Foreclosures

[metta]

http://articles.moneycentral.msn.co...s/WachoviaWaMuStillInBigTrouble.aspx?page=all

Many more foreclosures ahead

Foreclosures hit a record high in the first quarter, when homeowners walked away from about 448,000 mortgage loans. Matters are only going to get much worse, predicts Mark Zandi, the chief economist at Moody's Economy.com.

He bases his gloomy outlook in part on insights about worsening consumer credit trends that he gets from data compiled by Equifax, one of the credit reporting bureaus. "Foreclosures have been rising for just over two years, and they will rise for another year," Zandi says. "It is a serious problem that is not going away fast."

Zandi thinks defaults on first mortgages will jump 60% this year to 2.3 million, compared with 1.4 million last year. Then, in 2009, he expects defaults to hit 1.7 million, still 18% above last year's level. And defaults will remain at high levels "well into next decade," he says, as a delayed effect from adjustable-rate mortgages, or ARMs, kicks in.

Monthly payments on many ARMs aren't going up too much right now because they are linked to market interest rates, which are low. But the Federal Reserve will raise rates at some point, and that will create issues for borrowers in two or three years.

Meanwhile, the unrelenting decline in home values won't let up. Zandi predicts home prices will fall 12% this year and nearly 8% in 2009. This will lead to more foreclosures because it leaves a lot of new homeowners owing more than their homes are worth. This makes it tempting for them to walk away from mortgage payments when they are hit with an unexpected expense or job loss, fairly common problems because so many new homeowners have moderate incomes.

"These households are living on the financial edge, and it doesn't take much to push them over," Zandi says.

 

[ejbonk]

The Politicos on both sides of political fence are CLUELESS as to the real problems of most average Americans.

 

[metta]

Well....they finally did it...

what a huge mess our financial system is in.


i hope that my refinance goes well. I locked in my rate last week.



http://news.yahoo.com/s/nm/20080907/bs_nm/fannie_freddie_dc

U.S. takes over Fannie, Freddie

By Glenn Somerville and Mark Felsenthal 9 minutes ago



The U.S. government on Sunday seized control of mortgage finance companies Fannie Mae (FNM.N) and Freddie Mac (FRE.N) in an aggressive move to help the distressed U.S. housing market and economy.



Officials were concerned mounting losses at the two companies, which own or guarantee almost half of the country's $12 trillion in outstanding home mortgage debt, was sapping their vitality and threatening to undermine them at a time other sources of housing finance have largely run dry.

"Our economy and our markets will not recover until the bulk of this housing correction is behind us," Treasury Secretary Henry Paulson said at a news conference. "Fannie Mae and Freddie Mac are critical to turning the corner on housing."

The decision to take control of the companies, which have $1.6 trillion in debt outstanding, and place them into a conservatorship under their regulator could amount to the largest financial bailout in U.S. history. The Treasury Department, which is taking an equity stake in the two firms, said there was no reason to expect that taxpayers would have to shoulder losses.

The companies have suffered combined losses of nearly $14 billion in the last four quarters and large holders of their debt, including overseas central banks, have begun to show signs of increasing nervousness over their financial health.

"I strongly endorse both the decision by (Federal Housing Finance Agency) Director (James) Lockhart to place Fannie Mae and Freddie Mac into conservatorship and the actions taken by Treasury Secretary Paulson to ensure the financial soundness of those two companies," Federal Reserve Chairman Ben Bernanke said in a statement.

"These necessary steps will help to strengthen the U.S. housing market and promote stability in our financial markets," he said.

As part of the plan, FHFA will operate the companies until they are stabilized and the Treasury will extend financing until December 31, 2009, if needed.
In addition to the new financing facility, Treasury said it will take an equity stake in the two firms through senior preferred equity shares and warrants.
"Under the terms of the agreement, common and preferred shareholders bear losses ahead of the new government senior preferred shares," Paulson said.
Treasury also set up a program under which it would buy mortgage-backed securities currently held by Fannie Mae and Freddie Mac to pump fresh funds into the mortgage market. It said it would begin buying MBS later this month, and it would have authority to make such purchases through December 31, 2009.

The stocks of the two companies have fallen more than 90 percent in the past year and in recent months foreign investors have pared their holdings of the companies' securities.

Paulson said that Fannie Mae and Freddie Mac were so large that "a failure of either of them would cause great turmoil in our financial markets here at home and around the globe."

The costs to bail out these two big boys....esh...I'm guessing that this may make the dollar plunge being that we are going to have to finance these bailouts. It does need to be done but I think this is going to be messy.

 

[ejbonk]

It may just do the opposite and boost the Dollar Upward.
This will be seen as Washington,finally getting the Financial House of Mortage Lending back in order.

 

[thewiz]

Interest rates may finally get in line according to my lender. I saved by going for my financing today and not a couple weeks ago.

It does look like it could cost $100 billion by the time it is all over though....

 

[Kulindahr]

Our news was full of this today. I was stunned to see houses being sold for 1/10 of their value and some houses being burned down because they couldn't be sold.

Burned down??!?!?!?

 

[metta]

^
Wow...that is new to me...how is arson better than foreclosure? Do they really think that the insurance companies are not going to catch on to this?

 

[ejbonk]

^
Wow...that is new to me...how is arson better than foreclosure? Do they really think that the insurance companies are not going to catch on to this?

Desperate People do desperate things.
I remember a buddy of mine going through a messy divorce. She was to get half of everything + a car.

He gave it to her,He cut everything in half with a chain-saw(the house included )and pushed her car into Lake Erie off of a barge 6 miles off shore and gave her the keys and said go get your car and have a nice swim.

 

[Kulindahr]

Desperate People do desperate things.
I remember a buddy of mine going through a messy divorce. She was to get half of everything + a car.

He gave it to her,He cut everything in half with a chain-saw(the house included )and pushed her car into Lake Erie off of a barge 6 miles off shore and gave her the keys and said go get your car and have a nice swim.

That's hilarious!

 

[metta]

Summary Thread: Lehman, AIG, BofA Buys Merrill, Fed Initiative

This is a wild day for the financial markets. Here is a summary post (scroll down for actual posts):

UPDATE: from Bloomberg: Banks, Firms Set Up $70 Billion Fund for Liquidity

A group of banks including Bank of America Corp., Citigroup Inc. and JPMorgan Chase & Co. are putting up $70 billion for a borrowing fund aimed at providing liquidity.​

1) Lehman filed bankruptcy

2) AIG rejected private equity investment and has asked the Fed for help. A restructuring plan will be announced tonight or early tomorrow morning. Update: From the NY Times:

The American International Group is seeking a $40 billion bridge loan from the Federal Reserve, as it faces a potential downgrade from credit ratings agencies that could spell its doom, a person briefed on the matter said Sunday night.​

3) BofA bought Merrill Lynch for $29 per share in stock.

4) The Fed has expanded its lending facilities, including accepting equities.

Here are some sources for stock market futures:

CBOT mini-sized Dow (more liquid than big Dow above).

Barchart.com indices futures. (make sure you look at the ones with times - not dates - in the time column)

Bloomberg Futures.

 

[metta]

DataQuick: Almost Half of SoCal House Sales are Foreclosure Resales

From DataQuick: Southland home sales post second annual gain; another record price drop

Southern California home sales downshifted slightly in August from July, but were higher than a year ago for the second consecutive month. The median sales price continued to tumble, declining the most where buyers were the most active, a real estate information service reported.

The median price paid for all new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties was $330,000 last month, down 5.2 percent from $348,000 in July and down a record 34 percent from $500,000 in August 2007, according to San Diego-based MDA DataQuick.

Last month's median stood at the lowest point since November 2003 when it was also $330,000. The median peaked at $505,000 in the spring and summer of last year.​

We have to careful with the median house price because that can be impacted by the mix of homes sold. Most of the foreclosure activity is at the low end, and this pushes down the median. A better measure of prices are repeat sale indices.

Sales have picked up most - sometimes at double or more last year's pace - in inland communities where home values have plummeted and foreclosures have soared. Foreclosure resales made up 45.5 percent of all Southland resales last month, up from 43.7 in July and 10 percent a year ago. The figure represents the percentage of homes resold in August that had been foreclosed on at some point in the prior 12 months.

Foreclosure resales were highest in Riverside County, at 65.2 percent of resales, and lowest in Orange County, at 33.4 percent.​

Almost half the sales in SoCal are foreclosure resales. Wow.

 

[metta]

Bailout Proposal



"“Basically, market participants — the people really in there — felt the market died on Wednesday [and] without Paulson’s announced plans this morning, we were toast,” the source said, under condition of anonymity."


Here is the proposal so far:

LEGISLATIVE PROPOSAL FOR TREASURY AUTHORITY
TO PURCHASE MORTGAGE-RELATED ASSETS


Section 1. Short Title.

This Act may be cited as ____________________.

Sec. 2. Purchases of Mortgage-Related Assets.

(a) Authority to Purchase.--The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.

(b) Necessary Actions.--The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:

(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;

(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;

(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;

(4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and

(5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.

Sec. 3. Considerations.

In exercising the authorities granted in this Act, the Secretary shall take into consideration means for--

(1) providing stability or preventing disruption to the financial markets or banking system; and

(2) protecting the taxpayer.

Sec. 4. Reports to Congress.

Within three months of the first exercise of the authority granted in section 2(a), and semiannually thereafter, the Secretary shall report to the Committees on the Budget, Financial Services, and Ways and Means of the House of Representatives and the Committees on the Budget, Finance, and Banking, Housing, and Urban Affairs of the Senate with respect to the authorities exercised under this Act and the considerations required by section 3.

Sec. 5. Rights; Management; Sale of Mortgage-Related Assets.

(a) Exercise of Rights.--The Secretary may, at any time, exercise any rights received in connection with mortgage-related assets purchased under this Act.

(b) Management of Mortgage-Related Assets.--The Secretary shall have authority to manage mortgage-related assets purchased under this Act, including revenues and portfolio risks therefrom.

(c) Sale of Mortgage-Related Assets.--The Secretary may, at any time, upon terms and conditions and at prices determined by the Secretary, sell, or enter into securities loans, repurchase transactions or other financial transactions in regard to, any mortgage-related asset purchased under this Act.

(d) Application of Sunset to Mortgage-Related Assets.--The authority of the Secretary to hold any mortgage-related asset purchased under this Act before the termination date in section 9, or to purchase or fund the purchase of a mortgage-related asset under a commitment entered into before the termination date in section 9, is not subject to the provisions of section 9.

Sec. 6. Maximum Amount of Authorized Purchases.

The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time

Sec. 7. Funding.

For the purpose of the authorities granted in this Act, and for the costs of administering those authorities, the Secretary may use the proceeds of the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under chapter 31 of title 31, United States Code, are extended to include actions authorized by this Act, including the payment of administrative expenses. Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure.

Sec. 8. Review.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Sec. 9. Termination of Authority.

The authorities under this Act, with the exception of authorities granted in sections 2(b)(5), 5 and 7, shall terminate two years from the date of enactment of this Act.

Sec. 10. Increase in Statutory Limit on the Public Debt.

Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000.

Sec. 11. Credit Reform.

The costs of purchases of mortgage-related assets made under section 2(a) of this Act shall be determined as provided under the Federal Credit Reform Act of 1990, as applicable.

Sec. 12. Definitions.

For purposes of this section, the following definitions shall apply:

(1) Mortgage-Related Assets.--The term “mortgage-related assets” means residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before September 17, 2008.

(2) Secretary.--The term “Secretary” means the Secretary of the Treasury.

(3) United States.--The term “United States” means the States, territories, and possessions of the United States and the District of Columbia.​

I don't know what that $11.5 Trillion is yet.

Found it!!!

Our country has a federal debt of 9.7 trillion as of sept 2008. That 11.5 Trillion means an increase of 1.8 trillion. This is a very meaningful jump. The secretary had to risk tax payers' money and the stability of our currency to bailout the holders of bad assets. Looking out ten years, Our nation faces serious inflation threat on every day cost of living. Imagine the buying power of USD declines versus other major currencies. The lower & middle-class will ultimately get hurt the most in any scenario like this.

 

[gsdx]

Bailout Proposal

Here is the proposal so far:

Oh, dear. I think I just posted this 5 minutes ago here: http://www.justusboys.com/forum/showthread.php?t=232716

Sorry. I can ask to have my thread deleted if you wish.

 

[metta]

^
No, your thread is fine.

 

[metta]

Well, I just got an approval for my refinance today at 5.75%.

But the appraisal on my home has dropped in value a little over $300k since its peak so far.

I don't want to sell so I guess it does not matter, except I was hoping that would help towards my future imaginary retirement.

 

[mike_n_herrin]

i bought a house in march. my first one. i paid about 250K for it. it was a foreclosure and had been empty for about 8 months. it was one of 23 foreclosed homes i saw. i didn't go looking for just forecloses, but i did go looking in one particular subdivision. turns out around 50 homes were for sale at that time and the number has been about the same each month since.

11 trillion!!! omg.

 

[metta]

Price declines from peak by city:

http://4.bp.blogspot.com/_pMscxxELH...bZN4Lz-w/s1600-h/CaseShillerPriceDeclines.jpg

 

[metta]

Homeowners with negative equity:

http://4.bp.blogspot.com/_pMscxxELHEg/SOFlflQmPkI/AAAAAAAADgI/jBDk9NRyc9U/s1600-h/NegativeEquity.jpg

15.4 million households will be underwater or already foreclosed on by the end of 2008

The last two categories are based on various estimates for the price bottom (peak-to-trough). The 30% decline was suggested by Paul Krugman in December 2007: What it takes). The 35% decline is close to the "severe recession" case presented by JPMorgan last week.

My home has dropped a little over 30% so far and it is still dropping. Thankfully, due to my hatred of owing money which forced me to push the debt down as quickly as possible , I don't have to worry about my loan being more than it is worth.

 

[metta]

Foreclosure Alley


Gesh...so sad....watch the clip here.


http://p.castfire.com/fcieq/video/26078/26078_2008-09-25-215549.flv






....

 

[metta]

Oh my gosh. Homes are selling again in Lee County, Florida. Homes have dropped as much as 80%, according to the news. Many people are paying cash. Brand new homes can be purchased for $55k, $80k, etc.

My down payment on my home had to be more than that.