In Go(l)d We Trust?

From Las Vegas: Realtor works hard to survive tough times.

Gold and her husband, Andrew, worked banquets for casinos, earning - like many other resort workers - money to purchase property. Gold saw an opportunity.

A year after moving here, Gold got a license to sell real estate just like she once had California before quitting the business about 1985.

Gold, 62, bought nine homes and two condominiums in Las Vegas and four homes out of state. She couldn't believe her timing: When she started buying homes in 2001 and 2002, the median price of existing homes was $136,500. The price rose to $275,000 by 2005, and Gold's wealth grew to $4.5 million, not counting the six figures she earned a year as a Realtor.

"I came here in the golden age and realized this is a perfect time to make money. I felt for the first time that God blessed us," Gold says. "I was trying to create a future."

Firstly, the title is too easy to parody so the EE won't even bother.

"Everybody wants to move to Vegas," Gold says. "I believe in this market. It is not going away. It has started to turn around and this is the place to be."

Yeah, everyone wants to live in a lifeless desert that wouldn't even exist without water.

And yes, "belief" will keep the credit cycle in abeyance. And you'll be able to shake your finger at all those heathens and non-believers who are keeping your rightful success away from you.

After being able to make all her mortgage payments in the past through the end of 2007, Gold says she has fallen about $22,000 short each month on mortgage payments and is as much as four months behind on some payments. She lost access to her line of credit even though she is still paying it down. She also has to deal with some of her tenants' inability to pay rent.

Now you have the unique chance to tell everyone that "God's" economic cycle is shitting all over you.

The real estate market was hurting her income as a Realtor. Her once six-figure income fell to nothing because of no commissions in 2007.

Gold said she worries about prospect of foreclosure, but has no plans to file for bankruptcy. She remains adamant that she will survive these tough times.

"I am going to come through this fine," Gold says.

Tenants not paying rent? Losing $22K each month? I don't think Warren Buffett is shivering quite yet.

Impressing Jules Dassin

From Bloomberg: Citigroup's `Last Roman' CDO Shows Enron Accounting.

Citigroup Inc. created a $2.5 billion mortgage-backed security called Bonifacius Ltd. in August as capital markets seized up and panic swept Wall Street.

The issue took the name of a general, called by historian Edward Gibbon the ``last of the Romans,'' who fought and died for a fading empire. The bonds were created from subprime home loans as demand evaporated. Within six months, Bonifacius collapsed as homeowners fell behind on their payments in record numbers.

There are 2.5 billion stories in the Naked Shitti.

Housing Data

Source: OECD
Graphs: EE

100 = "long term average"

A few statistical comments on these "ratios" that may not be obvious to people not familiar with using normalized quantities in statistics.

The beauty of ratios is that they are "dimensionless". So as long as both quantities are denominated in the same unit, the unit of measurement simply doesn't matter. The answer is the same in dollars, yen, rupees, barrels of oil, and heads of cows, and for point-in-time comparisons, we don't have to worry about inflation, etc.

The problem with these ratios is that the are emphatically not "normal" (for starters, they're always positive) and they have a tendency to be centered around a number, typically 1. You can't just perform regressions on these because the distributions tend to be strange (log-normal if you're lucky but mostly power-law-ish.)

Also, the extreme ends of these ratios tends to be meaningless. You can only meaningfully compare stuff near the "central tendency" (Think about Steve Job's house to Steve Job's income to understand what the EE means by that.)

However, none of that applies for this particular data since we're just graphing the central tendency over time.

Your Tax Dollars at Work

From the San Jose Mercury News: Calif. congresswoman failed to pay mortgage on home.

California Congresswoman Laura Richardson has a unique perspective on the housing foreclosure bills moving through Congress: One of her own homes was threatened with repossession after she failed to pay the mortgage.

Richardson, a Southern California Democrat, bought a two-story home in a leafy, upper-middle class neighborhood of Sacramento in January 2007, just months after winning a seat in the state Assembly.

Property records on file in Sacramento show Richardson bought the three-bedroom, 1 1/2-bath home on West Curtis Drive for $535,500.

The bill collectors started knocking soon after, according to records reviewed Wednesday by The Associated Press.

Another default notice in March of this year put the "unpaid balance and other expenses" at $578,384 and said her 1,639-square-foot house would be auctioned at a trustee sale. The county records show the property was sold to a company called Red Rock Mortgage Inc. of Sacramento for $388,000, although no listing could be found for the company.

Records on file at the Sacramento County Tax Collector's Office also show Richardson is delinquent in paying $8,950 in property taxes.

"I understand that these homeownership issues are a reflection of what many Americans are going through as they fight to keep their homes and to remain financially stable," Richardson said in her statement.

She feels her own pain, folks!

USA rah-rah-rah

There are many many conclusions that one can draw from this graph (not all depressing even.)

Limerick

From the Boston Herald: Surf’s up, prices down

The outlook is cloudy for Nantucket’s once-sunny real estate market as the resort island sails into the crucial summer selling season.

In a sign of the times, the owners of some grand Nantucket estates are knocking millions off their price tags in a bid to lure buyers.

There was a young man from Nantucket
Whose house was so small he got stuck’n't.
He said with a groan
As he 'faulted his loan,
“If my ARM was an arse, I’d be f*ck’n't.”

Dear Prudence

From the South Oregon Mail Tribune: Daunting debt leaves 50-year-old with few good options.

DEAR BRUCE: I have been married for 30 years, and I'm 50 years old. I have done some major damage to my credit. I have borrowed against everything. I have refinanced my home, borrowing against my 401(k). Our home is worth $150,000, and we owe $135,000. I owe my 401(k) more than $20,000, and I have $20,000 in credit-card debt. I have been trying to reduce my debt, but it just seems daunting. Where do I go from here? I don't want to go bankrupt, but I'm just crushed. On top of everything, the company I work for is in financial trouble. — F.C.

This is the answer they gave:

DEAR F.C.: You do have a ton of problems here. While you say you don't want to go bankrupt, technically, you are bankrupt — you owe more than you are worth. First, you need to get out of debt. You didn't mention how much you earn, but you are probably so far in hock at your age, it would be difficult, if not impossible, to get out. You might also want to find a part-time job to help pay down the debt.

The EE will provide a translation:

DEAR F.C: You're bankrupt hence you are fucked. At your age, there are few options left. Consider borrowing a garage and a running motor. Be sure to put that last bottle of whisky on your credit card.

Metaphysician, Heal Thyself

Sometimes the stories just write themselves.

From the Snotrag of the Universe, the much self-laudatory New York Times: A Thicket of Easy Loans That Entangled One Mortgage Holder.

ROBIN SOTIRE thought she had a financial plan all worked out when she moved from Arizona to Connecticut in the summer of 2006 to handle her mother’s estate and care for an elderly aunt. She was going to sell her house in Arizona, fix up her mother’s three-family home in Stamford using home equity loans, and then sell both houses. With the profits, according to her plan, she hoped to pay off a $645,000 mortgage she had meanwhile obtained to buy her dream home in quiet, rural Redding.

But Ms. Sotire’s dream soon deteriorated into a financial nightmare and has turned her into a statistic in the national foreclosure story. The self-employed healer and metaphysical mystic is in at least $1.6 million debt and facing foreclosure on both Connecticut properties. After taking out a combination of first and second mortgages, refinances and home equity loans on all her properties, she plans to file for bankruptcy.

The EE has no idea what a metaphysical mystic is but it's impressive to know that the "healer" took on $1.6M in debt.

“As she juggled the Stamford and Redding properties, Ms. Sotire fell into a cycle of refinancing to get cash to stay afloat and avoid the steep increases of adjustable rate loans. She said she was unable to work as a healer - she is certified as a master in the Reiki technique - because she was so busy juggling all her responsibilities.”

“At times I was robbing Peter to pay Paul and was amazed when I got mortgages, but I really thought I’d be able to pay everything,” she said. “When houses didn’t sell, everything spiraled down. Looking back, I’m smarter and would do things differently.”

How about Vibrating to the Rhythms of the Universe™ to pay back those loans?

Parody Time

Bad times bring out the creative element. (Found off the web.)

Casey Chavez Billabongo, aged 42, an undocumented mortgage broker, and his REALTOR™ wife, Shirley Summiss-Steak, bought their American Dream 3 bedroom rustic house in the desert, 4 hours drive from work which could have sold for $900,000 at peak of market in 2005. Purchased in 2004 with 125% "no-doc" mortgage and wanting to build their nest egg, they refinanced out to invest more equity into their home. Things started to go well in Casey’s and Shirley’s jobs and they used opportunity to jump in and buy 5 neighboring properties that they would flip for more profit. They got their idea from a popular TV program.

Nobody could have foreseen that market would suddenly downturn and the Billango’s efforts to sell their investment properties to investors from California and Europe, came to nothing, despite Shirley’s plan of providing cupcakes and planting statues of St. Joseph in the yards.

At the same time, nobody could of foreseen the price of gas for their Hummer going up so Casey had to pick up 3 part time jobs.

Shirley cashed in the $3,000 they had in their 401(k) and opened up her dream business: selling dog manicure sets on ebay.

Then disaster hit, their dreams came to an end when an unforeseen medical emergency happened. During a golf game where Casey was working as a Caddy, he was struck in the testicles by a freak lightening bolt. Requiring Cosmetic surgery, the Billabongo’s maxed out their 50 credit cards and took out a HELOC.

Unfortunately, nobody could have foreseen the interest only ARM reseting to 5 times Billabongo’s monthly income. Casey said “When I spoke to the mortage company, they said ‘did you even read your contract ?’ I mean who reads that stuff”. The Billabongo’s now facing foreclosure have appealed to their politicians for help. “We have been taken advantage of” said Shirley. “I am a classy person. I am a REALTOR™ and I have a Rolex.”

Yousa screwed, Missa no help you

From CBS Marketwatch: Bernanke urged financial firms to raise more capital.

Banks and securities firms should continue to raise capital to help them navigate the treacherous waters of the financial market turmoil, Federal Reserve Board Chairman Ben Bernanke said Thursday. "I strongly urge financial institutions to remain proactive in their capital-raising efforts,"

Permit me to translate that into plain speak.

"Raising" capital either via debt or issuing more shares equals either increasing the risk, or diluting the current equity holder's stake.

Either way, this is a fairly explicit acknowledgment that the current owners are fooked with a capital F.

Dr. Bernanke might also want to review the concept of a Balance Sheet Recession.

How Government is Run

From the Washington Times:Regulators under fire for ignoring red flags.

Sheila Bair logged onto her e-mail account recently and got a pop-up ad offering a $175,000 home loan with monthly payments of only $400.

"I thought, 'Oh no, it's coming back already,' " said Mrs. Bair, the Federal Deposit Insurance Corp. chairman who had spotted problems with abusive and risky mortgages long before the mortgage crisis broke out last year.

The pop-up on the screen took her back several years to the time she first saw trouble brewing. The ads had been the warning flags: pop-ups, spam e-mails and junk-mail fliers offering loans at extraordinarily easy terms and low rates without explaining that the payments would eventually shoot up to unaffordable levels — a practice that will be banned in the future.

"Back then, we mainly looked at it as a consumer issue. I don't think anybody thought it had economic implications," Mrs. Bair said. Few people at the time had "a full appreciation of the costs of these mortgages, or [realized that] if the market stopped going up [borrowers] would lose their ability to pay."

First, we've met this bitch before right here. She is stupider than a rock, and the EE is insulting the rock, and he apologizes.

Secondly, if the buyers could only "pay" if the price was going up means that they were pulling out the appreciation to "pay" the monthly nut.

That is the freakin' definition of a Ponzi scheme which is illegal, the EE will point out to the ignorant government-salary bitch, for bleedin' obvious reasons.

However, we've lived through the Ultimate Ponzi Scheme.

What are the chances that she is doing this to preserve her job?

Academia Shmackademia

From the LA Times: In mortgage market, ‘walkaway’ homeowners may be urban myth.

Bankers and housing market analysts are warning of a chilling new trend in the mortgage world: Homeowners voluntarily defaulting on their loans even though they can actually afford to make the payments.

It's known colloquially as "walking away," or more jocularly as "jingle mail," from the sound your house keys supposedly make when you mail them back to your bank.

It's a way of saying that Americans are beginning to apply a cold financial calculation to home ownership: When a home's value has fallen below what is owed on its mortgage, they feel it makes no sense to keep up the payments.

But he said the bank did not have "firm figures" on how many homeowners were unnecessarily defaulting on their mortgages.

"We are working hard with our analytics to get at how much that is happening," Francisco said. Others suggest that it may be impossible to find out.

"How would you know what someone's true ability to pay would be?" asked Todd Sinai, an associate professor of real estate at the Wharton School of the University of Pennsylvania. "I'm not sure you could even come up with a definition."

Not to put too fine a point on it, Herr Doktor Professor, but the only goal of a lender is finding out the ability to repay. This is the core competency of a lender. If a lender can't even manage to do the job of their core competency, they should pack their bags and pick a different profession.

Of course, lenders also used to have downpayment requirements a.k.a. "skin in the game". Without any skin in the game, all the ability to repay isn't going to make them throw money on a rapidly devaluing asset.

Doubt the journalist knows their core competency here.

How Much Land Does a Man Need?

From the once-esteemed New York Times: Losing a Home, Then Losing All Out of Storage.

The foreclosure crisis is hitting yet another American locale: the self-storage center.

As they lose their homes, people are turning to these humble cinderblock and sheet-metal boxes to store their stuff. But some people cannot keep up with their storage bills any better than they could handle their mortgage payments, and storage companies are auctioning off their property for a pittance.

Subprime mortgage loans had low “teaser” rates to lure borrowers. Many storage facilities offer the first month for free.

“You tell yourself, ‘I’m only going to put my things in for a short time,’ ” Mr. Blair said. “Before you know it, you’re behind. Then you have to pay penalties and interest. You owe $400 to $500. If you lost your job, you can’t come up with that, not if you want to feed your family.”

Nearly non-existent 35 years ago, self-storage has become ubiquitous, with 51,000 facilities nationwide. Even as the larger economy falters, the industry is flourishing. Executives say the mortgage crisis is one reason.

For some units, $6 is too much. “A dollar bill, first dollar bill takes it,” Mr. Snyder implored in front of one unit. “Come on, this is everything they own!” To no avail.

Finally, folks, we have the "money quote".

This is the eternal mystery of self-storage. If the material was worth money, it was foolish to let it go to default. If it was not worth much, why spend at least $50 a month to store it?

Baby Jeebus Time

From San Francisco: Pray-in at S.F. gas station asks God to lower prices.

Rocky Twyman has a radical solution for surging gasoline prices: prayer.

Twyman - a community organizer, church choir director and public relations consultant from the Washington, D.C., suburbs - staged a pray-in at a San Francisco Chevron station on Friday, asking God for cheaper gas. He did the same thing in the nation's Capitol on Wednesday, with volunteers from a soup kitchen joining in. Today he will lead members of an Oakland church in prayer.

To solve the problem, Twyman isn't begging the Lord for any specific act of intervention. He is not asking God to make OPEC pump more oil. Nor is he praying for all the speculative investors to be purged from the New York Mercantile Exchange, where crude oil is traded.

Of course, monetary and fiscal policy have nothing to do it either.

C'mon baby Jeebus, we're all counting on you!

Let's have a class-action lawsuit!

From the New York Times: Low Spending Is Taking Toll on Economy.

For months, beleaguered American consumers have defied expert forecasts that they would soon succumb to the pressures of falling home prices, fewer jobs and shrinking paychecks. Now, they appear to have given in.

As real estate prices plunge, so does the ability of homeowners to borrow against the value of their homes, crimping a major artery of spending. As banks grow tighter with their dollars in a period of uncertainty, families are running up against credit limits, forcing many to live within their incomes.

They have to live within their incomes?

Oh the horror, the horror!