The Collected Works of Author and Blogger Larry Roberts

Archive for February, 2012

I have repeatedly made the argument that government intervention is counterproductive. However, politicians and federal reserve policy makers either don't accept this simple fact, or they don't care. Politicians need to look like they are trying because doing nothing -- which is the proper course of action -- makes them look helpless and inept -- which they are. The same is true for the federal reserve, but they also have a mandate to keep their member banks solvent. Most of the meddling in the markets has been done for that reason. Perhaps a few loan owners were saved along the way, but the real reason for most interventions is to keep the banks alive. I am not the only one…[READ MORE]

Homebuilders are optimistic by nature. I have been to many economic forecasts, and homebuilder economists always tell their audience the demand for homes will far outpace the supply. There is always a chronic shortage of housing according to homebuilding economists, and homebuilders must step up to meet this need. Homebuilders are like any other seller prone to hear what they want to hear and pay for economists to tell them the same. Unfortunately, homebuilder economists have been consistently wrong. Homebuilders overbuilt homes to meet the false demand of the housing bubble while economists were telling them they were fulfilling years of pent-up demand. Most homebuilders were completely blindsided by the collapse of the housing bubble. Homebuilder economists as a group…[READ MORE]

Home owners and loan owners are different. Both experience changes to their net worth from fluctuations in the resale prices of houses, but beyond that, people who own property don't benefit from the various bailouts designed to keep loan owners paying their mortgages. Most people who own a loan erroneously think of themselves as home owners. They are not. They are money renters who hold title only as long as they continue to pay the rent on the money they borrowed. Let's review from Money rentership: housing and the new American dream: Over the years, the slow erosion of property rights has made the distinctions between owning and renting less dramatic, particularly in renter-friendly cities in California. Owners have few…[READ MORE]

The newly announced foreclosure settlement deal should dramatically increase foreclosure rates because banks no longer have to worry about lawsuits over their foreclosure practices. Further, with impending sales of bulk portfolios to private equity groups, banks will be able to dispose of the REO once they acquire it at auction. With the two biggest impediments to foreclosure removed, banks have no reason to permit delinquent mortgage squatters to continue receiving free housing. Let the foreclosures begin. Foreclosure Deal to Spur New Wave of U.S. Home Seizures, Help Heal Market By Prashant Gopal and John Gittelsohn -- Feb 9, 2012 9:01 PM PT  The $25 billion settlement with banks over foreclosure abuses may result in a wave of home seizures, inflicting…[READ MORE]

Last Friday, I posted an opinion piece about bailing out California debtors. The post was more about moral hazard than about the details of the bank settlement. Now that I have had time to review the bank settlement, I see the issues raised in Friday's post were completely wrong. From what I now understand about the agreement, it only pertains to the big commercial banks, and it really doesn't bail out anyone other than the banks. The moral hazard I was concerned about does not appear to be a big issue on the settlement. The real beneficiaries are not loan owners, it's the banks. California's size lands state big share of foreclosure settlement Bank of America's desire to escape the…[READ MORE]

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