The Collected Works of Author and Blogger Larry Roberts

Archive for January, 2012

A reader recently emailed me his story on getting a loan on a property. I know first-hand how tough the banks are making it to get a loan, but mine are investment property loans, and they should have more scrutiny. I am always suspect when I hear complaints about the tougher underwriting standards because most people compare today's standards with the non-existent standards of the bubble. However, hearing stories from very well qualified borrowers having troubles does make me pause and wonder if perhaps we have gone a bit too far tightening standards. I am writing to provide you with a data point and possibly an idea for a blog entry.   We are about to close on a 2/2 condo in…[READ MORE]

It isn't often I find an economist I agree with. Most economists missed the housing bubble, and even six years later, they fail to understand the ramifications of it. They act surprised when their forecasts prove faulty. Basically, most economists don't know what they are doing. It's refreshing when I find one who grasps what's really going on, and today's interview is with one such economist. Economist eyes 5% home-price drop January 7th, 2012, 12:28 am · · posted by Jon Lansner Christopher Cagan is a veteran Southern California real estate economist. He’s our 19th guest for “Eyeball 2012!” This series of interviews is our holiday gift to you, Lansner on Real Estate’s sixth annual collection of outlooks on local…[READ MORE]

The federal reserve exists to create moral hazard. Their policies are designed to lessen the impact of the financial cycle, make booms less of an upswing and make busts less of a drag. However, the recessions at the end of a long boom are necessary. Unsustainable Ponzi-based business plans and lending programs must be purged. If these business and lending practices are allowed to continue, the improper allocation of resources becomes an even larger drag on the economy. Ponzi borrowing from mortgage equity withdrawal is one such lending practice that must be purged from the system. All Ponzi schemes are unsustainable. Eventually, the loan balances become too large for debtors to service, and they quit paying. Once borrowers quit paying,…[READ MORE]

The Orange County Great Park located on the El Toro airbase in Irvine is running out of money. The main source of development money was to be the development of the residential properties which have been delayed due to the housing bubble. Now the other source of funding, redevelopment agency funds, has been wiped out by governor Jerry Brown. With no cash coming in, it's hard to see how this project goes forward. Money Woes: What's a Great Park To Do? Posted: Monday, January 9, 2012 6:42 am | Updated: 5:42 am, Tue Jan 10, 2012. ADAM ELMAHREK The Orange County Great Park's chance of losing its primary funding is more likely now that the California Supreme Court has backed…[READ MORE]

The FHA has been the lender of last resort during the collapse of the housing bubble. Conventional lending dried up once they realized how lax lending standards became, and how likely it was that borrowers would strategically default and cause more losses. Without the FHA, a Las Vegas style crash of 70% or more would have been common to markets across the country. The banks would have been obliterated. The FHA insured many of the loans issued as prices declined. Since the FHA down payment is only 3.5%, and since it takes a 6% commission plus closing costs to exit a property, nearly every FHA loan issued over the last 10 years is effectively underwater. The losses are going to…[READ MORE]

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