The Collected Works of Author and Blogger Larry Roberts

Archive for February, 2013

One of the results of the ultra low mortgage rates is that they can only go higher or stay the same for the very long time.  In fact, I think the US will do everything they possibly can to keep mortgage rates down for sometime.  However, the low cost of mortgage rates will be paid for the in the move up or trade up market in future year.  As a side note, the examples below are also relevant to show asset inflation due these ultra low rates. My wife and I will probably start looking to purchase a semi-starter house in 2013, however with the lack of supply I'm not too sure that we would find anything.  She asks me…[READ MORE]

Baby boomers came to look at housing as an investment that would provide for their retirement. Owning a primary residence is a solid part of a retirement financial plan, but when house prices took off during the bubble, baby boomers responded by spending more money, retiring early, and slowing their saving and investment in other areas. As a result, many baby boomers were completely unprepared for retirement when house prices crashed. In response, Ben Bernanke lowered interest rates to zero to attempt to reflate the asset bubbles in stocks, bonds and real estate to restore the illusory wealth of the baby boomers. I imagine the boomers are quite grateful for Uncle Ben's help, but as with any market manipulation, there…[READ MORE]

When lenders make loans, they far prefer borrowers to repay those loans; in fact, their entire business plan relies on it. As long as borrowers are current with their payments, lenders are happy and making money. When borrowers don't make their payments, the end result is a distressed sale. If there are enough of these, market prices are reduced dramatically which causes significant lender losses. Lenders know this too, so when distressed loans become an overwhelming problem, they devise can-kicking methods including loan modifications, mark-to-fantasy accounting, and when all else fails, they simply allow the delinquent borrowers to squat in shadow inventory. Below is the lender decision tree for delinquent borrowers. Today we will explore this diagram in some detail and discuss the…[READ MORE]

If you ask many middle-class loanowners in coastal California, and they will tell you that they are entitled to a 2,000+ SF detached single-family home pimped out with pergraniteel -- and they will really mean it. The sense of entitlement in coastal California is appalling to anyone viewing it from the outside (and even some of us viewing it from the inside). There are places on earth where there is no housing entitlement. Even the US has a problem with homelessness and people living in unsafe and unsanitary conditions. However, the homeless here have access to shelters and other forms of assistance. In some countries, there is little or no assistance either public or private to help out those in…[READ MORE]

REO-to-rental hedge funds are latest bogeymen touted by the political left. The evil Wall Street money grubbers are profiting from the disaster created by the Banksters. It's a narrative Matt Taibi popularized, and now others are jumping on the bandwagon. The latest diatribe from the left attempts to link their pet cause principal forgiveness to the activities of REO-to-rental hedge funds. As many political screeds are, this one is loaded with emotional pandering and is weak on good reasoning. The housing “recovery” is a myth Wall Street is running a new profit game by buying foreclosed homes and renting them back to their former owners [and this is a bad thing?] Thursday, Feb 7, 2013 08:40 AM PST -- By…[READ MORE]

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