Friday, October 29, 2010

Ryland Shares - Update

   Last week, I mentioned that Ryland was my favorite housing stock. I also mentioned that I wasn't buying yet because I don't buy on weakness but on strength. When I wrote my post last week, Ryland shares were trading at around $16.50. Today, those shares are down to $14.98 because of a middling earnings report earlier in the week. From Reuters:
Oct 28 (Reuters) - Shares of Ryland Group Inc (RYL.N) fell on Thursday, the day after the seventh-largest U.S. homebuilder reported a quarterly loss and a 37 percent drop in orders. Ryland shares were down 4.5 percent at $15.20 in midmorning trading on the New York Stock Exchange, compared with a 0.9 percent dip in the Dow Jones U.S. Home Construction Index .DJUSHB.

    The shares are off about $1.50 from last week. So, am I looking to scoop any shares up NOW? Not yet. As I've mentioned before and I'll mention it again in the future, I don't start a position on weakness. I know that the shares are a nice bargain now compared to last week but there's a chance that prices will be discounted further in the next 1-2 months. I'm a patient investor and my time horizon is usually a minimum of 5 years. I do have a price in mind where Ryland shares would be so compelling that I'd have to break my buying rule and start a small position. In general however, I'm looking to buy size in Ryland only on strength.

Thursday, October 28, 2010

Foreclosure activity up across most US metro areas

   From an AP article today:

LOS ANGELES (AP) -- The foreclosure crisis intensified across a majority of large U.S. metropolitan areas this summer, with Chicago and Seattle -- cities outside of the states that have shouldered the worst of the housing downturn -- seeing a sharp increase in foreclosure warnings.
California, Nevada, Florida and Arizona remain the nation's foreclosure hotbeds, accounting for 19 of the top 20 metropolitan areas with the highest foreclosure rates between July and September, foreclosure listing firm RealtyTrac Inc. said Thursday.
Those states saw housing values surge during the housing boom years. When the boom ended, values collapsed and foreclosures soared.

   I feel like I'm beating a dead horse when I state that the "foreclosure crisis" won't be over for at least another 5 years and recovery in the real estate market won't arrive until 2018-2019. I know that seems like a long time but this is how financial crises work. They take time and they burn up huge amounts of wealth before they're contained. While the foreclosure crisis is resolving itself over the next few years, the economy will continue to get stronger and the stock market's going to go ballistic. The seeds of the next boom have already been planted and all it's going to take is time. Most people don't have the patience to wait nearly a decade for all this to happen but my advice is to continue working at your job (if you have one), invest monthly, take care of your family, and watch for the boom to happen right before your eyes.

Tuesday, October 26, 2010

Why Home Price Reports Are Irrelevant - CNBC

^^ The article title is correct but the content of the article by Diana Olick still doesn't get it. Let me state emphatically that ALL reports are irrelevant. You know why? They all rely on trailing/lagging data which is useless. Revisions are constantly done as well to these reports so what use are they? There is no use but we live in a world where people in power live and die by "data points" and ever changing information. They need to put the information in some sort of tabulated order and stamp an "official" inkstain on the data. It's all nonsense but that's the world we live in. If you want to read the article, here you go.

Monday, October 25, 2010

Owners seek short sales as banks push foreclosure

   The mighty American foreclosure machine is about to start cranking again in style and thousands of Americans are going to be kicked out of their homes. The banks are foreclosing on these homes because said Americans haven't paid their mortgages but a New York Times article this morning asks, "Why not short sales instead of foreclosures?" From the piece:
   Concerns about fraud are one of the reasons lenders are so careful about short sales. Sometimes well-off homeowners want to portray their finances as dire and cut their losses on a property. In other instances, distressed homeowners try to make a short sale to a relative, who would then sell it back to them (a practice that is illegal). A recent industry report estimates that short sale fraud occurs in at least 2 percent of sales and costs banks about $300 million annually. Short sales are also hindered when homeowners fail to forward the proper papers, have tax liens or cannot find a buyer.

   Banks are swamped with delinguent mortgages and the attendant foreclosures. When swamped in such a manner, large organizations such as BAC have to wade through the morass and attempt to move forward as efficiently as possible. The current firebomb attack method to push through foreclosures is the only way that banks can proceed and this is how it'll be henceforth. It's ugly but that's business. Nothing personal.

Friday, October 22, 2010

America Hates Wall Street

   A CNBC article from today reminds me that, "America Hates Wall Street" and one from the WSJ exhorts, "A new form of madness grips investors" which are about Americans' distaste for the stock market.

   These types of stories are indicative of the fear that still grips the American public when it comes to Wall Street. I guess it's understandable because during the 2007-2009 crash, the DOW dropped from 14,279.96 all the way down to 6,440.08. I traded through those days so I know there was irrational trading going on, lots of fear, and a feeling amongst the rabble that the end of America was upon us. Crazy right? Yet, here we are in 2010 and the Dow's recovered all the way to 11,113.91 but folks are still fearful.

   That's why po' folk will never get ahead. They should've been buying with both hands and both feet when the market dropped like a stone in 2008 - mom and pop investors should've been stampeding into the market when Pfizer was $11.62 on March 2009 and GE had dropped to $5.87. Yeah, I know GE is a hedge fund in drag (Thanks, Cramer) but c'mon now. GE has survived wars, turmoil, and recessions before and it's not going out of business.

   So yeah, the social class strata in America is going to stay the same for the next hundred years because of fear and greed. It's as simple as that. When the market dives, Joe Sixpack becomes fearful and sells near the bottom only to watch the market bounce back again. However, he doesn't buy when the market climbs - he stays out because of a fear of being whacked again. That's why Joe will never ever become wealthy or be rewarded by the market.

   Joe Sixpack will probably buy when the DOW's at all time highs in the next few years when prices are dear. A powerful bull market is upon us but the majority of American's won't benefit from what's coming because their fear outweighs their greed at precisely the wrong time.

Thursday, October 21, 2010

Fannie and Freddie may need another $215 billion

   The black holes known as Fannie Mae and Freddie Mac continue to suck money into their nether regions like a pair of ravenous vortices without end. From today's Reuters article:
   NEW YORK (Reuters) - Fannie Mae (OTC BB:FNMA.OB - News) and Freddie Mac (OTC BB:FMCC.OB - News) may need as much as $215 billion in additional capital from the Treasury through 2013 to offset losses and maintain a positive net worth, their federal regulator said on Thursday. Fannie Mae and Freddie Mac, whose programs fund the lion's share of all new home loans, are at the center of debate as Congress sets to overhaul a U.S. mortgage finance system that contributed to the worst housing crisis since the 1930s.

   The capital to support those two hulking disasters ultimately come from the American taxpayer. The wealth of the United States is created by working men and women who toil at their jobs and a good chunk of that will be going to fund Fannie and Freddie and keep them from imploding. I'm of the belief however that if that capital wasn't being used to keep F&F alive, it would be going to waste in another BIG program designed to destroy wealth and feed the wastrels. Remember Gravina Island Bridge aka "The Bridge to Nowhere" which was advocated by Representative Don Young and Senator Ted Stevens? That's the kind of waste and wastrel(s) I'm referring to.

   Continuing further into the Reuters article:
   "The cumulative capital needs of the two housing finance giants, which were seized by the government in late 2008, will likely fall between $221 billion and $363 billion through 2013, the Federal Housing Finance Agency estimated."

   Whenever I read a cost estimate preceded by the word, "likely," I automatically double the figure in my head so I'd pinpoint the total losses to be $750 billion when 2013 rolls around. Since I'm certain there's no housing recovery until 2018 or thereabouts, the total losses will probably reach $1.5 trillion when it's all said and done.

Wednesday, October 20, 2010

How the Foreclosure Fiasco Threatens the Economy

^^ Another doom and gloom article, this time from US News and World Report. The first paragraph starts like so:
It might seem like a respite for struggling homeowners, but the sudden snags and slowdowns in thousands of foreclosure proceedings could prolong the housing bust well beyond its fifth year--and spell deep trouble for the broader economy.

   The broader economy's already in recovery mode and it'll soon be galloping along like a stallion despite the stumbling banks, the struggling homeowners, and the snarky foreclosure proceedings. America's like an engine that might sputter every now and then because of overheating but once it's been sufficiently cooled and lubricated, it's going to purr like a kitty kat. Yeah, I believe in America and the resourcefulness of our citizens and workers. Watch with me and see how the economy rebounds in the next few years. When the country is basking once again in the spotlight, we'll reminesce about how awful 2008-2010 was. When it's 2015 and the economy's hotter than the Alabama sun at noon, I'll probably be preparing for the next bust because by then, the engine that is America will be reaching for another critical temperature event.

Tuesday, October 19, 2010

My Favorite Housing Stock

   Nah, it's not Toll Brothers or D.R. Horton nor Pulte Group. My favorite home builder stock is Ryland (RYL) which I've followed and traded since the 90s. Their profile is as follows:

The Ryland Group, Inc., together with its subsidiaries, operates as a home building and mortgage-finance company in the United States. The company’s operations cover various aspects of the home buying process, including design, construction, and sale. It offers single-family detached homes; and attached homes, such as town homes, condominiums, and mid-rise buildings, as well as sells land and lots. The Ryland Group also provides mortgage-related products and services, as well as title, escrow, and insurance services to its homeowners and subcontractors. It markets its homes to entry-level, and first and second-time move-up buyers. The company was founded in 1967 and is headquartered in Calabasas, California.

   Ryland's near 52-week lows so I'm not buying now. I do think ~$16 is a good price for each RYL share but as mentioned before, I normally don't buy on weakness. I prefer to buy as a stock goes up and then pyramid the position as higher prices lead me upwards. The market's pulling back today but housing stocks are nursing middling losses. This doesn't mean anything based on a 1-day snapshot but I am of the opinion that housing stocks will recover way before the real estate market recovers and they're my indicators for the impending real estate recovery.

Housing Slump Offers Opportunity In Apartment-Building Market

   CNBC has a reasonable article on apartment-building investing during the current downturn in real estate. The first paragraph draws the reader in with a small tale of success:
   "The property in Fort Lauderdale, Fla. was originally valued at $285,000. Clint Gordon, a private investor in multifamily properties, offered the bank $50,000 cash-and within 10 days had closed the deal. A few days after that, he began renting it for $15,000 a year.
"Anybody that's getting into this business now, you get a whole lot of return if you're paying cash for properties," he says. "You're just buying them so cheap."

   The company I work for has been investing in various businesses in the past year and I think buying a few apartment buildings might be a workable plan in depressed areas like Fort Lauderdale. Then again, do we really want to be landlords? I mean, landlords have to deal with non-paying tenants, evictions, dirty ass people, property damage, bed bugs, and sabotage. What's going to stop an evil tenant from putting bed bugs in his apartment and then withholding rent until the bed bugs are evicted? I have an active imagination and I can think of a thousand ways a tenant might torment a landlord but I won't post them here. Posting the bed bug evilness was bad enough. 

   So, anyway, we probably won't become landlords anytime soon but it's awful tempting with the knockdown and blowout prices that we've seen in Florida. The economy's going to be roaring back in another few years and buying sometime in the next 2-3 years might be a wise investment.

The Love Dress (Just a joke to make you smirk)

   The mother-in-law stopped by unexpectedly at the recently married couple's house. She rang the doorbell and stepped into the house to see her daughter-in-law standing naked by the door. "What are you doing?" the mother-in-law asked. "I am waiting for my husband to come home from work," the daughter-in-law replied. "Why are you naked?" asked the mother-in-law. "This is my love dress," the daughter-in-law replied. "LOVE DRESS!. You are naked," said the mother-in-law. "But my husband loves it when I wear this dress. It makes him happy and he makes me happy," said the daughter-in-law. "I would appreciate your leaving now because my husband will be home any minute."

   Soured by all this romantic stuff, the mother-in-law left. On the way home she thought about the LOVE DRESS and got an idea. She undressed, showered, applied her best perfume and waited by the door for her husband to come home. Finally the pickup truck drove up the drive way and she took her place by the door. The father-in-law opened the door and immediately saw his wife naked by the door. "What are you doing?" he exclaimed. "This is my love dress," the mother-in-law replied. "Maybe you should iron it," retorted the father-in-law.

Monday, October 18, 2010

Bank of America starts thaw in foreclosure freeze

   Remember the foreclosure moratorium that was mentioned last week? Remember how some people thought it was seriously going to be considered by the banks? Well, there won't be a moratorium and BAC is already restarting their foreclosure machine after halting it in 23 states. From an AP article published today:

"Bank of America said Monday that it plans to resume seizing more than 100,000 homes in 23 states next week. It said it has a legal right to foreclose despite accusations that documents used in the process were flawed.
Other major lenders have yet to say whether they will follow suit and resume foreclosures in the 23 states that require a judge's approval. But analysts said they expect the move by the nation's biggest bank will mean other lenders will proceed with a wave of foreclosures that have depressed the housing market.
Banking analyst Nancy Bush of NAB Research said other lenders are likely to follow because foreclosure practices were similar from bank to bank."

   On the back of that news,  bank shares rebounded today. Am I buying the banks now? Nah, not yet. If I'm late to the banking party, so be it but as mentioned last week, I buy on strength. If the banks are going up, they're going up by a lot more than what they've shown in the past year and there's always time to take a bite out of the impending move once it's in motion.

Friday, October 15, 2010

A House in Maine kicks off Foreclosure Freeze

   A woman named Nicolle Bradbury lives in the house in Maine that set off the current furor over the foreclosure mess that the banks find themselves mired in. The NY Times captures her case like so:
"Nicolle Bradbury bought this house seven years ago for $75,000, a major step up from the trailer she had been living in with her family. But she lost her job and the $474 monthly mortgage payment became difficult, then impossible.

It should have been a routine foreclosure, with Mrs. Bradbury joining the anonymous millions quietly dispossessed since the recession began. But she was savvy enough to contact a nonprofit group, Pine Tree Legal Assistance, where for once in her 38 years, she caught a break." 

   That break came in the form of a retired lawyer named Thomas A. Cox who was volunteering at Tree Legal. Cox exposed the shoddy paperwork that GMAC was using to evict Ms Bradbury and eventually showed that all of the banks were using the same shoddy paperwork and questionable tactics to foreclose on borrowers.

   This type of laxity on the part of the banks shows me that there's no leadership at the top. The troops look to the leadership for guidance and structure but what happens when there's no leadership to begin with? Well, just look at the sorry state of banks like Citi, BAC, and GMAC for the first clue. Are we really in 2010? Is this still America? Feels more like the old times I've seen in movies where banks did whatever they wanted and kicked widows and orphans to the curb with all the might of a grizzly old sea captain. Shit's depressing.

Thursday, October 14, 2010

Wall St blames homeowners in foreclosure fiasco

   I'm ambivalent on the opinions of Wall Streeters who scalp their earnings and profits from the backs of the general population whom they despise. Okay, maybe that was harsh but it's true. People in positions of power don't find the unwashed masses agreeable. That's why the ultra-rich and nouveau-riche build fences and gates around their estates and seclude themselves in protected enclaves to huddle with their own kind. In a Reuters article titled "Wall St blames homeowners in foreclosure fiasco,"  I have to grudgingly agree with the following statement:

"Wall Street's reaction to the allegations that some banks cut corners while foreclosing on 3 million homes since 2007: Pay your mortgage in the first place.

Those on Wall Street, however, are largely unsympathetic, insisting that possible errors in the foreclosure process are beside the point, that the process begins only when a borrower starts missing mortgage payments."

   It's true that the foreclosure process only kicks off when a borrower misses payments but should it really just be business as usual without regard as to why the borrower has missed payments? I understand that altruism isn't part of the Wall Street vernacular and it's a shark-eat-shark world out there but a part of me feels there should be a little more compassion and a willingness to work with borrowers. That won't ever happen though because banks are huge corporations and once they get that big, they lose their humanity and become more machine-like even though it's still humans that operate within the corporation. What's the primary driver of corporations? Profit. Greed. Avarice. It's as simple as that and the reason why robo-signers, foreclosures, and the whole dang real estate mess ignited into a conflagration in the first place.

Mortgage rates hit decades-low of 4.19 percent- AP

From the AP today:

"As a result, the average rate for 30-year fixed loans dropped to the lowest level on records dating back to 1971, mortgage buyer Freddie Mac said Thursday. It's down from 4.27 percent the previous week. The last time rates were this low was in the early 1950s.
The average rate on 15-year fixed loans fell to 3.62 percent, the lowest on records dating back to 1991, Freddie Mac said.

Rates have fallen since spring as investors shifted money into the safety of Treasury bonds. That demand lowers their yields, which mortgage rates tend to track. The 30-year rate was 5.08 percent at the beginning of April. The 15-year rate was 4.39 percent."

   Rates are lower than they've been in decades but hardly anyone who needs those low rates are going to get them. Could mortgage rates break down below 4%? Yeah, they can drop all the way to 3% after QE2. If and when rates drop to 3%, I'm going to take out a $250,000 loan. My FICO is in the high 700s and I can service a 3% vig on a quarter-of-a-million which I'll use to invest with a time horizon of 5 years. If rates never hit the 3% level, I won't act because the risk/reward wouldn't be worth it for my investment scenario.

Bank shares drop on foreclosure woes

   Banks can't get out of their own way but I like it. Earlier this morning, shares of JPM were down 3.2%, BAC down 5.5%, C down 5.4%, and Wells Fargo was dropping 5%. Will they go lower? Yes, I think so. Although it is unlikely that a moratorium on foreclosures will be instituted, the fear of such a stoppage is going to weigh on shares in the short term. I've mentioned before that a moratorium won't happen but not everyone knows that. These weak hands flee on any sign of trouble and their selling presents opportunity.

    This doesn't mean that traders should blindly buy when trouble rears its head however. I've mentioned before that I prefer to buy shares on strength instead of weakness. With the bank shares sliding, I'd take a wait and see approach before starting any positions but I like the banks for trading. I'd never hold them long term however because they blow up every now and then and destroy capital like nothing else.

Tuesday, October 12, 2010

Foreclosure Fraud: It's Worse Than You Think

^^ That's a headline from a CNBC article today. The writer assumes that the reader doesn't know how bad the "Foreclosure Fraud" has become but I know. I've looked into the hearts of men and I have found unbounded greed, lust, and a thirst for vice. Think about it this way: As bad as someone tells you something is, multiply it by 5 to get the true reality of the situation. Sometimes you have to muiltiply it by 10 depending on how good a liar the official in charge is.

   Where do we go from here? Now that the writer Diana Olick has told us how bad it is, what happens? Well, nothing really. Facts and figures don't make things happen. What does make things happen is greed, lust, and a thirst for vice. The country will slog through the mortgage and foreclosure mess for a looooong time until someone figures out a way to make money from all this crap. Once that spark is ignited, action will be taken, swamps will be cleaned up, and things will get moving again. Until then, the reality will be like molasses. Slovenly, syrupy, and slow to move.

Monday, October 11, 2010

How Banks Can Fix the Foreclosure Crisis

   Daniel Gross has written an article for Yahoo Finance which states that banks can "Fix the Foreclosure Crisis" by doing the following:

"Jamie Dimon of J.P. Morgan Chase, Brian Moynihan of Bank of America, and other banking CEOs willing to show their face in public should call a press conference today and announce their intention to hired 50,000 people to deal with all aspects of the foreclosure crisis. They should hire processors who will actually read the legal documents, but also professionals to work on debtor counseling and modification, landscapers to mow loans of real estate they own, and security guards who will ensure that repossessed homes aren't stripped or occupied by squatters."

Does Daniel Gross live in a fantasy land where 50,000 people can be hired and marshalled into a foreclosure force capable of efficiently going through the muddle that is the American real estate crisis? How long will it take for the banks to train those 50,000 people and ensure that the foreclosure process is performed in admirable fashion? My estimate would be at least 3-5 years and banks aren't going to invest the capital and time for that. In the eyes of the banks, hacking and slashing people out of their homes should be quick and painful. Daniel goes on in the article to state the following:

"Doing so would help put a small chunk of the underemployed workforce back on the job.  It would be a bold, public gesture that might spur other companies to hire. It would demonstrate to courts and politicians that the banks are finally getting serious about getting on top of the problem. Perhaps some of the newly employed will use their wages to stay current on their mortgages, and the banks can certainly afford it. Fifty thousand people at $50,000 per year comes to $2.5 billion. J.P. Morgan Chase earned $4.8 billion in the second quarter. In other words, it would cost the industry about what one of its leading members makes in seven weeks."   

   Since when was altriusm part of any banks' business model or vernacular? I found this sentence particularly laughable" "It would be a bold, public gesture that might spur other companies to hire." HAHAHA. Daniel, you do live in fantasy land. Can I join you and look at the unicorns and rainbows? Daniel insinuates that just because banks hire people, other businesses like Dunkin' Donuts, Saks Fifth Avenue, and British Petroleum are going to start hiring people too. Damn, that's the kind of logic that writers for Yahoo are capable of? He even works out the equation for hiring 50,000 people and then multiplies everyone's $50,000 in annual wages to come up with $2.5 billion in total wages. This guy is a simpleton of the highest order and he can't be taken seriously. I'm done with this guy and his future articles will be shitcanned immediately.

Sunday, October 10, 2010

White House doubts need to halt all foreclosures

   That headline up there is from an AP article today. First off, who is proposing a "need to halt all foreclosures?" A few paragraphs into the article, we find one of the culprits who are calling for a moratorium:

"Rep. Debbie Wasserman Schultz of Florida, a top House Democrat, said she backed a foreclosure moratorium and government talks with the banking industry to concoct ways to let lenders reshape troubled mortgages. She said the foreclosure problem has been "extremely vexing" in her state."

   I'm not going to blame her for being a woman. I'm not going to blame for her being stupid. I'm not even going to blame Debbie of being self-serving in the face of her proposal. I'm not going to do any of those things because there simply won't be a moratorium. It really is that simple. Why belabor or argue a point when I know that nothing will come of it? Debbie, you're going to get some votes and nods from constituents but that's pretty much it. Well, the banks probably won't contribute anything to your next campaign but you'll probably make it up from the donations provided by impoverished homeowners who are facing foreclosure. Yeah, that's the ticket.

Friday, October 8, 2010

Employers in U.S. Cut More Jobs Than Forecast in September

From a Bloomberg article today:
The U.S. lost more jobs than forecast in September, reflecting a decline in government payrolls that shows the damage being done by rising fiscal deficits.

   So, the economists doing the forecasting are continually wrong month after month. What are they good for then? What else do they do in their offices? Play desktop pool? Surf porn sites? What?

Employers cut staffing by 95,000 workers after a revised 57,000 decrease in August, Labor Department figures in Washington showed today. The median estimate of economists surveyed by Bloomberg News called for a 5,000 drop. The unemployment rate unexpectedly held at 9.6 percent.

   I love the following sentence: "The unemployment rate unexpectedly held at 9.6 percent." Why should the unemployment rate at 9.6% be unexpected? Are the economists so out of touch with reality that these data points are "unexpected?" I've said it before and I'll say it again. Economists are useless. Worthless. They'd serve society better if they worked at a Staples or an Office Depot... at the copier machine. At least they'd be working with data that's useful for someone.

Thursday, October 7, 2010

Real Estate Collapse Spells Havoc in Dubai

   Think back to the summer of 2007 when real estate around the world was still booming and average citizens were caught up in the hype. Goaded by cheap money, easy mortgages, and the infectious "me-too" mentality, everyone was getting into real estate. Janitors who couldn't afford it, single-income families who definitely couldn't afford it, and people like Casey Serin who eventually lost all of the houses he speculated on.

   The disease of real estate speculation also reached Dubai as an article in the Times relates today:
On a sultry June evening in 2007, more than 100 people camped out at the offices of Emaar, a prestigious Dubai property developer, to ensure that they would land a coveted spot in a gleaming new skyscraper scheduled to open this year near the Burj Khalifa, the world’s tallest building, Liz Alderman writes in The New York Times.
Today, the property, designed by the New York architect Frank Williams (who died in February), is like a number of others around Dubai — little more than a foundation. Its value has plunged by more than 40 percent since 2008, after the collapse of Dubai’s real estate boom.

   This type of capital destruction was happening everywhere at around the same time and billions in wealth got transferred in a big way.  The speculators and buyers got swindled and bamboozled by a slick shell game that ended in 2008. If global real estate was a piece of golden farm land in 2007, it's a bombed out crater now.

Wednesday, October 6, 2010

Wells Fargo to pay $24M to end mortgage probe

   The real estate boom years seem so long ago given the pickle that housing's in but it was only 4 years ago that housing was the road to riches for a lot of Kool-Aid drinking Americans. There's news today concerning Wells Fargo's payoff to eight states to close an investigation into option adjustable rate loans that are contributing to the current malaise. From the AP:

WASHINGTON (AP) -- Wells Fargo is paying $24 million to end an investigation by eight states probing whether lenders acquired by the company made risky mortgages to consumers without disclosing their perils.

The states said loans known as option adjustable rate loans, or "pick-a-payment" mortgages, were deceptive to borrowers. Those particularly toxic loans allowed borrowers to defer some of their interest payments and add them to the principal balance. Borrowers could make payments so low that loan debt actually increased every month.
San Francisco-based Wells Fargo & Co. announced the agreement Wednesday with attorneys general in Arizona, Colorado, Florida, Illinois, Nevada, New Jersey, Texas and Washington state.
The loans were made by Wachovia Corp. and a California company it acquired, World Savings Bank. Wells purchased Wachovia at the end of 2008. Wachovia had already stopped making those loans before the acquisition was complete.

What the @&*# were the banks thinking back then? That things had changed and this time was different? When the real estate market eventually recovers in the next decade or so and things are looking bright again, the banks will be making these kinds of crazy ass loans once again. You know why? Because memories are short and short term profits will always be on the forefront of profiteering banks.  

Midnight grocery runs capture economic desperation

   An AP story that's being flashed on the usual news carriers today reveals the hard times that Americans have found themselves immersed in. From the article:
FREDRICKSBURG, Va. (AP) -- Once a month, just after midnight, the beeping checkout scanners at a Walmart just off Interstate 95 come alive in a chorus of financial desperation.
Here and at grocery stores across the country, the chimes come just after food stamps and other monthly government benefits drop into the accounts of shoppers who have been rationing things like milk, ground beef and toilet paper and can finally stock up again.
Shoppers mill around the store after 11 p.m., killing time until their accounts are replenished. When midnight strikes, they rush for the checkout counter.
"The kids are sleeping, so we go do what we've gotta do. Money is tight," Martin Young said as he and his wife pushed two carts piled high with ground beef, toilet paper and other items.
The couple said they need food-stamp benefits, which are electronically deposited onto debit cards, because his job as a restaurant server doesn't quite cover expenses for their five children.
"We try to get here between 10:30 and 11 because we know we've got a lot of stuff to get. That way by 12 o'clock we're at the line cashing out and done," he said.

I knew things were bad but didn't know they were this shitty. Here we are in 2010 with iPods, iPads, blazing fast internet, and the Hubble Telescope peering into the universe above our heads and Americans are waiting around in supermarkets like a 2010 version of Communist Russia? The debit cards have replaced the ration tickets but the gist is the same. It brings a tear to my eye when society never seems to evolve in a continual path but devolves and evolves in cycles. Two steps forward and one step back is how the world works and it's a damn shame.  

Monday, October 4, 2010

Pending Home Sales Rise 4.3 Percent in August but Remain Below Last Year's Pace - AP

   Some good news on housing coming down the pike? Nah, not really. From today's AP article on home sales:
   WASHINGTON (AP) -- The number of people who signed contracts to buy homes rose in August for the second straight month but remained far below last year's pace. The weak economy and fears that prices will fall are keeping many consumers away from the housing market.
The National Association of Realtors said Monday that its seasonally adjusted index of sales agreements for previously occupied homes rose 4.3 percent to a reading of 82.3. That's still more than 20 percent below the pace in the same month a year earlier.
Economists surveyed by Thomson Reuters had expected the index would rise to 81.4.

   Don't you love the part about economists expecting the index to rise to 81.4? I do. It bolsters my contention that economists are far removed from reality and operate on models, dogma, and "data" that insulates them from what's happening in the real world. I'll bet that no economist surveyed by Thomson Reuters has a clue about how the average American family lives or what the price of a quart of milk is. Until the reality of life blows through the sanctified world of the economists, we'll continue to get dumb and nonsensical expectations about the real estate market and the economy.

Friday, October 1, 2010

Bank of America delays foreclosures in 23 states

   During the height of the real estate boom when anyone with a pulse was able to get a home loan, banks were signing off on mortgages like risk was dead. Back then, banks couldn't process mortgages fast enough and liar loans were approved without much of a background check or due diligence.

   All of that laxity came back to haunt and nearly destroy the big banks during the real estate crash of 2008-2009 when loans soured like milk under a hot Alabama sun. Now, news come from the likes of JP Morgan, GMAC Mortgage, and Bank of America that they didn't do their due diligence when processing foreclosure documents. Homeowners in foreclosure now have the process delayed while the banks go through the paperwork to determine if the foreclosures were properly handled.

   Are the banks really this shitty? Well, yeah, I guess so. When big banks have the full backing of Uncle Sam and by proxy, the American taxpayer, banks have a blank check to do whatever they want. When they take on too much risk and that risk bites them in the ass, it's okay. Taxpayers will bail them out. Bail Out Nation. That has a nice ring to it.