Archive for April, 2011

I saw a recent headline on another Nicolas Cage foreclosure, and it inspired me to do a little research into our local celebrities to see who is posing and who is for real. I didn't find anyone who was for real. Graphrix, formerly of the IHB, discussed the Real Housewives of OC in A Real Housedebtor of OC.  posers

Having grown up and lived most of my life in OC I have come to the conclusion that the people here who seem to have money can be broken down to three types of people. The first is the person who actually has money and accumulated wealth. They may be a business owner or they may have a decent paying job. They may not have the most glamorous job but they live within their means and have saved and invested well. They don't really[READ MORE]

The idea of a right to rent has been floated by Dean Baker of the Center for Economic and Policy Research. His proposal is to give every loan owner the right to stay on in their foreclosure for five years paying market rents. I first covered this issue in The Right to Rent Would Flatten the California Housing Market. I noted the following:right_to_rent

Dean Baker of the CEPR was one of the early public voices who called the housing bubble. He accurately noted the disparity between rent and payments and concluded housing prices were not sustainable. Like me, he was a renter looking to buy as prices were ramping up, and like me, he noted that since it didn't make sense for him personally to buy, it didn't make sense for anyone else either. Being an economist at an influential think tank, he[READ MORE]

The Bankers Circle Of Life – principal reduction programs and unintended consequences.

Soylent Green Is People -- April 7, 2011king_conforming Banks have had it good for the past couple of years. They’ve feasted on taxpayer subsidized capital, allowed accounting tricks to book phantom profits, and transferred privately created risk to the public’s balance sheet with nary a whisper of protest. Many responsible home owners continue to enriched said same bankers by paying mortgages that can never be refinanced into today’s lower rates. By owing more than the present value of their property, many home owners are trapped in a cycle that often ends in financial ruin. The final insult to those who chose to live up to their promise to repay instead of living large through leverage will soon be here. How do I know this to be true? Since Irvine lives in[READ MORE]

Most people during the bubble bought a house as an investment. The fantasy was perfect: the better and more expensive the house, the more free money the house provides as it goes up in value forever. Just by purchasing real estate and using the largest loan available, everyone was enabled to be or do whatever they desired with abundant debt. Much of the wealth created during the bubble was an accounting trick. Prices were temporarily and unsustainably elevated, and the wealth created was ephemeral and illusory.real_estate_wealth People can't lose what they never had. Only the lingering attachment to an old dream remains to torment the kool aid intoxicated.

Californians' wealth took one of the biggest hits in the recession

In California and other Western states, 67.5% of households saw their net worth fall, compared with 62.5% in the U.S. overall. The median decline in[READ MORE]

In early 2010, i predicted the moral trepidation about strategic default would largely be gone from the American psyche. People are beginning to look at their homes as their other investments, and when the numbers favor waling away, they do so. People are opting to get out of the rat trap of working to service a bottomless pit of debt.screw_yourself As underwater borrowers strategically default, lenders are trying different methods for holding back the rising tide. Loan modifications have postponed some foreclosures, and principal reductions might postpone a few more. The value in doing a few principal reductions goes beyond the money spent. It makes for a fantastic carrot lenders can dangle in front of distressed borrowers. Lenders benefit if the herd makes a few more payments based on false hope -- whether that false hope be imminent appreciation or potential debt[READ MORE]

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