underlying asset. I feel the opposite.

Anyway, if it is a bubble, the dollar is it's opposite (whatever the opposite of a bubble is), and I have a good number of those, too.

How 'bout that SM Rally?
Marcus Aurelius | 03.17.08 - 1:22 pm | #

Yearning to learn writes:
"The market was almost even for a while, looks like the U.S. has decoupled from the U.S."

Bob in MA: that was classic!
Yearning to learn | 03.17.08 - 1:24 pm | #

Rob Dawg writes:
bacon dreamz writes:
one interesting thing to note is that performance deterioration for 2006 vintage high CLTV borrowers (so far, anyway) is linear with HPA. all else equal, you would expect performance deterioration to accelerate as HPA becomes negative if borrowers were walking away in droves just because they were in a negative equity position.

I disagree on technical terms. The HPa deterioration has been accelerating of late. There is a time phase differential of 6-18 months depending on circumstance. The tracking of defaults and negative HPA is IMO an artifact and not an association.
Rob Dawg | Homepage | 03.17.08 - 1:25 pm | #

M.Z. Forrest writes:
Auto loans can sustain an upside down amount, but that amount isn't infinite. If you were to see used car values collapse (which has happened before) you would see a number of auto defaults. They would not be immediate, but the guy who walks into the dealership 36 months into a 72 month note may just end up saying, "Forget it!" It isn't really just accountants so much as people facing a day of reckoning where price discovery actually occurs. There was a reason auto financing used to be a lot more difficult. There was a reason you used to be required to have a down payment.

Given the rent v. cost of ownership metrics, I wouldn't be shocked that "ruthless" defaults start appearing at an earlier point. Maybe it's after the 10th night of beans and rice. Maybe its when the homeowners insurance premium goes up because the insured value is so far above the present value. Maybe it's when a repair is discovered that is going to require more than a couple mortgage payments. At some point, rational decisions will be made.
M.Z. Forrest | 03.17.08 - 1:26 pm | #

Tanta writes:
prufrock, imagine that a large company laid off thousands of employees.

Imagine that the newspaper reported that as "Thousands of Company X Employees Quit Today."

This, I take it, would trouble you?

In any mass layoff, there will--the laws of probability guarantee it--be a handful of doofuses and ne'er-do-wells who should have been fired a long time ago.

Does that mean that all layoffs are "healthy firings of bad employees"?

Often we read about certain layoffs and think, about time that bloated unprofitable company exited that dumb business line.

Often we think something else. It does tend to depend on context.

I'm trying to deal with the rhetoric of the situation here, which I think is terribly dangerous.
Tanta | 03.17.08 - 1:26 pm | #

Greg Weston writes:
Tanta, for some hard evidence, look at Downey's NPA ratio, now above 10%. Very few of Downey's option mortgages have hit their resets, yet NPA are going up more than 1% per month the past few months.

The CA economy isn't going downhill THAT fast. More than 1% of DSL's debtors didn't suddenly lose their job in February. Much more likely is that more than 1% realized that it is in their interest to allow a foreclosure.
Greg Weston | Homepage | 03.17.08 - 1:27 pm | #

Kirk Spencer writes:
... duped with their eyes wide open...

OK, I'm about to rant about this BS.

I'm young Joe Sixpack with wife and one child on the way. I go to the lender and say, "I want to buy a house." Lender hands me a bunch of paper and says I can afford THIIIIS much 'price'. Stop a moment, let's look at two things.

I go to a tax preparation company to have them fill out my taxes. They do some work, and say I'm going to get money back - twice my annual income. I ask them, "Are you sure?" and they say, "Yes." Now, in about three months I get this audit, and they determine that I was supposed to pay $100. Who gets hammered for how much?

The answer lies in another element. Your local public library is EXTREMELY unhelpful when it comes to tax time. Basically, "here are the forms." No help for "which ones do I need" or anything like that. The reason is that several years ago one of the big libraries got sued to cover part of the erroneous filing discovered during an audit - and was found culpable. The key phrase from the decision goes (paraphrased) that someone asking we librarians an information had an "reasonable expectation of professionalism." If the patron is asking assistance it's because while they're not an expert they expect US (librarians) to be one, or to direct them to one, as appropriate.

I go to the tax preparation company because I'm not an expert, and I have reasonable expectation that the preparer will be such. Which is why if the audit eats me, my tax preparer gets socked for a big chunk of the responsibility.

And so this crap about the 'eyes wide open' is, well, crap. Yes, there are the BS experts, the scam artists who know how it SHOULD work and who mis-inform their lender in JUST the right fashion to maximize their gain. But for the most part, we expect the lender to be a professional and to set up their loan based on what we can manage to accomplish. And part of the expectation of professionalism is if they screw up, they eat the error.
Kirk Spencer | 03.17.08 - 1:27 pm | #

bacon dreamz writes:
The tracking of defaults and negative HPA is IMO an artifact and not an association.

performance deterioration refers to delinquencies, not defaults.

The HPa deterioration has been accelerating of late.

that's why i said "so far, anyway."
bacon dreamz | 03.17.08 - 1:28 pm | #

prufrock writes:
I'm trying to deal with the rhetoric of the situation here, which I think is terribly dangerous.

Tanta,
Yes, I agreed with you, I said that's how the media spins it.
prufrock | 03.17.08 - 1:30 pm | #

homedad43 writes:
Marcus:

Also bought gold this AM. Unlike your guy, mine thinks that some people should seriously be shot.

Perfectly happy selling me gold but was surprised (not really) to find that gold futures for June were about 1200. Then, he said that I could use margin to buy contract to sell for 1200 and buy now.

Same here, I don't do margin.
homedad43 | 03.17.08 - 1:31 pm | #

prufrock writes:
But for the most part, we expect the lender to be a professional and to set up their loan based on what we can manage to accomplish. And part of the expectation of professionalism is if they screw up, they eat the error.

Kirk,

I agree with a lot of what you said, but here's the thing: the lender is not the borrower's friend. The lender is the borrower's potential adversary.

Yes, the borrower is lulled into a misplaced sense of trust.
prufrock | 03.17.08 - 1:34 pm | #

homedad43 writes:
Bob in MA/Douglas Watts:

Yeah, you probably need a freezer but you might want to consider a dehydrator; the tomatoes/apples/etc. can be stored in ziploc bags and require much less volume of space.
homedad43 | 03.17.08 - 1:35 pm | #

Greg Weston writes:
Downey NPA as of 9/30/07 was 2.94%, as of 2/28/08 10.93%.

These mortgages are especially likely to be underwater and subject to "ruthless defaults" because the amount owed has increased on them and they are concentrated in OC and Inland CA.

8% of DSL's borrowers didn't suddenly become unable to pay in this 5 month period, especially given they do not even have to pay the full interest for each month.

Actually this 10.9% figure underestimates nonperforming mortgages since it is % of all assets, not just mortgages. DSL also has about 16% of its assets outside of mortgage loans, such as cash and FHLB stock.
Greg Weston | Homepage | 03.17.08 - 1:36 pm | #

Tanta writes:
Tanta, for some hard evidence, look at Downey's NPA ratio, now above 10%. Very few of Downey's option mortgages have hit their resets, yet NPA are going up more than 1% per month the past few months.

Downey's Option ARM product requires annual payment adjustments up to that point where the balance cap might get hit and then it recasts. You are assuming that the payment never went up on these folks in the years prior to recast.

Furthermore, there might just be a correlation between borrowers making the minimum payment and borrowers having experienced a drop in income since origination or other unavoidable expense or something. That correlation might stand some looking into.

I happen to believe that there were many, many mortgage borrowers in 2004-2006 who were struggling under crippling mortgage payments that they couldn't even afford the day the loan was made.

But they sold, because they could. Some of them refinanced, because the could.

Now, they can't.

This will cause an increase in foreclosures. I call it an "unmasking" of distress rates in many cases, not necessarily an increase in distress rates.

That said, being as how I believe we are now in a recession, I have no interest in pretending that people aren't losing jobs, getting pay cuts or hour reductions, etc.
Tanta | 03.17.08 - 1:36 pm | #

Rob Dawg writes:
Bacon Dreamz,
We seem to be on the same page just singing in different keys. Yes, I used "defaults" when I should have been more precise. This is a Tanta Ranta™ about the dangers of imprecise rhetoric.

I'm more concerned with cascade failure. It will take very few REOs to cause entire neighborhoods to consider their "investments" from an investment perspective. Remember also the socioeconomic impact. Household displacement is likely to change the character of these types of neighborhoods. That causes these same people to reconsider their lifestyle investment decisions as well.
Rob Dawg | Homepage | 03.17.08 - 1:37 pm | #

Kirk Spencer writes:
Prufrock,

Nope. I didn't say friend or adversary. I said, "Expectation of professionalism."

The lender is expected to suggest the largest amount he expects to recover from the borrower. The borrower may borrow less, but can REASONABLY EXPECT that the lender wouldn't push more than he expects to recover.
Kirk Spencer | 03.17.08 - 1:38 pm | #

Greg Weston writes:
Tanta, I would have to look again to make sure, but last time I ran the numbers on DSL only a small % of its mortgages (vast majority or option ARM) have reset thus far.

This post shows as a general matter the big wave of option arm resets will happen in 2009-2011, not 2008.

http://calculatedrisk.blogspot.c...eset- chart.html
Greg Weston | Homepage | 03.17.08 - 1:41 pm | #

Exit writes:
$100k pools are commonplace in California, especially OC. Consider the rising costs of concrete and steel over the past decade as BRIC economic growth increased demand. As MEW grew, homedebtors clamored for the status symbol, creating additional demand above the slowly growing supply of labor and rising material costs.

I used to sell pool loans using specialty financing (full doc, generally conforming to FNMA guidelines for DTI and credit but with high LTV compensated for by higher rates) until rising equity gave Bank on the Corner the ability to offer J6P and Disco bay-man easy MEW terms.
Exit | 03.17.08 - 1:41 pm | #

Greg Weston writes:
that parenthetical should read: (the vast majority are option ARM)
Greg Weston | Homepage | 03.17.08 - 1:42 pm | #

bacon dreamz writes:
Rob, i'm not trying to suggest that that data will be predictive of future behavior or performance, i'm just sharing the data i've seen so far, fwiw.
bacon dreamz | 03.17.08 - 1:43 pm | #

Tanta writes:
the lender is not the borrower's friend. The lender is the borrower's potential adversary.

OK, there's the problem.

Traditionally, borrowers did not think of the lender as having opposite interests. They thought that the lender's interest and their interest were aligned. It seemed that the bank wanted to be paid back and wanted to assure that the collateral was marketable and not overpriced. As the borrowers wanted to be able to pay the loan back and didn't want to overpay, there wasn't really an adversarial relationship here.

At some point in time lenders developed an interest in making loans they knew couldn't be repaid, on collateral they knew was overpriced.

It took some borrowers a while to figure that out. After all, it's profoundly stupid and guaranteed to not last for long. Why shouldn't borrowers have had a hard time figuring out that lenders were now their own worst enemies?

I make proposals all the time for going back to what I consider sane lending practices. Those can be summed up as practices in which the lender's interests and the borrower's interests are aligned.
Tanta | 03.17.08 - 1:46 pm | #

bacon dreamz writes:
Greg, i think you're confusing "reset" and "recast."

http://calculatedrisk.blogspot.c...zation- for.html
bacon dreamz | 03.17.08 - 1:46 pm | #

Tanta writes:
Tanta, I would have to look again to make sure, but last time I ran the numbers on DSL only a small % of its mortgages (vast majority or option ARM) have reset thus far.

They haven't recast.

Most of them started getting rate adjustments in the second or third month of the loan.

All of them, as far as I know, have provisions to increase the minimum payment by up to 7.5% a year.
Tanta | 03.17.08 - 1:48 pm | #

Fair Economist writes:
Given that after a month of extensive nationwide free publicity YouWalkAway has a grand total of 150 possible "ruthless defaulters" it's safe to say ruthless default is not a major issue ATM. At that rate it would take nearly 2 centuries for ruthless defaulters to consume the Fed's backstop of Bear Stearns, assuming a 100K loss per default.

Re rhetoric: "Walk away" has long referred to abandoning your house to foreclosure, without specifying whether the walker is ruthless or penniless. The vast majority of foreclosures in the past have involved penniless, so if anything it referred more to the needy and desperate defaulter. Inevitably there's confusion now that some are trying to restrict "walk away" to refer only to ruthless defaults. A cynical person might think this was a deliberate attempt by lenders and their apologists to increase the stigma of "walking away" in the old loose sense to squeeze a little more out of the FBs before they go under.
Fair Economist | 03.17.08 - 1:49 pm | #

prufrock writes:
Jeez,

I feel misunderstood.

"The lender is expected to suggest the largest amount he expects to recover from the borrower. The borrower may borrow less, but can REASONABLY EXPECT that the lender wouldn't push more than he expects to recover."

Yes, I agree and I indicated this in a prior post, that the lenders should not have lent because the borrowers couldn't afford it. Likewise, the borrowers shouldn't have borrowed cuz they couldn't afford it. Complete mismatch on both sides.
prufrock | 03.17.08 - 1:49 pm | #

MaxedOutMama writes:
Greg Weston - the cited NPA includes "modified" loans which for accounting rules are put into NPAs until they work out for six months.

So you are quite wrong. This topic has been covered on this blog already. In fact an awful lot of those NPAs are people who were willing to work with the lender TO KEEP THEIR HOME. They are paying, they responded to the lender, and they signed a mod agreement. That is somewhat the opposite of a walkaway.

I don't think you know what NPAs mean. OK, that's understandable, but that is what this blog is for.

You are flunking your reading comprehension course pretty badly this morning.
MaxedOutMama | Homepage | 03.17.08 - 1:50 pm | #

Rob Dawg writes:
bacon dreamz writes:
Rob, i'm not trying to suggest that that data will be predictive of future behavior or performance, i'm just sharing the data i've seen so far, fwiw.

I know and respect that position. CR is the same way and sometimes gets unfairly accused of any number of biases just by straight reporting. I know the difference. This is about the subtlety of what data says and what it predicts and more important, what it cannot predict. The reason we are seeing so many model failures is precisely because all the models are unable to predict in current conditions but the operators continue to blindly punch in the numbers and pull the lever (dating myself).
Rob Dawg | Homepage | 03.17.08 - 1:51 pm | #

TCA writes:
Why are the CNBC commentators repeatedly saying that commodities are getting "routed" today?.Really?With gold and oil at near record levels!!

When oil drops 5% after a runup that seems like it has lasted forever, it's a "rout".

When stocks