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Impending FHA bailout to be justified by "saving banks" - (www.ochousingnews.com) 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 be enormous. The use of the FHA as the lender of last resort will be justified as a necessary act to save the banks. That’s bullshit. The FHA probably did save many of our too-big-to-fail banks, but this was not necessary. We could have let them fail, nationalized them, and recapitalized them with government money later to be sold at a profit. The government basically did this with Citi buying a huge amount of stock at $3 and selling it at $4 after it stabilized. The government took over the GSEs and assumed their liabilities. They currently own most of their worthless stock, but at some point, they may spin these off and recoup some of the losses on stock sales. The FHA has no such resale option.
Shadow inventory estimated to be at 9.8 million. Oh dear. - (www.nakedcapitalism.com) “Shadow inventory,” the number of homes that are either in foreclosure or are likely to end up in foreclosure, creates substantial but hidden pressure on housing prices and potential losses to banks and investors. This is a critical figure for policymakers and financial services industry executives, since if the number is manageable, that means waiting for the market to digest the overhang might not be such a terrible option. But if shadow inventory is large, housing prices have a good bit further to go before they hit bottom, which has dire consequences for communities, homeowners, and the broader economy. Yet estimates of shadow inventory, and even the definition of what constitutes shadow inventory property, vary widely. For example, the Wall Street Journal published a Nov. 11, 2011 article, “How Many Homes Are In Trouble?” where values varied from 1.6 million (CoreLogic), to “about 3 million” (Barclays Capital), to 4 million (LPS Applied Analytic), to 4.3 million (Capital Economics), to LPS Applied Analytics, to between 8.2 million and 10.3 million (Laurie Goodman, Amherst Securities).
Senators Say Fed Overstepped Its Role With Advice on Housing - (www.bloomberg.com) Republican Senators Orrin Hatch of Utah and Bob Corker ofTennessee criticized the Federal Reserve for overstepping its role by making policy recommendations on how the U.S. government should try new ways to spur the housing market. Hatch, the top-ranking Republican on the Senate Finance Committee, said the housing study sent by Chairman Ben S. Bernanke to Congress last week, along with recent Fed speeches, “intrudes too far into fiscal policy advice and advocacy.” Corker said New York Fed President William C. Dudley’s suggestion last week that Fannie Mae and Freddie Mac reduce the principal of the loans they guarantee was “absolutely egregious.” Fed officials have been increasing their calls for government measures to boost the housing market after record-low interest rates failed to revive borrowing. Bernanke last week sent lawmakers a staff study discussing policy options to help boost the housing market that said Fannie Mae and Freddie Mac might have to bear greater losses to stoke a broader recovery.
Americans Gorge on Credit Card Offers - (www.timiacono.com) It would appear that the Federal Reserve’s guarantee of freakishly low interest rates until at least 2013 (soon to be extended into 2014 or beyond) and the resulting push by credit card companies to clog mail boxes with all sorts or tempting offers had the desired effect on Americans as they racked up new credit card debt in November at a rate not seen since before the wheels fell of the global financial system back in early-2008. The data for December might be even more impressive since, what U.S. citizen in their right mind wouldn’t borrow a thousand dollars or two to get that big flat screen TV and new sound system at Christmas time if they could do so without incurring any interest charges and making only minimal payments for the next year or two. While some say this indicates renewed confidence in the U.S. economy – one where 70 percent of all activity is based on consumer spending - others think this is akin to a drunk “falling of the wagon” after almost three years of sobriety.
The due-on-sale time bomb: be aware and ready - (www.firsttuesdayjournal.com) Thus, while the housing market lingers in the purgatory of low interest rates and low prices, waiting for interest rates to begin their inevitable rise, there exists a due-on time bomb ticking silently just below the surface of real estate sales volume numbers. The bomb will not explode all at once but in slow motion, as rates will rise gradually with creeping inflation and as the employment rate picks up. This calculus is well-known to brokers who arranged sales during the high interest rate period of 1977 to 1982, a period during which the due-on clause was held at bay by the courts and the strong-arm sheriff – until deregulation let the bears of Wall Street roam at will and build strength, gorging themselves on profits for the last 30 years. However, once those who have been lucky enough to secure a mortgage at today’s low rates are ready to sell and interest rates have begun to rise (likely during a 2016-forward real estate boomlet), prospective buyers everywhere will be asking the same question that most did in the late ‘70s and early ‘80s: how can I assume the seller’s low-rate loan? At that moment, real estate brokers and agents will have to take the opportunity to educate their client buyers and sellers about the due-on-sale clause included in every trust deed.
Underwater Houseowners May Swim Freely - (www.patrick.net)
Prop 13: The Building-Sized Loopholes Corporations Exploit - (www.sfweekly.com)
Whose Encampment Should Crowd-Control Police Be Breaking Up? - (www.boingboing.net)
Candidate Blind Date: Who matches you? - (www.chartporn.org)
Influence Explorer - (www.influenceexplorer.com)
What We Can Learn From How Doctors Choose to Die - (www.oftwominds.com)
Little Change in Public's Response to Terms Capitalism, Socialism - (www.people-press.org)
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