Friday, May 11, 2007

Risk Anything for Bailout of Housing Bubble: Real Estate Industry’s Shocking New Tactic

Realtors, property appraisers, mortgage brokers, and risky borrowers cooked the loan books to boost the housing bubble with dodgy loans, then cooked the real-estate sales books for as long as possible to hide the housing-market downturn, and then cooked the public relations to prop up the bubble by claiming that it is a great time to buy and not to worry about a small correction limited to subprime loans already at the bottom of the drop.

Hoisted on Their Own Petard

The bubble-denial backfires on them when it becomes a reason to refuse any taxpayer bailout of the industry, so the conspiracy of silence is cracking.

Orange County real-estate consultant John Burns confessed:

"The housing market has softened much more than is being reported. We have been advising our retainer clients for more than one year about misleading national sales information, both with the Existing Home Sales and New Home Sales data. We are now going public with our concerns because we are concerned that policy makers are relying on national data to conclude that the housing market correction has not been severe" (OCR).
It seems that fear of no bailout is driving industry insiders to a desperate new tactic—telling the truth.

Tuesday, May 1, 2007

Federal Government Threatens Mortgage Lenders with Unprecedented Sanctions

You Have Rights, It's Just Illegal To Use Them

The federal government threatens to punish mortgage lenders if they do not give up their legal contract protections and submit to rewritten terms. The Federal Reserve and 5 other federal agencies recently issued this unprecedented joint statement:

“Institutions will not face regulatory penalties if they pursue reasonable workout arrangements with borrowers” (TMO).

In other words, the federal government will penalize them if they do not surrender their legal rights "voluntarily."

Government Doublespeak Sustains Housing Bubble Inflation

Wanted: New Signs

Treasury Secretary Henry Paulson used the “nothing to see here” tactic:

“All the signs I look at" show "the housing market is at or near the bottom” (TMO).

That is entirely possible—as long as you can get your underlings to show you only the wrong signs.

How To Stop Progress

Senator Chuck Schumer (D-NY) used the opposite, fear-mongering, crisis tactic:

“The subprime mortgage meltdown has economic consequences that will ripple through our communities unless we act” (TMO).

True, as long as you do nothing, housing will become more affordable for millions.

Paulson and Schumer seem opposite at first but both their statements try to keep housing expensive by propping up record high prices (relative to economic fundamentals).

Minneapolis Mayor Slanders Renters, Praises Mortgage Defaulters

Government Logic at Its Finest

Minneapolis Mayor R. T. Rybak said of foreclosed properties:

“And in those properties which were once owned by stable homeowners, they're replacing them with renters who may be very problematic and have proved to be problematic in our neighborhoods” (MPR).

Rybek claims that people who lost their homes because they did not pay their debts are “stable” but renters, including people who patiently wait and save and responsibly resisted the overbuying housing-bubble mania, “may be very problematic” (or are the problematic renters the ones who rent now only because they previously defaulted on their mortgages?).

Minnesota Bailout Rewards Defaulters, Sustains Inflation? Call To Federalize Bailout

Minnesota State Government Hates Affordable Housing?

The Minnesota state government is creating a loan and grant program to have the Greater Metropolitan Housing Corporation buy foreclosed homes in an effort to stop “predatory buying” by bargain hunters. Maybe the government also can make it illegal for you to use coupons or buy anything on sale (admit it; you predatorily have bought things below MSRP).

The MPR article gave few details but any increased sales price that reduces the defaulter’s debt would be a taxpayer bailout at the expense of taxpayers and home buyers. Basic economics says that the government’s entry as a rival buyer will bid up housing prices (increase demand), so taxpayers can overpay for other people’s houses and sustain the housing bubble that keeps homes overpriced and unaffordable.

Call To Nationalize the Home Mortgage Bailout

Minnesota Housing Finance Agency Commissioner Tim Marx said:

“We know much more needs to be done and if we're going to address this issue it's going to take many, many hands from the national government the state government and the local government, the entire homeownership industry, lenders (and) realtors to really work together and drill down and address this issue” (MPR).

Massachusetts 2-Month Mortgage Bailout Increases Moral Hazards

Bailout Escalation for Bean Town

Foreclosures in Massachusetts have almost doubled in the past year. The Massachusetts state government already has been making phone calls on behalf of delinquent home borrowers to change the terms of mortgage contracts. Now, the Massachusetts Division of Banks further increases moral hazard by seeking a 2-month financial vacation for home-mortgage delinquents.