The Collected Works of Author and Blogger Larry Roberts

Archive for June, 2013

Banks are in survival mode. They must reflate the housing bubble, or the losses on their non-performing single-family residential loans will wipe them out. In order to reflate the bubble, the banks must keep these properties off the MLS, a task they are currently succeeding at, and mortgage interest rates must remain low so buyers can bid up prices to peak levels so banks can liquidate without a loss. The chart above shows the $144.75 billion exposure they have just on their non-performing loans. Since these non-performing loans only represent 9% of the total number of underwater borrowers, the total potential exposure is more than 10 times larger. As I noted, banks are still exposed to $1 trillion in unsecured…[READ MORE]

While the US and many other countries around the world inflated housing bubbles, Ireland tried to surpass them all. From 1996 to 2006, house prices in Ireland increased more than 300%! As in the United States, Ireland inflated it's housing bubble with lender debt. When the toxic brew of mortgages poisoned borrowers, delinquencies mounted, and house prices crashed. An issue of solvency When the service on existing debt exceeds the borrowers capacity to make payments, the borrower is insolvent. The limit of insolvency is also known as the Ponzi limit. Once this threshold is crossed, only additional infusions of borrowed money used to make debt service payments keeps the borrower afloat. Every dollar loaned to a borrower beyond the threshold…[READ MORE]

Prices in many housing markets around the country are rising at unsustainable rates. The last time this happened was 2004-2006, and the pundits at the time said that appreciation would moderate and resume its "normal" 5%+ yearly rates in the future. Gary Watts even assured us that "Fifteen percent is pretty much in the bag for Orange County in 2006," he says. "It's impossible for prices to go down this year." It's difficult to imagine a statement that was more wrong. The bust from 2007-2009 was characterized by steeply falling prices. It was a relatively quick and severe crash by real estate standards. Residential real estate prices rarely fall, and when they do, they are generally "sticky" on the way…[READ MORE]

Current housing news has been mostly the double digit increases in home values with the CoreLogic and Case-Shiller indexes are the prime example.  This home value news is initiating further review into different aspects of the housing market and older subjects are coming into the news cycle  Remember way back at the start of the housing bubble the main focus on the news was the shadow inventory.  Shadow Inventory are homes that have mortgage values greater than market values. The greater the negative equity on the house the more likely it would cause the homeowners to walk away and default their mortgages.   Shadow inventory is also classified as homes with adjustable rate mortgages, negative amortization loans, or option ARMS…[READ MORE]

The US taxpayer (you) paid for the mess the bank's made. Back in late 2008, the Department of Treasury took the GSEs under conservatorship and injected about $150 billion into them to make them solvent. And although the FHA has not officially requested a bailout yet, it's no secret a bailout is coming. The only mystery so far is when the bailout will come and how large the ultimate price will be. Politicians have consistently lied to us about housing bailouts. The first batch of lies surrounded the GSEs: “There is no guarantee. There’s no explicit guarantee. There’s no implicit guarantee. There’s no wink-and-nod guarantee. Invest and you’re on your own.” — Barney Frank, senior Democratic congressman, notable Fannie supporter,…[READ MORE]

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