The Collected Works of Author and Blogger Larry Roberts

Archive for March, 2010

Lenders really need to let go. They blew it. It's over. Just let it die. Both the lender and the borrower pay a price -- or at least they are supposed to. Instead, we bail them out, and we pay the price. Don't forget about us who pay for their mistakes. Part of the price we pay is obvious in the accounting for the various bailouts, but much of the price we pay is hidden in higher home prices, greater public indebtedness, and in the subsidized entitlements of borrowers everywhere. Government backed loan modification attempts are ill-conceived because bailouts create moral hazard. However, the bailouts and the resulting moral hazard can be disguised inside the black box of obfuscation and paperwork of the HAMP program. If the banks and bureaucrats raise…[READ MORE]

Did our brilliant politicians and the cool heads at the Federal Reserve save the world? Popular public opinion says yes. Me and many other astute observors say no. The only thing our collective actions has accomplished is to stop a group of greedy and ignorant fools from experiencing the consequences of their actions. Instead, the consequences have been passed on to us in the form of huge government bailouts and locally inflated house prices. Blame It on the Bubble Dean Baker Politicians and the media continue to refer to the economic downturn as being the result of a financial crisis. This is wrong. We have 15 million people out of work because the housing bubble that drove the economy since the last recession finally burst.…[READ MORE]

Lenders and borrowers dance with disaster. Borrowers have the lead in the amend-pretend-extend fandango, but as the economy improves, along with lender balance sheets, lenders will take the lead. As the default shuffle plays out, wallflowers who chose not to cha-cha are wilting under the economic distress caused when the music stopped. Dancers are short on chairs. Walking One Block Damaged By The Housing Crisis by Tamara Keith Dana Lane doesn't look devastated. It's part of a California subdivision built in the late 1980s, a mix of stucco and wood siding with mismatched fences. It looks like so many working-class suburban blocks. But since the foreclosure crisis started, Riverside County, Calif., has ranked near the top of the list for its rate of homes being…[READ MORE]

Properties are encumbered with too much debt, and buyers in markets where prices have not crashed are being asked to pay much higher prices as a percentage of their incomes than generations past. Today's buyers are being asked to pay for the excesses of those that came before them and sell out to the money changers. Mom, Apple Pie and Mortgages By ROBERT J. SHILLERPublished: March 5, 2010 FOR decades, the federal government has subsidized housing — particularly owner-occupied housing. This has been especially true during the continuing financial crisis, with Fannie Mae, Freddie Mac and the Federal Housing Administration propping up the housing market by issuing guarantees for investors on most new mortgages. But what is the long-term justification for putting…[READ MORE]

Wouldn't life be much easier if we could hit a reset button and wipe away the excesses of the housing bubble? In the housing bubble era, reset is associated with a bad thing that happens to adjustable rate mortgages. I remember last year a few astute observers much wiser than me chastised me for worrying about adjustable rate mortgages because they were all resetting to lower rates -- problem solved. Foolish me. I must be a Chicken Little sounding a false alarm, right? I wrote most recently about The ARM Problem in the summary post Option ARM story. The problem with adjustable rate mortgages resetting and recasting to higher payments has diminished in importance because many of the loans have defaulted early, so now the major…[READ MORE]

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