Periwinkle writes:
Time shares are also heavily concentrated in certain areas and now going into foreclosure and pulling their "investors" down with them
Periwinkle | 05.17.08 - 7:54 pm | #

VennData writes:
It's amazing to me that only now, the bankers-that-be - used to be powers-that-be, but not when you're begging the yet-to-be-named-3rd-World SWF for capital - are realizing how many of their valued clients would annually HELOC out another $100K and blow it on fun times.

I guess that's what happens when you live a cloistered life.

Bankers, mortgage lenders, money managers, pension fund gnomes... get out and see the world. Realize the fleece on the floor that's been sheared is yours.
VennData | 05.17.08 - 8:05 pm | #

Elvis writes:
As we've always said here, "But if you take away my HELOC, how am I going to pay my mortgage?"
Elvis | 05.17.08 - 8:05 pm | #

Grasshopper writes:
It seems some of those HELOCs were SHELOCs(supposed home equity lines of credit).
Grasshopper | 05.17.08 - 8:20 pm | #

tg writes:
Realize the fleece on the floor that's been sheared is yours

Ours
tg | 05.17.08 - 8:24 pm | #

KnotRP writes:
SF Bay Area is starting to the first signs of movement....one of my sibling's friends just made an offer for 20% below the current price for a house in Pleasanton and apparently got it. This long time renter has enough cash saved to make the down payment, and apparently really really likes this particular house.

Also got a "Real Estate Flyer" with some actual "Sold" listings on it -- haven't seen one of those in a long long while. They used to list them by closing date and closing price -- these guys didn't post the closing date, and they posted the "listing price" instead of the final sales price. But they listed 5 homes as sold. So much left out, it could mean almost anything. Someone's trying very hard to convince folks it's a great time to buy or sell a home.

I guess the question is, how many savings-rich ultra-patient non-home-owning renters exist out there ready to pounce.
KnotRP | 05.17.08 - 8:30 pm | #

MarkS writes:
Using new debt to service old debt ... woohoo.
MarkS | 05.17.08 - 8:56 pm | #

jm writes:
Venn Data wrote, [Bankers et al, realize] the fleece on the floor that's been sheared is yours.

But it's not, it's the depositors', and the stockholders. The people doing the actual lending-out of other people's money made out like bandits.
jm | 05.17.08 - 8:58 pm | #

wpepp writes:
I used to work with someone who's spouse worked in manufacturing and was layed off several times. Each time they used their credit card to get them through then refinanced their mortgage to get rid of the high interest credit cards when he found a job.

With HELOC restrictions I'm surprised I haven't heard of credit cards companies reducing the available credit to customers.
wpepp | 05.17.08 - 9:03 pm | #

jbarm writes:
Per Periwinkle's comments on time shares... anyone have any info on how this business is doing?

My understanding of the business is that they make much of their money off of financing fractional ownership shares. I would guess this model is probably taking a hit now, but have no data on it.

jb
jbarm | 05.17.08 - 9:10 pm | #

jm writes:
Yesterday I closed on a 2-year lease for a very nice 4-bedroom home in the northwest suburbs of Chicago at $1900/month. Last summer when I was looking they had just recently started advertising it for rent asking $3000/month.

So instead I rented a nice 3-br, 2-1/2 batch townhome nearby for $1950 (sold my home last July to get out before prices dropped any further). Just after that they dropped their asking rent to $2400, and I was sorely tempted to let my deposit on the townhome go -- but for some of us, still, a deal's a deal.

Yet even at the lower asking rent they never found a tenant, and tried again this spring to sell in the mid-high $400s. Then started trying to rent again at $2050. When I contacted them they had a couple other possible prospects, but were also a little at their wits' end after having shown it to many people and had a number say they would rent and then not follow through. So they were willing to take $1900 on a 2-year to avoid going through that hassle so soon again.

Meanwhile, dozens of other comparable homes that have been up for rent since last summer continue to have asking rents in the $2500+ range.

Having gotten bank statements from my lessors as proof they are current on the mortgage, I can note that one reason they were able to drop to $1900 is that they bought long enough ago, with a large enough down payment, that that is their breakeven price.

Since they didn't immediately get a renter at the lowered price, and several deals fell through, it seems that may still be above what the market will easily bear -- which bodes ill for all the others out there still dreaming they'll rent for more.

That the people trying unsuccessfully to rent those places would rather get zero rental income at an asking rent of $2500-$3000 than $20-24k annually at a rent that might actually attract a tenant is very interesting.
jm | 05.17.08 - 9:19 pm | #

eh writes:
Maybe LTE would be better than LTV here?
eh | 05.17.08 - 9:33 pm | #

Darkness writes:
wpeep, the are definitely doing that:
jacking up credit card interest rates and lowering maximums

I especially like the notion that the card company will set the new maximum to just above the current balance so when the person makes the minimum payment and the interest accrued maxes the card out they can then lay on the fees and the 32% interest rate. Whoo hoo. Good times.

If this isn't a sign that the banks, having screwed themselves over on home loans, aren't trying to make the money back through usury, I don't know what is.
Darkness | 05.17.08 - 10:01 pm | #

Tom Lindmark writes:
A couple things.
1. Anyone know the dollar amount of outstanding HELOC's?
2.Jbarm-Fractional and timeshare are a little different. Spent last year working on a fractional project in Florida and my contacts in the business tell me it's not that bad. The timeshare and fractional loans were actually written with real underwriting and most of the timeshare paper which is generated by companies like Marriott gets sold into a pretty solid secondary market. They also price it properly. They didn't forget risk.
3.KnotRP-Phoenix is exhibiting the same phenomena, lots of sold foreclosures. Problem is that they really are foreclosures on which the bank has accepted an offer and then the buyer can't qualify for a loan. They come back on the market after 30 or 60 days. That's why you're seeing list prices and not sales prices on the info you get from realtors. Don't panic, you're not missing the bottom.
Tom Lindmark | Homepage | 05.17.08 - 10:07 pm | #

RW writes:
Could be another false dichotomy: There is no need to choose between (a) servicer backlogs and (b) HELOC abuse ...the correct answer remains "all of the above," servicers are overwhelmed (and understaffed) and the HELOC is part of the mechanism by which home owners and other unduly leveraged souls continue to make the monthly nut.

Basically it's kiting and it used to be done with checking accounts before the clearing process became too fast; now it's done using HELOC's and credit cards; nothing new (shrug).

Ecclesiastes was right.
RW | 05.17.08 - 10:08 pm | #

sdtfs writes:
1. Anyone know the dollar amount of outstanding HELOC's?

From one of Tanta's posts linked at the end of this post Mar 28, 08:


This morning we have Vikas Bajaj in the NYT reporting on second-lien lenders refusing to go quietly:

Americans owe a staggering $1.1 trillion on home equity loans — and banks are increasingly worried they may not get some of that money back.
sdtfs | 05.17.08 - 10:26 pm | #

sdtfs writes:
BTW- TomL, and any other newbie, I also reccomend you read the posts by Tanta that CR linked. Be careful, because Tanta is very precise, and many people who are used to skimming news reports get led astray by what they think she wrote. She'll usually clear up the misconceptions in the comments,...but as you've learned, be prepared to skim a lot of OT comments.
sdtfs | 05.17.08 - 10:36 pm | #

sdtfs writes:
Speaking of OT- FWIW Buffalo Springfield
http://www.youtube.com/watch?v=v...h? v=vJV44YV69z0

There's something happening here
What it is ain't exactly clear,...

...A thousand people in the street
Singing songs and carrying signs
Mostly say, hooray for our side
It's time we stop, hey, what's that sound
Everybody look what's going down
Paranoia strikes deep
Into your life it will creep
It starts when you're always afraid
You step out of line, the man come and take you away,...
sdtfs | 05.17.08 - 10:49 pm | #

Anonymous writes:
You step out of line, the man come and take you away,...unless your a banker.
Anonymous | 05.17.08 - 11:04 pm | #

VacantHomes writes:
Tom Lindmark writes:
"KnotRP-Phoenix is exhibiting the same phenomena, lots of sold foreclosures. Problem is that they really are foreclosures on which the bank has accepted an offer and then the buyer can't qualify for a loan. They come back on the market after 30 or 60 days. That's why you're seeing list prices and not sales prices on the info you get from realtors. Don't panic, you're not missing the bottom."

Absolutely, I'm seeing the same thing here in Detroit. Lots of accepted offers on REO homes, and sales listed as "pending", but then the homes just come back on the market because people can't get a loan. ("You mean I need a downpayment? What?") There have even been a few sad cases with people starting to fix up a home during this Pending period, before they actually close, and then the closing doesn't go through. Bad for them, but not all bad for the neighborhood since the home gets fixed up a bit. :-)
VacantHomes | 05.17.08 - 11:05 pm | #

iceman writes:
Subprime was always the canary in the coal mine, not - as the mainstream media and policymakers pro-offered - the whole shebang. The killer? Systemic lax underwriting.

After subprime, the next broad residential lend group that flailed (and is still flailing) was/is Option ARMs. The story of the Downey Savings, BankUnited, and FirstFeds of the world is pretty evident in the stock market. The Wachovias, WaMus, and Countrywides have been heavily clipped by this category.

CR is suspecting that HELOCs are the next big beasts to roar in residential lending, and I suspect he's right. While true walkaways might be a fairy tale, I doubt the concept that folks were "paying off leverage with leverage" will be only found in the fiction section of your local library. As the defaults increase in this area, there will be massive repercussions for the mainstream banks (those that thought of themselves as pure of snow when it came to staying away from the poor/subprime and exotic/option ARMs).
iceman | 05.17.08 - 11:17 pm | #

Clear1 writes:
Great article...I just found your blog from a CNN article...also found randomroger.com and summit-advisors.com helpful. The www.summit-advisors.com site has a great piece on the subprime crisis.
Clear1 | Homepage | 05.17.08 - 11:18 pm | #

anon writes:
The Banks & the FED know the end result of price discovery. Thats the only reason the FED took it on its books. What will happen when the FED bails out the Banks from an investment perspective?
anon | 05.17.08 - 11:48 pm | #

Siberian Donkey Muffin writes:
When discussing 2nd's be they HELOC or HEL, please remember it is no longer LTV, it is CLTV.

"Combined Loan to Value".

This takes into account the (presumably existing) first mortgage.

(Remember, it is possible to have a HELOC or HEL without a first in place. A HELOC can be in first lien position)

(First lien + Second lien)/Home Value = CLTV.

For example: Home value $100k. First lien balance $80k. Second lien balance (or credit limit) $20k equals 100% CLTV.

CLTV is used so as to capture the full picture of the 1st/2nd LTV ratio. 2nd's are granted (or not) based upon CLTV.

Thank you for your time and attention. Now back to regularly scheduled programming.

SDM
Siberian Donkey Muffin | 05.17.08 - 11:50 pm | #

Mike Dillon writes:
No way that FSA had no clue. They used to own a the largest minority share of Fairbanks Capital/Select Portfolio Servicing until Fairbanks/SPS was sold to CSFB in 2005.

James Ozanne of FSA and Greenrange Partners in Greenwich, CT formerly sat on Fairbanks BOD.

Zero chance that FSA had no clue.
Mike Dillon | Homepage | 05.18.08 - 12:28 am | #

optionarmageddon writes:
So which leders hold the most toxic heloc waste?

My guess is Wells Fargo, Citifinanicial and Chase
optionarmageddon | 05.18.08 - 12:48 am | #

Anonymous writes:
Re: "no "HE" in the "HELOC"

Say it aint so!
Anonymous | 05.18.08 - 1:11 am | #

picosec writes:
Regarding HEL/credit card links...

The CC companies recognize that a lot of cardholders are in trouble. I think the issuers are playing a game of chicken with the cardholders in an effort to get more cash one way or another.

By jacking up interest rate and lowering maximums they are betting that the benefits (to the bank) of higher interest payments or even a holder transfering the balance to another card (meaning instant total payoff of the debt) outweigh any increased potential of the holder bailing altogether, resulting in a total loss.

Cash is king for the banks and if a shakey debt is paid off that's money they can apply to less risky investments.
picosec | 05.18.08 - 1:15 am | #

FFDIC writes:
WSJ-FDIC Grows Wary of Brokered Deposits
http://online.wsj.com/article/ SB...y_and_investing
FFDIC | 05.18.08 - 1:30 am | #

picosec writes:

Here's the solution to the mortgage crisis.

But it ain't gonna be pretty.
picosec | 05.18.08 - 1:38 am | #

Tom Lindmark writes:
Thanks all for the direction to info on the HELOC exposure. I didn't find a definitive answer in the links you suggested so I am going to keep on looking. If it's $1.1 trillion as someone suggested then that's not too bad. Assuming a loss rate of 20% to even an unimaginable 50% then you're still looking at a loss the system can absorb. Not fun but not a ball buster.

Iceman is right. Subprime was the canary in the coal mine and Option ARMs are the tactical nuke. They won't take down the system because they're too concentrated in CA and FLA. The politicians won't let these explode. To see a map and schedule of resets for these loans go here-http://blog.metro-real-estate.com/?p=304.
Tom Lindmark | Homepage | 05.18.08 - 1:48 am | #

w writes:
Centex sells its RiverPark housing project in Oxnard

"Under the deal, Centex receives about $161 million and an anticipated related tax refund of about $294 million. The book value of all the properties was about $528 million."

http://www.venturacountystar.com...ing-project-in/
w | 05.18.08 - 1:54 am | #

RE writes:
Via Russ Winter, a VERY interesting chart from the Fed:

Spending on Essentials At Record
RE | 05.18.08 - 1:54 am | #

Tom Lindmark writes:
RE,
Very interesting chart indeed but how do they come up with this data and what constitutes essentials?
Tom Lindmark | Homepage | 05.18.08 - 1:58 am | #

Sol writes:
"What if certain HELOC borrowers were using the HELOCs as ATMs, paying their HELOC (and first lien) monthly payments using borrowed money? Yes, a different bred of NegAm loans!"

Sounds like mortgage kiting to me.
Sol | 05.18.08 - 2:00 am | #

tj & the bear writes:
That the people trying unsuccessfully to rent those places would rather get zero rental income at an asking rent of $2500-$3000 than $20-24k annually at a rent that might actually attract a tenant is very interesting.

Sounds like L.A., only priced a notch or two higher.
tj & the bear | 05.18.08 - 2:11 am | #

tj & the bear writes:
Centex sells its RiverPark housing project in Oxnard

Ooh, Rob Dawg's gonna love that!
tj & the bear | 05.18.08 - 2:12 am | #

Warsh Watch writes:
Re: Three Fed officials will be speaking. Vice Chairman Donald Kohn will discuss the economic outlook on Tuesday morning. Kevin Warsh will deliver a speech entitled "Using the Federal Funds Rate in Extraordinary Times" on Wednesday afternoon. Randall Kroszner will talk about the mortgage markets on Thursday morning.

I though Warsh was still on holiday?
Warsh Watch | 05.18.08 - 2:21 am | #

Warsh Watch writes:
I thought he was just a young inexperienced retard, a spoiled brat that came from big money, and married into more, but it turns out he is a romantic retard:

Financial Market Turmoil and the Federal Reserve: The Plot Thickens
http://www.federalreserve.gov/ ne...sh20080414a.htm

Fed policy--both with respect to liquidity tools and monetary policy--is partially offsetting the consequences of the liquidity and credit pullback on real activity. But we must be careful to not ask policy to do more than it is rightly capable of accomplishing. The problems afflicting our financial markets are indeed long-in-the-making. Correspondingly, the curative process is unlikely to be swift or smooth. Time is an oft-forgotten, yet equally essential, tool of our policy response.
Warsh Watch | 05.18.08 - 2:27 am | #

mp writes:
Well, it looks like another shock wave is coming. It's time to bail out. Again.
mp | 05.18.08 - 2:29 am | #

Anonymous writes:
70% from the old article is now 65%.
Anonymous | 05.18.08 - 2:55 am | #

joeblo writes:
Don't worry... there are still greater fools out there!

Almost a hundred camp out for the chance buy a home!
http://www.azcentral.com/busines...ers0517- ON.html

Even potential homeowners in Blandford Homes Mountain Bridge are baffled by the buying frenzy, which began Monday night when the first two home buyers took a number rather than wait to line up later in the week for the sale, which begins at 9 a.m. today. In this little corner of the world, where the mountain views are stunning and the Sonoran Desert still pristine, the buzz from wannabe home buyers brings back memories of the Valley's runaway real-estate train in 2005. Buyers are racing from San Diego and flying in from Alaska and Canada to try to get one of the last major pieces in the Desert Uplands area.

Campers have been treated to breakfast, lunch and dinner courtesy of the builder, Blandford Homes, and have nabbed plenty of media attention, too.


Just follow the third start to the right, and everything will be fine again. You spoil sports just haven't been believing hard enough :^(
joeblo | 05.18.08 - 3:12 am | #

joeblo writes:
Hmmmm, well home "starts" could be "stars" I guess, or I'm just wee bit tired... and ready to fly! Wheeeeee :^)
joeblo | 05.18.08 - 3:15 am | #

Cal writes:
LA Times Money Column gets question regarding Credit card companies lowering available credit

Dear Liz: My wife and I were bombarded with offers for special credit card rates. Now, for absolutely no reason on our part, our credit card issuer has notified us that the rates on our accounts are about to skyrocket from 1.99% and 3.99% to the prime rate plus 23.99%, or nearly 30%. The issuer also lowered our credit limit to equal our balance. I'm not aware of any derogatory information on our credit reports that could explain this change. We initially used the low rates for purchases on which we could have gotten a fixed-rate, conventional loan.
Cal | 05.18.08 - 3:16 am | #

Chicken Reel writes:
Maybe we shouldn't call them HELOCs but instead call them HEMLOCK loans.

Home Equity Mega-Loan on Codified Kiting
Chicken Reel | 05.18.08 - 3:33 am | #

joeblo writes:
mp: When you say, "It's time to bail out, again".- I'm very interested in what you mean.

A) Buy gold, wheat, and lead. In that order!
B) Make sure that's really a parachute propping up your neck, and go to sleep... it's late... ZZZ
C) The Bank of Ben is going to guarantee yet more collateral to ensure a quick sale.
D) Our bank is leaking! Get a bucket and start bailing all these stinky HELOCs out.

or were you being more metaphorical? :^)
joeblo | 05.18.08 - 4:01 am | #

FinanceGuy writes:
Here is what is really going on out there folks.

http:// globaleconomicanalysis.bl...depression.html

This is about much more than investing or following the developments at this point. I would sure like to see all the good folks at this blog, Mish's, Roubini, Denninger and any others band together to raise some hell about this issue. We need to stop the charade and start unwinding these homebuilders, banks and investment banks before this becomes an irrepairable disaster.
FinanceGuy | 05.18.08 - 5:11 am | #

bond guy writes:
"FinanceGuy writes:
We need to stop the charade and start unwinding these homebuilders, banks and investment banks before this becomes an irrepairable disaster."

Considering that the HELOC story here is likely not the last shoe to fall, it may be questionable to assume that it is still before the time that this is an irrepairable disaster.
bond guy | 05.18.08 - 7:28 am | #

Bogus writes:
"mp writes:
Well, it looks like another shock wave is coming. It's time to bail out. Again."

Sorry to hear you say this.
Bogus | 05.18.08 - 7:53 am | #

Ann writes:
YOu don't give these HELCO junkies enough credit..I already know a few who have TAKEN the full amount of the HELCO months ago and stashed it into a account so that they could still have it to pay their mortgages...You can't stay one step ahead of a junkie...
Ann | 05.18.08 - 8:02 am | #

Paul writes:
The scars of losing a home by Robert Shiller is in the NY Times today.

http://www.nytimes.com/2008/05/1...ml? ref=business

He must be reading the comments on this blog.

"But instead of having sympathy for these homeowners, many people blame them for their predicaments....that after an initial pang of sympathy, people tend to develop negative views toward others who are suffering. That negative tendency seems to be at work today."
Paul | 05.18.08 - 8:52 am | #

mal writes:
Why should I feel overly sorry for people who "bought" too much house and lived beyond their means?

I live in a little Cape Cod that most of you folks in California would sneer at. At least my house is paid for. I live within my means. Why should I automatically feel sorry if someone has lost hold on their five-bathroom monstrosity?

An asteroid did not just fall out of the sky and hit these people. They lived unwisely and went along with the herd, they rejected modest neighborhoods with modest homes like mine, and now that's just too bad. There, I shed one tear. Moving on.
mal | 05.18.08 - 8:59 am | #

DEC writes:
optionarmageddon writes:
So which leders hold the most toxic heloc waste?

My guess is Wells Fargo, Citifinanicial and Chase

Option-you are probably right, but the larger question in my mind is what will these things do to the smaller regional banks? I think there are a bunch where HELOC balances are a significant percentage of assets. If/when HELOCs start defaulting, the FDIC will be very busy this summer and fall.
DEC | 05.18.08 - 9:09 am | #

ZackAttack writes:
Oh, Yves just ripped that Schiller dude a new one. It was a thing of beauty.
ZackAttack | 05.18.08 - 9:18 am | #

gm writes:
Paul,

"The Scars of Losing a Home" is a very balanced opinion indeed. Somehow, I don't feel it will be heeded by anyone singled out as perpetrators in this mess:
brokers, mortgage originators, appraisers, regulatory agencies, securities ratings agencies, the chairman of the Federal Reserve and the president of the United States
they will continue to do well, but the homeowner is ultimately responsible for their own action or inaction and maybe it's a lesson worth learning.
gm | 05.18.08 - 9:22 am | #

central_scrutinizer writes:
mal - I'm with you on the point that most who got in over their heads deserve little sympathy.

If Americans saw how the rest of the world lives, we'd be quite content with a "modest" 3 BR/2 bath ranch or rambler. The desire to "live large", egged on by our corporate media, has led many down the path of financial ruin.
central_scrutinizer | 05.18.08 - 9:25 am | #

mb writes:
some good coming. I got hit with a $30 late charge on an $8 balance on my mastercard thru Chase. I only use this card for online purchases, and while working out of town, forgot to pay it.

At first they were non-compliant. When I told them I would pull the ~100K I had in their bank out, they got downright apologetic! Fee removed.
mb | 05.18.08 - 9:33 am | #

Anonymous writes:
"But instead of having sympathy for these homeowners, many people blame them for their predicaments....that after an initial pang of sympathy, people tend to develop negative views toward others who are suffering. That negative tendency seems to be at work today."

I can empathize with them but I don't want to have to pay for their mistake because government says I need to bail them or the banks that lent them the money out. I've lost money on bad investments and it was my fault, I took the loss and learned a lesson.
Everyone agrees this country needs more savings but the ones who saved are now the ones being destroyed. Not to bright.
Anonymous | 05.18.08 - 9:38 am | #

Alo writes:
before you cast stones - never forget the bubble anthem:
"Buy now or be priced out forever!"

the only reason I didn't believe this is that I stumbled on some really good blogs -- like CR-- a couple years ago (my local media trumpeted the "buy now" line repeatedly to serve their RE advertising masters)

It'd be an exercise in hypocrisy, and arrogance, and most importantly, a waste of time, for me to pass judgment on the already-FBs out there who got taken by this Big Lie. Yes, the patsys share the blame, but getting mad at them isn't productive, and takes focus off the con men (who "made out like bandits" as a post above says). We should be going after them and their ill-gotten gains.
Alo | 05.18.08 - 9:54 am | #

RayOnTheFarm writes:
LA Times Money Column gets question regarding Credit card companies lowering available credit

My first reaction to that is that in prior days, borrowers who carried a balance (and paid the interest) were actually funding the party for those (like me) who paid off the balance every month.

If the CC companies are limiting balances for those customers whom they don't earn any interest from, then this could indicate some serious problems with the folks who have been funding the party. It might also indicate that the CC companies are having problems moving pools of structured debt out the door at reasonable rates.

This could be the real explanation for that 'fell good' email from Mr Pandit (at Citi): That Citi is about to cut a bunch of my (unused) credit line.

Lets see how this one works out in the coming weeks.
RayOnTheFarm | 05.18.08 - 9:58 am | #

Chase Sucks writes:
mb,
Thanks for letting me know what the market price is to get a fee waived at Chase. A couple of months ago I had an almost identical situation occur whereby I missed paying a small balance by a few days because of travel. I had the account since 1992, always paid the balance in full, and have a credit score in the top 2%. I tried to get a waiver of the $30, but to no avail. They were completely indignant so I closed the account. The only difference appears to be I didn't have $100k at their bank. Yeah, I know it would be insured but a bank too stupid to waive a $30 fee for a stellar account doesn't deserve my deposits anyway.

btw, always enjoy your posts.
Chase Sucks | 05.18.08 - 10:05 am | #

curious writes:
mb-
Something similar happened to me with my AMEX bill. One month I accidentally made the check out for $1 less than the due amount. The next month they added that $1 to that bill and I paid it plus whatever that bill was for and I didn't notice that a $4 finance charge was added to it. The next month a $10 finance charge was added and I finally noticed that. It took a while to figure out what happened but I looked over the past bills and noticed that I paid $1 less one month.
So for that $1 mistake, they were charging me $14.
I called them and they corrected it right away because they saw that I always paid my bills on time. But I can't imagine how much extra people pay for not paying their bills in full each month.
curious | 05.18.08 - 10:12 am | #

Bob Dobbs writes:
I have sympathy for the homeowners, because they bought a line that was being projected at them by hundreds of millions in advertising and powerful nationwide corporations. It wasn't just greed they bought, it was fear: buy before it's too late, buy and get the nest egg for retirement or you'll end up on the street.

And they didn't realize that the game had changed, that the man in the nice suit didn't _care_ whether they could afford the loan. He would always tell them everything was fine.

Some greedheads and fraudsters, sure, who did a lot of damage. But mostly lambs to the slaughter with bad advice from bad people playing on their fears and worst instincts.

All that said -- I wouldn't bail them out either. Those mortgages should never have been made. Yes, we have to take our medicine, all of us. Unfortunately, pain seems to be the one teacher that gets everyone's attention.

And afterwards, something better, I hope.
Bob Dobbs | Homepage | 05.18.08 - 10:13 am | #

Chase Sucks writes:
RayOnTheFarm,
I like your insight. I think it explains why Chase seemed almost eager to drop me as an account. I never paid them interest even though I would run up some substantial balances during the month. Seems short sighted to me to shun the good credit customer which will be an important ingredient to turnaround for them down the road.
Chase Sucks | 05.18.08 - 10:15 am | #

Joe Six Pack writes:
Summertiiiimmmeee, and the livin is easy. Fish are jumpin, and stocks are goin high...

Relax, it's all over.

http://biz.yahoo.com/ap/080517/w.../ wall_main.html
Joe Six Pack | 05.18.08 - 10:17 am | #

mal writes:
No, I'm sorry but "Buy now or be priced out forever!" was pitched at people who thought they were too good to live in certain cities or certain neighborhoods.

The bubble did not exist everywhere.

How about talking to Americans who DIDN'T fall for that line of crap?
mal | 05.18.08 - 10:33 am | #

Anonymous writes:
"How about talking to Americans who DIDN'T fall for that line of crap?"

They are. How much you got? Now hand it over. I guess telling them is talking to them isn't it?
Anonymous | 05.18.08 - 10:46 am | #

barely writes:
"So which leders hold the most toxic heloc waste?"

Well, according to NMN, BAC has been absolutely BLOWING the competition away in 2nd liens. I'm not sure what qualifies as a second, according to NMN. Could be everything that isn't a first.

http://data.nationalmortgagenews...a/? what=secorig
barely | 05.18.08 - 10:55 am | #

FFDIC writes:
GRETCHEN MORGENSON
What a Deal: Trash for Treasuries
(Love the last line. It's so damn Tantaish.)
http://www.nytimes.com/2008/05/1...on&st=cse& scp=3
FFDIC | 05.18.08 - 10:57 am | #

Chase Sucks writes:
Barely,
Interesting data on 2nd liens. Anyone have ideas on how much of this type of product was packaged, securitized, and sold off vs held in portfolio? My guess much more of this stayed with the originator than the subprime/Alt A trash.
Chase Sucks | 05.18.08 - 11:19 am | #

tg writes:
I live in a little Cape Cod that most of you folks in California would sneer at.

I think that really misses the true dynamic. Many many people in CA live in the same size houses but they recently were selling well over 500k. So what does the first time buyer do?. Most drive until they can buy. People were being priced out. Housing took on the false image as a way to build wealth. I see it as people were trying to save in the commodity that had fifty years of price appreciation. It was a false rational choice. This was a bubble engineered to make up for the dot-com bubble. The PTB thought housing would probably deflate slowly if overpriced and would be rational again after prolonged inflation...

The road to hell is paved with good intentions... Hell, Hell is paved with good intentions. anon
tg | 05.18.08 - 11:20 am | #

Curious writes:
Is the Deutsche Bank CEO just talking his book or can he really be so clueless:

"We should feel the effects in the second half of the year already and see a strong recovery on the U.S. real estate market," Ackermann told Sonntagsblick.

http://www.easybourse.com/bourse...e-papers- 455881

Read the whole article to marvel at his outlandish prognostications. Sounds like he emerged from under a rock after 5 years ...
Curious | 05.18.08 - 11:37 am | #

Paul writes:
I wouldn't bail them out either. Those mortgages should never have been made. Yes, we have to take our medicine, all of us. Unfortunately, pain seems to be the one teacher that gets everyone's attention.


The effect of this problem may be to permanently eliminate the house as a store of personal wealth. Either we force all these bad mortgages into foreclosure and completely crash the markets in the bubble areas or we keep people in their homes "renting" from the owners of the MBS. I suspect that the latter option would do less damage to the overall economy. It's a tough choice, though.
Paul | 05.18.08 - 11:37 am | #

barely writes:
What I marvel at are the catchy marketing terms the bailout cabal are trotting out in front of the sheep in congress.

FHA Modernization
GSE Reforms
...

Revolutionary! MORE Innovation! Sounds like REAL progress, doesn't it? And the entire shameless PPT is selling like mad.

Once the flood gates are opened (so the temporary parking spot for all the trash on lenders' books at the Fed gets to its ultimate destination which was the plan all along), the black hole can effectively vaporize the paper.

A trillion dollar invention!
barely | 05.18.08 - 11:55 am | #

Emma Anne writes:
Bob Dobbs: "And they didn't realize that the game had changed, that the man in the nice suit didn't _care_ whether they could afford the loan. He would always tell them everything was fine.

Some greedheads and fraudsters, sure, who did a lot of damage. But mostly lambs to the slaughter with bad advice from bad people playing on their fears and worst instincts.

All that said -- I wouldn't bail them out either."


This is about where I come out. No point holding people in contempt for not understanding the massive changes that were taking place in the financial systems, because that's most people. I do have compassion for people who are losing their homes because they thought the bankers wouldn't put them in a loan they couldn't afford (which was true not that long ago).

But no, we can't bail these people out. First of all, we can't possibly afford it. The losses are too immense. And second, there is such a thing as moral hazard.

But two things nag at me:

(1) Why are the home owners the only one paying a big, ongoing price for this fiasco? The brokers, the loan officers, the ratings people, at most are losing their jobs. They get to keep their huge fees, they aren't going to suffer the humiliation of having being thrown out of their homes (unless they drank their own koolaid) and their credit isn't trashed for the next ten years. I find them *more* at fault, but they get to walk away unscathed.

(2) I don't get the hostility of people like mal above. I, too, have a small tract house that we can easily afford. I am grateful that we are comfortable circumstances and aren't facing escalating payments and eventual foreclosure. I am good at math, so I wouldn't have gotten in that particular kind of trouble. But I have made other mistakes. I'm not good at everything. What's wrong with saying "poor bastards. I'm glad it's not me."

Is the hostility a way of pushing misfortune away - those people are greedy and stupid, so nothing like that could ever happen to me? Home owners didn't start the fire here. Changes in the system to prevent this from happening again won't be based on shaming individuals who messed up.
Emma Anne | 05.18.08 - 12:12 pm | #

El Cliffo writes:
There are 41 Visitors Online now, but according to the Feds, that's really a seasonally-adjusted -2.
El Cliffo | 05.18.08 - 12:20 pm | #

yogurt writes:
I suspect that the latter option would do less damage to the overall economy.

Disagree, if only because the debtor side is 100% domestic, while the creditor side has a substantial foreign percentage.

How can keeping US homeowners paying foreign creditors, when the debt can simply be discharged through foreclosure, be good for the country?
yogurt | 05.18.08 - 12:34 pm | #

yogurt writes:
What's wrong with saying "poor bastards. I'm glad it's not me."

Because if someone borrows more money than he can afford to buy a car, it doesn't affect my ability to buy a car. But if someone borrows more money than he can afford to buy a house, it prevents me from buying a house I can afford.

Just for starters. There are many other externalities, of course.
yogurt | 05.18.08 - 12:38 pm | #

Yearning to Learn writes:
"Because if someone borrows more money than he can afford to buy a car, it doesn't affect my ability to buy a car"

not necessarily true. if people took out $100,000 on a 30 yr car loan to buy cars it would affect your ability to buy a car.

it's just that we haven't had a bubble in cars. yet
Yearning to Learn | 05.18.08 - 12:47 pm | #

yogurt writes:
No it wouldn't, because the supply of cars is global and elastic, while the supply of houses is local and inelastic (in the short run).

Oh BTW, people have been taking out 30 year loans to buy cars. They're called mortgage refinancings and HELOC's.
yogurt | 05.18.08 - 1:57 pm | #

Alo writes:
Yogurt, I too got slowly more miffed that prices kept going crazily higher -- but the only reason that buyers could set foot in overpriced properties is that a whole slew of grifters - from RE agents, to brokers, to bankers -- got them in there.

I fully expect more lazy journalists, politicians and regulators to incessantly throw focus on homebuyers (with either a "poor bastards" or "they got what they deserve" theme) all in the name of not bothering to do the legwork to find, name, and bring to task those who unjustly enriched themselves. Making poor bastards out of all of us.

Bob Dobbs - well said.
Alo | 05.18.08 - 2:40 pm | #

Owner Earnings writes:
"Because if someone borrows more money than he can afford to buy a car, it doesn't affect my ability to buy a car"

not necessarily true. if people took out $100,000 on a 30 yr car loan to buy cars it would affect your ability to buy a car.

it's just that we haven't had a bubble in cars. yet

Last I checked the only way GM and Ford can sell cars is by using their own financing? I'd like to see what would happen to their car sales if their financing operations went away.
Owner Earnings | Homepage | 05.18.08 - 2:54 pm | #

Lawyerliz writes:
Having seen what I've seen in foreclosures, I am willing to believe that it really is in part "servicer delays".

And I have heard several stories about being unable to buy an REO, and
trashed REOs.

Hmmm, I suggest a little adverse possession. In Florida, you move in, file a notice and pay taxes for 7
years, and then sue to quiet title. I did it once for a client. Find a house that's in foreclosure, or already foreclosed and emply, move in, pay the taxes, file the notice and see what happens. I think in a fair number of cases, the bank will not notice that someone has paid the taxes, and in some rare cases, the possessor will be able to last out the 7 years. . .

Hah. The lenders richly deserve it.
Lawyerliz | 05.18.08 - 3:33 pm | #

Cobradriver writes:
"it's just that we haven't had a bubble in cars. yet"
Yearning to Learn | 05.18.08 - 12:47 pm | #

YTL,

Ferrai bubble,late 80's. Ugly when it popped. Current bubble is in muscle cars. I just saw a pretty rare Camaro sell north of 750k...Wait till Carrol Shelby kicks the bucket. You will see his cars go to the moon...These bubbles move with the age of the purchasers with money.

Chris
Cobradriver | 05.18.08 - 4:08 pm | #

Lifexpert writes:
Current bubble is in muscle cars.

Really?

Is there a website that tracks this sort of thing?

My father-in-law has a fully restored 64 Mustang.
Lifexpert | 05.19.08 - 1:28 am | #