Mr. Mortgage: Dec CA Foreclosure Report – Defaults up 100%

Posted on January 14th, 2009 in Daily Mortgage/Housing News - The Real Story, Mr Mortgage's Personal Opinions/Research

December CA Mortgage Defaults Up 100% month-over-month, nearly reach record high

It’s that time again…the monthly foreclosure reports will soon come pouring out and confuse everyone. Later this week, the popular reports from RealtyTrac will come out and show that activity increased, but few will be able to tell you why. Well, here’s the explanation.

By the way, try not to pay attention to anything that is written by anyone other than Diana Olick at CNBC. She does a great job and is one of the few in the mainstream media that live on the same planet as the rest of us.

The mortgage Notice-of-Default (first stage of foreclosure) problem is worsening without doubt. Even with Countrywide and a few others in nearly full moratorium, most banks doing whatever they can to modify pre-existing mortgages and Dec being shortened by the holidays, defaults were still near record highs.

CA’s default jump was so strong that it will lift the national report significantly when it comes out next week.

Monthly Loan Default and Foreclosure Report

The chart below shows monthly aggregate default (NOD) activity from January 2007. This is the first stage of foreclosure. The drop in Sept and Oct was due to CA law SB1137 enacted on Sept 5. It essentially kicked the can down the road 60-days, like all foreclosure moratoria do.

In Dec, NOD’s reached near 42k (up 100%), despite the factors mentioned in the previous paragraph. This does not play well for January, especially if Countrywide and others come out of moratorium.

The chart above shows that Countrywide remains on an NOD moratorium. Add their summer month totals of 6k per month and total CA NOD’s would have been at a record high in the Holiday shortened month of December.

The NOD chart below is the same as above, but by dollar amount. In CA alone, there were $15 BILLION in NOD’s, an increase of more that 90% over the preceding month. This translates into roughly $35 billion nationally. No second mortgages are included here.  Adding Countrywide’s missing $1.5 billion, the default dollar amount would have been at an all-time high.

The chart below shows the actual Trustee Sales that turned into bank REOs. This is the final stage of foreclosure, when the home is seized. Over the past year, at least 95% of all foreclosures have been bought back by the foreclosing entity due to lack of third party interest at the opening bid price.

The drop in Sept was due to SB1137 and wide-spread modification efforts. The number would have spiked in Dec like NOD’s did if FNM and FRE had not gone on Trustee Sale moratorium. Adding back CFC, FNM and FRE, foreclosure counts would have been near record highs like NOD’s.

Additionally, January is typically a big month for Trustee Sales, as banks go to sell the properties they held over from Dec.  Many think banks hold properties from foreclosure in Dec in order to help boost quarterly and year-end earnings. Others think it is a holiday gesture to the home owners. I think the former.  It is not uncommon to see a double digit increase in this data point in Jan.

The chart below shows the number of properties sold to third parties at Trustee Sale on a monthly basis. In Dec, only 830 foreclosures in the entire state were sold at Trustee Sale, with the rest reverting back to the banks as the REOs shown above.  With sales waning, banks’ shelves will start getting packed with REO properties, likely forcing them to price aggressively. This will put further pressure on CA real estate prices.

Best, Mr. Mortgage


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93 Responses to “Mr. Mortgage: Dec CA Foreclosure Report – Defaults up 100%”

  1. JohnF, I sure hope your employment is in the tumbleweed business.

  2. Anybody notice BofA’s troubles?

    Their stock is starting to look like WAMU’s a few months back,,,

  3. I did not realize that was an actual stock quote. I thought that was just my checking account balance….

  4. od:

    “Anybody notice BofA’s troubles?”

    Sure did Boss. And there will be more lining up at the trough soon enough. GM will burn through theirs too in short order. Once this stuff gets started, it can’t be stopped. As I stated in an earlier post – and today’s rumblings about further bailouts simply reinforce my comments – and while we preoccupy ourselves with the latest episode of ‘Who wants to be a Principal Reduction-aire’ – keep your ears to the ground for rumblings of a ‘Bank Holiday’…

    Is anybody here aware of what a Bank ‘Holiday’ is…? How about a ‘Hooverville’?

    Rents are taking a shellacking too, by the way. And will continue their downward spiral. Unlike present home-ownership (in a growing number of cases), rent has to be paid – every month, or it’s out on your keyster. So if there’s no paycheck coming in, from a recent layoff, you don’t rent – you sleep in tent. The End.


  5. Richard said:

    [why didn’t lenders]… ask for a 30-40% down payment and tell the borrower that they need a huge downpayment because the market could be headed for a fall??

    This is what more people really need to understand.
    The root cause of this is the Federal Reserve putting hot and cheap credit into the hands of lenders, who had a profit motive to make as many loans as possible, and who could unload those to a gullible secondary MBS market.
    When banks borrow from the Fed at negative real interest rates, they will bid down loans like mad, since they collect interest on each one based on money they never earned (they just borrow it from the Fed on demand). They knock down underwriting standards because they stand in the way of a profit.
    If there is a gullible bag holder (pension funds, international banks, some IBs) then they don’t even take the risk of holding the loans to maturity.

    But, it takes one very special someone in order to make the magic happen….

    The price-insensitive buyer, who can be fooled into believing that real estate only goes up, or any other lie needed to make him/her look past the purchase price.

    I admit, in my area it was a no-brainer to see what was happening. A 40 year old crapshack does not naturally triple in value in 5 years if jobs remain constant, especially right after a previous bubble bursts (no more hot stock option money)

    I can believe that it might have been harder to spot the artificial bubble in up-and-coming areas (perhaps Arizona?) where one might see rational demographic reasons for the price increase — lots of retirees, job market expansion, gain in prestige, etc.

    But still, it was clearly a phenomenon occurring in many states at once.

    One clear lesson to be learned is that access to credit (size/types of loans/underwriting standards) has a huge artificial influence, simply because many people’s eyes are bigger than their wallets, and in an easy credit environment, it’s difficult to get Mr. Bank to be the responsible one to say “No!”

  6. JohnF:

    >> Significant quantities of principal reduction mods will lead to fewer foreclosures…

    Principal reductions ARE effectively foreclosures (from a macro standpoint). They are totally deflationary and result in neighborhood price declines almost as surely as foreclosures. The primary difference is the degree of latency in price discovery. With a foreclosure, price discovery is rapid. The bank sells the house quickly and that sale price is recorded and becomes a new comp for the hood. With a true principal writedown (i.e., no string attached) the jackpot winner (aka borrower) has his cost basis drastically reduced and can (and will) ultimately sell the house for much less than his not-so-fortunate neighbor (aka chump) who didn’t overleverage himself to buy his home. So even though it’s grossly unfair, it’s still deflationary. It’s just that the rate of decline won’t be as steep. As for me, I’d much rather just have the foreclosures. Get it over with quickly (2-3 years). That’s the game I signed on the play. All this rule changing is pissing me off.

    And it remains to be seen if principal reductions will ever really happen on any meaningful scale (say a half million borrowers or more) or if they will just remain the fevered fantasies of some posters on Mr. Mortgage’s blog.

  7. Just out. Gov’t give BofA another $20B. Alos provides backstop.

    Your tax dollars at work…..again.

  8. Watched a lot of distressed assets experts on Bloomberg, usually a contentious group but not one single person put forth principle reductions. The general consensus of the group was if there is a reduction from the banks then the banks are going to go under. Nobody claimed to know a bank they could say was safe.

  9. Mr. Mortgage,

    While I disagree with your take on principal writedowns (I actually think it will make the whole problem worse), I have to say your data is consistently great and you’re way ahead of the curve again.

    That said, I have to confess that of these thousands of NOD’s, I know at least 4 of them, and probably more. Everyone on this blog knows some, whether you know it or not. Think about it.

    Of the 4 I know of, 2 already have bought their exit strategy homes… at least one used part of the money they pulled out of the equity on the one that is now in NOD. The other is trying to shortsell before moving out into the new acquisition. Both of their “new” homes are bigger and have more amenities and were much cheaper than payments on the NOD. We’re talking $1000-$2000 per month saved in payments. To be fair, who couldn’t use that kind of extra money every month? The 2 that have not yet bought are voluntarily not paying because they are going to try for a loan modification. If they don’t get it, they are ready and willing to walk.

    These are all highly educated, upright, law abiding, NICE people, some with families. The types who go to church. They are not doing anything illegal, and in fairness, they will probably be able to give their children a much nicer lifestyle with the extra money.

    People, this housing disaster is going to be much much uglier than any of the traditional news medias predict. You can’t turn on the TV, Radio, read a paper, etc., without getting hit with ads for loan modification companies and predatory lending lawyers who will take your bank out back and whip them for you. Not only is it perfectly acceptable to renege on your obligations; you’re now a fool if you don’t take advantage of the opportunity. Up to now, the number of people defaulting on purpose for loan mods and walking away because it is a purely financial decision is going to drive the foreclosure rates even higher than any of us think. And I don’t think we’ve even really hit the unemployment wall yet. Add in the huge numbers of people who will have no choice on whether to pay or not because of job losses, depleted savings, can’t handle the reset, etc., and it gets even worse.

    People are now getting the entitlement mentality about home loans and loan modifications. “The banks caused this mess, it’s the banks fault, and we’re the victims so its OK to screw the bank.” Ignoring the fact for the moment that we are all of us now THE BANK thanks to the bailouts and are going to pay for this down the road, this is still no way to run an orderly society much less a stable market/economy. The herd mentality that led people to buy at ALL COSTS during the boom is now becoming herd mentality that we all deserve to be bailed out of our bad decisions by somebody else.

    If you are thinking, “no one I know would do that on purpose…” that’s because some people are still a little embarrassed to admit to you that they are in foreclosure, even if it was voluntarily done. (Do you know anyone who’s moved lately?) But give it about 3-6 months and pretty soon you’ll be hearing people YOU KNOW brag about how they stopped paying and got a loan modification/principal writedown … or walked away from their mortgage/s accidently on purpose. Many of these were people who could and would have stuck it out and stayed in those houses if they thought society and their friends would disapprove. Take away that barrier and watch how fast people ditch their homes. And it won’t just be those who bought recently. With all the equity withdrawals that happened, many more families than just those that bought in the “boom” years will be on this bandwagon.

  10. Get Real,

    Great post. Indeed, several aquaintances of mine are voluntarily walking. It truly does take on a herd mentality as I have seen in our neighborhood. My particular street is very ethnically diverse, but all fairly comparable financially. The homes on our street are about 50% down from two years ago when most of us bought. Although most, if not all, of us can afford the homes it makes too much long-term fiscal sense to stay. We have ~ 25 homes on our street and at least 15, yes 15, of my neighbors either have stopped paying the mortgage or are very strongly considering it. In fact, we have discussed writing a letter to each of our lenders as a group and asking them for principal reductions to 110% of current home value. Our thought is that each institution (there are 5 different lenders between the 15 of us) may view this as a better alternative to foreclosure, especially if they end up with an REO where at least 60% of the homes on that street are vacant. As you stated in your post, it is not illegal and would very likely be the most beneficial move for each of our families in the long run. I am curious if there are any other neighborhoods with discussions afoot to try to negotiate like this…

  11. Get real, interesting post. I see this from the other side as well and I wonder if lenders will look at neighborhoods where they have multiple mortgages. When principal write downs become a reality on a wide scale, it would seem to be a great approach to me. They get everyone on board as well as creating a sort of bond with the neighborhood in terms of the way they view things moving forward. I like the thought process from either end, and it may help to build up some much needed strength in our communities if adopted on a wide scale. I am opened to any ideas that get us moving as a nation in a positive direction, unlike what all of these ridicules bailouts are doing.

  12. “Kevin you drastically overestimate what the average persons knowledge of the economy or housing is. Most people that I have questioned just saw that housing was going up and up and thought if they didnt get in know they would never get in. I cant blame the average person.”

    I know this. That’s why I have no sympathy for them either. They thought it was a get rich quick scheme and bought in. So now they can fail. I don’t overestimate the knowledge of buyers, I just know that if they had the slightest bit of prudence and sensibility, they wouldn’t have bought more than they could afford, or at a time when prices had just doubled. I am certain of this because there are a LOT of people out there that exercised prudence and sensibility and DIDN’T do it. Now the sickos in these threads want them to pick up the tab (YES THE TAXPAYER WOULD HAVE TO BAIL THEM OUT!).

    “Kevin. You also drastically underestimate how the end result is going to be shared part in parcel by you, principal write downs or not. You are not insulated my friend, regardless of your involvement in the RE market.”

    This is not about me. All of you, stop trying to scare me with the “this will impact you” bullshit. I can take care of myself and don’t support these marxist ideas, whether they’re to my benefit or not. Nice try by attempting to appeal to one’s selfishness; I can see there is a lot of self-serving motivation going on here with the principal reductions.

    “Unless you own free and clear and have a tremendous amount of liquidity, there is no scenario where you come out of this unscathed.”

    No. So long as you have at least SOME quantitative understanding of the housing bubble, you realize that a lot of the remaining “equity” out there is bubble money, fake, and bullshit. All of this is a really pathetic attempt to keep housing prices near the peak so you all can swim in your pool of fake money.

  13. Get real,

    Very good post. I think Mr. Mortgage should stick to his analysis of the market, and leave the “great ideas” to somebody else. Like I’ve said before, I come here for his insightful analysis of the mortgages, foreclosures, and trends. Not marxist propaganda and pompoming principal reductions. Simply the worst idea I’ve ever heard.

  14. Mr. Mortgage, your excellent insight and abiltiy to be forward looking/ahead of the curve is what draws so many people to this site.

    While it’s understandable, the opposition to write-downs for “principle” reasons, I think you are once again ahead of the curve with the idea. I suspect it is an approach the lenders are attempting to take with their creditors.

    Keeping folks in their homes, stabilizing prices by reducing the supply of homes for sale is the only way to lessen the impact of the next wave of resets.

    Banks don’t want homes, they want monthly payments and they probably would have written down principals long ago if not for the fact that these things have been securitized.

    Is this not simply an accounting exercise based on the rules of the game?

    Here’s a thought, reduce the principal to eliminate the negative equity situation but raise the interest rate on the modified mortgage to a point were the monthly payment remains the same. It corrects the LTV and does not provide the “irresponsible” homeowners (as they are sometimes referred to) a break. They claimed they could make the monthly payments when they signed the deal so…or maybe adjust the modified mortgage interest rate such that both parties (bank and mortgage holder) share the hit.

    This is an arrangement between two parties ultimately. One lender, one borrower. What pisses folks off, I beleive, is how those who did the “right” thing or have nothing to do with this arrangement are getting pulled down as well. Can’t argue with that, however “Off with their heads” will not improve the situation, just another mess to clean up.

  15. Yesterday I was gambling at my local Indian Casino. I lost about $150. I noticed that several other people around me had lost money too, so I gathered them all together as they left the casino and asked if they would like to join me in collectively petitioning the casino to reduce our losses. Afterall, we were duped. There was a big sign out front showing a lady who had recently won $12000 and another sign said this casino had the loosest slots. Obviously we were gambling in hopes of making money, but $150 is a lot to lose in just a few hours so I think it would be fair for the casino to reduce that loss, to say a more fair…. $75.

    Most of the crowd of losers that gathered agreed that a 50% reduction in our losses was fair, given the fact that both parties were at fault, the casino was at fault (faulse claims of riches) and we were somewhat to blame as well (gambling in hopes of making a profit).

    The casino reluctantly agreed but insisted that the few winners at the casino pay for the consession. The winners asked why they should have to pay? The casino explained to the winners (actually at this point they were merely the ones who stood to win, but in the end won’t) that it was a new tax designed to bailout gambling losses.

  16. […] Mr. Mortgage: Dec CA Foreclosure Report – Defaults up 100% […]

  17. Just to correct some mis-information:

    Loan modifications, with or without principal reductions, are NOT granted due to equity loss. Equity loss does not impact one’s ability honor their contract. The inability to pay as agreed must come from a “hardship.” A hardship can be defined as a negative change to one’s income due to unemployment (1040), under-employment (1099) illness, divorce or the reset or recast of the existing note.

    So enough with the casino analogies and other meaningless comparisons. To the extent banks do loan mods, they do so to preserve the loan as an asset by ensuring the borrower has enough money to pay. When the borrower stops paying, the asset becomes a liability.

  18. […] Mr. Mortgage: Dec CA Foreclosure Report – Defaults up 100% […]

  19. ahead of the curve:

    >> “Off with their heads” will not improve the situation..

    Sure it would. Let the foreclosures happen. Prices would decline rapidly (a good thing since they’re still too high). Once prices are down, sales will recover.

    >> stabilizing prices by reducing the supply of homes for sale…

    No-strings-attached principal reductions do not stabilize prices. They do exactly the opposite. They drive prices down. That’s what’s good about them (they’re deflationary). On the other hand, loan mods that reduce interest rates to below market levels DO prop up prices (they’re inflationary).

  20. “When the borrower stops paying, the asset becomes a liability.”

    See, there’s the crux of this problem, right there:

    Viewing a liability as an asset instead of the other way around. And both banks and homeowners share the pie on that count.

    The ‘asset’ (home) is in fact, a liability – subject to:

    – Market economics (what we’re experiencing right now)
    – Employment
    – Age
    – Insurance
    – Maintenance and upkeep costs
    – Changing demographics
    – Other

    It has only been because of 25+ years of artificially rising real-estate/home prices, which are a direct result of artificially low interest rates over many years, that a mindset of continually rising home price expectation came to be the norm.

    This is why most are unable to get a grip on the future-shock of home prices returning to a mean. Matters little though, since it’s coming whether you want it or not.


  21. Mr. M

    Thank you for another quality post.

  22. Yawn, good article bad progapaganda.. I’m with you Kevin!


  23. propaganda

  24. “Redeye Said:
    January 16th, 2009 2:46 pm
    Just to correct some mis-information:

    Loan modifications, with or without principal reductions, are NOT granted due to equity loss. Equity loss does not impact one’s ability honor their contract. The inability to pay as agreed must come from a “hardship.” A hardship can be defined as a negative change to one’s income due to unemployment (1040), under-employment (1099) illness, divorce or the reset or recast of the existing note.”

    I wouldn’t be so sure about that. Actually, I am hearing that since the lenders never bothered to check on borrower’s income when they made the loans, it is not that hard to prove that your income has gone down from what you expected to make back then, and you can say you are making less for just about any, or no particular reason, including “due to the downturn in the housing market.” It is also very easy to show that currently, you are above the debt to income ratios, thus so the loan should be modified.

    In addition, the predatory lending attorneys who advertise agressively, are using the bank’s alleged violations, and I am told in some cases, almost no other factors including hardship, need be shown. The two who stopped paying voluntarily are counting on this since they do not really have “inability” to pay. Ultimately their ace in the hole is that they will walk, so they will see who blinks first. Less than a year ago, I am sure none of these people would have thought of doing this. In fact, in past conversations I remember some of them were vocal and indignant about flippers ditching their investment houses.

    My post about the 4 NOD’s was meant as a cautionary tale about what we can expect when normal people, not just speculators, get into the herd gimme-my-mod-principal-write-down mentality. If banks blink first, the avalanche of “normal” middle and high end families walking because they feel they are entitled to do it, will be overwhelming. If the able stop making payments, no bank can survive IMO, and not even the US can print enough “money” to save us. WIth apologies to Mr. Mortgage, when respected people start agitating for massive principal writedowns as almost the right of a homeowner and the “only answer,” I believe this hurts the stability of the housing market much more than having a set of RULES (for example, if you can’t pay, you can’t keep the house…”) would.

    And if you think having objective financial “standards” of who gets write downs and who doesn’t will work, (ignoring the inherent unfairness of such a system) think how easy it is to manipulate financial data, debt data, etc. and how you would actually go about verifying if any of the info provided were true. Having vetted many prospective tenants, I can tell you that anyone can answer the phone at the other end and claim to be employer X or past landlord Y and “verify” that they are employed, just started their new job making X dollars and were WONDERFUL people. There was alot of fraud on the way up. Why would there be any less on the way down?

  25. If banks blink first, the avalanche of “normal” middle and high end families walking because they feel they are entitled to do it, will be overwhelming. If [they] stop making payments, no bank can survive IMO

    And since the fed now owns majority stakes in both Citi and Bofa with more to come, they would be, umm… let’s say compelled to prevent families from walking.

    Face it people. Either principal reductions and/or 0-1% interest rates for current homeowners are inevitable.

    Because when it comes down to it, the only thing preventing an entire crash of the banking system is how important a FICO score is to the Average Joe.

  26. Hello all:

    The set of rules that if you can’t pay, you lose the house, no longer applies due to volume.There will be too much inventory to sell without further drastic reductions in price.

    The big questions IS the potential borrowers pool big enough to purchase all of the increase inventory if foreclosures continue to occur? And is the potential borrowers pools income sufficient enough to purchase at todays price with the NEW restricted underwriting guidelines?

    The banks and investors can not make money if they lose not only the majority of their principal but can only earn the interest on “50,40,30,20,10%” of the prior mortgage amount (market value).

    The goal of all should be to maintain the highest return of money possible, especially since all taxpayers are involved in the losses and not just with TARP.

    Simple math– 70% homeowners(agreed creative financing enabled this increase) vs 30% renters
    (some of them very smart, responsible and prudent not to get involved in being priced out of the market)

    The 30% renters include 12% of the populaton that have incomes at poverty or near poverty levels.

    Personal incomes according to the US Census Bureau for 2006:

    17% earn over 100K (5% earn over $200K)
    13% earn between 75-100K
    19% earn between 50-75K
    23% earn between 25-50K
    28% earn less then 25K, including the 12% at poverty levels

    We already have experienced massive foreclosures and some of those homeowners have already been replaced with the “renters pool” thru recent sales. The former homeowners themselves are “in the No Count Pool” unable to participate for a couple of years.

    Currently 1 out of every 5 homeowners (20% of mortgaged homeowners) have negative equity, and 1 out of every 10 homeowners are deliquent (10% of mortgaged homeowners)

    If the banks/investors/government allowed every underwater homeowner, deliquent or current, to walk, there is not enough “renters” with sufficient income to replace them at todays market prices, especially with unemployment increasing. The government and the banks do not want further reductions in values since that increases the potential and likelyhood for MORE underwater homeowners and defaults, especially to less than 3x the income, as most here want.

    I would love to be an idealist, and have housing values come down to no more than 2 to 3 times the incomes, with 28%/36% ratios, but that can’t and WON”T be allowed to happen logically.

    Realistically (math), the 67% (formerly 70%) of current homeowners are the best bet to keep in the houses, even if eventually there will have to be principal reductions in the mortgage amount to be more affordable and financially stable. Let’s do modifications, moratoriums on foreclosures, cram-downs thru bankruptcy collecting some more payments before addressing the issue.

    Right now (as published in the newspapers)the goal is to see if the government will absorb any and all “underwater deliquent homeowners” on their balance books, saving the banks, before having to take any real deductions in principal balances. They don’t have to foreclose if the government takes over the mortgage and the losses and they get to keep the “cream of the crop”, the payers earning them money. The taxpayers are taking the losses.

    There are as many posters against principal writedowns as there are for principal reductions. But stop and think what is actually being offered.

    The real question we should be asking ourselves, is:

    the government is going to print, borrow,give lend money to __???__someone or something to try to limit the losses and boost the economy, but who do we as taxpayers want that help/correction to go to, Wall Street or Main Street?

    They are going to do one or another, right now it is Wall Street, make a choice, one or the other, but a choice must be made, no middle ground it is to late for that.

    Wall Street or Main Street, those are the only two choices available.

  27. CC;

    Your a sweetheart too, but stop being so negative, you remind me of my husband.

    You are right though, all this discussion is for naught. If we as the people can’t agreed what is “best for us”, and learn from our mistakes, we will not be able to change or promote change in time to correct the situation.

    Our government is deciding what is best for “us”, since we can’t agreed or won’t agreed. Our government is using the “big gun of the taxpayers money” to attempt to free up the credit markets enabling and promoting the publics’ spending ability. (meanwhile they are using our money for investments, M & A, bonuses and capital reserves)

    Is that what we want or need?

    Who exactly does “us” consist of is my question?

  28. Susan:

    “The real question we should be asking ourselves, is:

    the government is going to print, borrow,give lend money to __???__someone or something to try to limit the losses and boost the economy, but who do we as taxpayers want that help/correction to go to, Wall Street or Main Street?

    They are going to do one or another, right now it is Wall Street, make a choice, one or the other, but a choice must be made, no middle ground it is to late for that.

    Wall Street or Main Street, those are the only two choices available.”

    – The real question you should be asking yourself Susan is: How are you going to survive when your currency, as a result of all this new-found borrowing and printing of worthless paper, collapses?

    – We’re broke Susan. The consumer-based economy that spawned this mess is finished – for good. And so are the jobs that contributed to the 72% of GDP by consumers. And those jobs are never coming back. So where is the domestic GDP to underpin all of this ‘borrowing & printing’ from the Fed going to come from?

    – The government can throw all the money it wants at this housing mess – it’s not going to matter because fundamentally, the basis for the (phony) wealth creation that was once there is Gone. For good.

    – So although a large majority who would ‘benefit’ from a bailout might float for a while, what happens when they go broke again – or lose their job in the unemployment hurricane swirling around for the next few years? Will they too, be back at the government feeding trough? When does it stop?


  29. CC:

    Thank you for responding, but you hit the nail on the head with your first question to me. We do not have the choice of whether or not to stop or proceed in the governments plan of “borrowing and printing of worthless paper,” the choice is who is it for Wall Street or Main Street only.

  30. Susan –

    It’s not sinking in…

    It doesn’t matter where the money goes. The fact is we’re broke and the money that goes to shore-up losses in the private sector (home mortgage re-writes) – or elsewhere (Wall Street), has been and will continue to be created out of thin air.

    This is the Fundamental problem people aren’t seeing. They think that it’s just a matter of ‘shoring up’ and ‘funding’, not paying a whit about where the money comes from and more importantly, what Economic Fundamentals provide for the creation of that funding.

    It’s a rather pointless argument on this forum as the rote responses towards principal write-downs indicates. It’s a dog chasing its tail. People are caught in a myopic rut where they think the economic Sun rises and sets on mortgage Redemption, while becoming completely detached from the flawed economics that got us into this mess in the first place.

    This has been going on for quite some time – the housing bust is simply the latest example one of the last nails in the coffin of economic fundamentals gone awry over the past 25+ years of excessive borrowing, spending and deficits – both private and public.

    Now then, regarding your husband’s negativity… I could enjoy a stiff whiskey sour with a fellow like that! He’s likely not as negative as he is wise.

    Peace –


  31. Certainly that money shouldn’t go to people’s principal write-downs. That’s just absurd. You borrow money, you pay it back. This isn’t a lottery with millions of winners. That’s insane and completely unfair to those that get nothing (and still ultimately have to pay for it).

  32. One of my college buddies works in investment banking in NYC. His bank (along with many others) are getting ready for mass layoffs in the next few months…

  33. Musical chairs! ready?


    Hello!! earth to Susan .. why don’t you for office? since your idea is such a fix… NOT!

    LIVE WITHIN YOUR MEANS.. Let prices come down to afordability.. no bailouts.. keynesian model.. has been tried in the previous depression.. it’s a lost battle!

  35. CC:

    It’s cherry brandy and beer.

    and your missing the point, you and everyone else has no options, it is Wall Street or Main Street?


  36. I agree that the era of borrowing and spending accounting for 72% of our GDP is over, but our government doesn’t.

    So, the American people have to choose, who do we save, Wall Street or Main Street?

    I also agreed, the USA is broke !!!

    But do we protect the income of less than 5% of the population or do we protect the income of the 95% of the population?

  37. Susan Day Minerly Said:
    January 18th, 2009 3:06 am

    It’s cherry brandy and beer.

    and your missing the point, you and everyone else has no options, it is Wall Street or Main Street?


    Those that we have elected have already chosen, and they chose Wall Street and the banks. The banks are already insolvent and operating on fake fundamentals.

    Personally I would like to see money go to main street, but not one cent to priciple writedowns. If you bought a house you can afford then pay for it, even tho it is worth $200k less than you gambled on. If you gambled on a house you could not afford, then get out (you don’t own it) and let someone who can afford it buy it. And dont think just because you paid $450k that some deserving person will not buy it for $65k in 4 years from RTC2. It will happen, BUT ONLY AFTER 2 waves of knife catchers buy before the bottom and get foreclosed on as well..

    The Gov. will always give the money to themselves and the rich and elite. Our only defense is to not play their game. Those who chose to particpate in the housing bubble madness, volentarily entered into a massivley overpriced contract of indebtedness and servitude to the banks/elite. You ruined it for us all with your reckless gambles and herd mentality. You need to learn a painful, painful leason. If you think the Gov. will be forced into writing down your principal then you are truly in outerspace. They will print dollars until the cows come home before they will actually do anything other than pay lip service to gifts of pricipal reduction for the masses.

    Do you think the Gov/rich/elite will allow a climate where the people no longer feel obligated to pay their debts to the Gov/rich/elite? Why would they when they can simply print more dollars?

    Nope, you will not get a write down, you will get tossed out and in two years the IRS will start coming after all the folks who lived in houses free (not paying the mortgage for 18 months) and treat those savings/lootings as….taxable INCOME!

    The Gov./rich/elite will make sure there is a very bitter pill to swallow so that future generations know they have to pay the man or else.

    Those of us who chose not to participate in the madness will buy your house for pennies on the dollar, for a price that is actually fiscally responsable and rent it back to you for at least the 7 years it will take for your shot-to-h@ll credit to come back. Make no mistake there are plenty of us out here waiting and prices will come down to the point that even the dual income couple working at McDonalds will be able to afford your house. There is no shortage of buyers, just a shortage of buyers willing/able to qualify at the still hugely inflated prices. The people bringing down a combined $45k will be buying homes while the $100k earners who walked away from their contracts will be renting, justice will served!

    And if you don’t think that is possible then maybe you can beleive you will be renting the house you were forclosed on, from the Government. Fannie/Freddie just announced they will be doing just that.

  38. JoanJett:

    Read my post listed, there is not a mass of buyer waiting to purchase at “bottom prices”

    Math- 70% of the population is homeowners , 30% are renters.

    Renting from the government, costs you money. They are purchasing the asset at full value and taking the loss for the taxpayer.

    The government is protecting the banks (wall street), not you or me and we are considered main street.

    Put yourself in the homeowners shoes, you purchased a property for %500,000. in 2004.

    Since then you have paid a monthly mortgage payment about 3 x the cost of a rental payment BECAUSE you are a homeowner. YOU ARE WHAT HAS BEEN FUELING THE ECONOMY.

    Hopefully the property is now worth at least, $375,000. at the national decrease of 25%, thru no fault of your own.

    You realize that it will take you over __________ years to recoup just your lost (25-30-35-40-45-50%) in principal with paying 3 times the same as a rental payment, with NOT A CENT BEING APPIED TOWARD YOUR PRINCIPAL BALANCE AFTER WHAT 10-15-20 YEARS, what would you do?

    These are gamblers but your friends, neighbors, people you work with, go to church with, etcetera. What would you really tell them? What would you tell yourself?

  39. Susan,

    That is the big flaw here. Emotion has nothing to do with solving the crisis. I don’t differentiate a family of 4 from a single person. If they made bad choices they should face the consequences of those choices. This current economic / society model that rejects responsibility is the core cause. The housing crisis is a symptom.

    CC is right.. America is completely bankrupt. This horrid way of life caused by rebellion against WWII Era parents has got us here. Now they have mostly died off no one remembers how to correctly manage a post depression economy. We are going to have to relearn these principles. This is not going to spare your friends, neighbors, co-workers, church-goers or any other group you are emotionally attached to.

  40. Susan,

    “Hopefully the property is now worth at least, $375,000. at the national decrease of 25%, thru no fault of your own.”

    Of course. Somebody held a gun to my head and said “buy this house at a bubbled price and eight times your salary”. No fault of the buyers, never is.

    “These are gamblers but your friends, neighbors, people you work with, go to church with, etcetera. What would you really tell them? What would you tell yourself?”

    Same thing I’d say if they spent all their money in Vegas. Except it wasn’t their money. Stop the sob party.

  41. Susan…start with admiting you messed up…

    The buyers will a be lot..2-4 years from now

  42. or I should correct myself: buyers would be here today, if prices would be fair..problem is pissing off the market with all this bailouts..and unitended consequences take place.. now they will have to get cheaper that just normal…and it’s up to pp like u to stop asking for bailouts.. and what pp would say.. do we want to repeat Japan? what would you say for the next 20 years then?

    Just say it now.. admit it and move on, and start correcting withIN your life…

  43. I would like to suggest that there is a correlation between California’s increasing unemployment rate and the fact that this State has the largest concentration of Alt-A and Option ARMs mortgages and that these borrowers include a large number of small business owners.

    Given the following facts:

    1) California leads the nation in Option ARMs mortgages which are the most “toxic”. 80-90% of these borrowers paid the “minimum”. At “reset” they will experience “payment shock” and default.

    2) Experts predict a 2nd “Tsunami” Wave of Foreclosures of these “Toxic” Mortgages beginning in 4th quarter 2008 through 2012. Credit Suisse and others offer evidence from their research.

    3) Credit Suisse predict 8.1 million Foreclosures in next 4 years

    4) NASE Survey provides evidence that small business owners fell for these “Toxic” mortgages in the millions. Btw, I was the author of the NASE national survey.

    5) Small businesses employ between in to 10 employees

    6) Small businesses are closing due to the Recession


    California’s spike in unemployment at this time may be due to the foreclosures on the “Toxic” Alt-A and Option ARMs mortgages held by small business owners whose businesses have closed and their employees are now jobless.

    This trend will continue and intensify as we get into 2009. CBS “60 Minutes” devoted a segment to the 2nd Wave of Foreclosueson on 12/14/08.

    I would be happy to discuss.

    Thank you,

    Samuel D. Bornstein
    Professor of Accounting & Taxation
    Kean University, School of Business, Union, NJ
    Tel: (732) 493 – 4799

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