On 60 Minutes...the foreclosure market

Parent Cafe
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<p><a href=“http://www.cbsnews.com/stories/2008/01/25/60minutes/main3752515.shtml[/url]”>http://www.cbsnews.com/stories/2008/01/25/60minutes/main3752515.shtml&lt;/a&gt;&lt;/p&gt;

<p>“It was a House of Cards”</p>

<p>" It was another nervous week for the world’s financial markets and for Wall Street. In the last six months, Americans have seen their investments shrink, their property values plummet, and the country edge closer towards a recession. At the heart of the problem is something called the subprime mortgage crisis, which began last summer and continues to ricochet through the economy. </p>

<p>It sounds complicated, but it’s really fairly simple. Banks lent hundreds of billions of dollars to homebuyers who can’t pay them back. Wall Street took the risky debt, dressed it up as fancy securities, and sold it around the world as safe investments. It sounds like a shell game or Ponzi scheme; in some ways, it was a house of cards rife with corruption, greed, and negligence. "</p>

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<p>You don’t have to watch 60 minutes to see this clip.</p>

<p>If you click on the link and scroll down, the video of this story is there.</p>

<p>I can’t believe we are bailing out any of these people.</p>

<p>The buyers gambled and lost.</p>

<p>Everybody else in the deal got paid.</p>

<p>It was free money.</p>

<p>Many people borrowed more than the house was worth right in the beginning.</p>

<p>There are houses worth 70% less than their original prices. Amazing.</p>

<p>"The Wall Street and foreign investors are now stuck with the millions of distressed properties on Sean O’Toole’s map, the unsold condos in Miami, the unfinished apartments on the Vegas Strip, the developments in Atlanta that are sitting idle and the thousand stucco houses in Stockton. Not even Kevin Moran, who has copies of the foreclosed mortgages, can figure out who exactly owns them. </p>

<p>“That’s the fascinating part of this whole debacle we’re in. Mortgages are sold in mortgage backed securities, so they’re pooled. I’ve seen everything from some of the largest financial institutions in the country, and you see ‘Deutsche Bank’ in a series and a series of numbers and letters to a mortgage pool,” he says. </p>

<p>The pools are part and parcel of those high-yield mortgage backed securities everyone gobbled up a few years ago, and are now stuck in the windpipe of the world’s financial system. No one wants to buy them, so no one can sell them. </p>

<p>“Bonds marked triple-A are now quoted at 50 cents to the dollar, 40 cents on the dollar. Some of them, much less,” Grant says. </p>

<p>“How much on the dollar, do ya think?” Kroft asks. </p>

<p>“Some of them are worth nothing on the dollar. Nothing on the dollar. This is the worst thing that has happened to Wall Street in a long time,” Grant says. </p>

<p>Asked how many of these securities are out there, Grant says, “A trillion with a T-plus.”</p>

<p>"In the past few months, Wall Street’s top investment banks have written off more than $120 billion in losses related mortgage backed securities, and some are now under new management. </p>

<p>Two of the fired CEO’s responsible for the biggest losses rode off into the sunset with some free money of their own. Charles Prince of Citigroup collected $29 million on his way out the door; Stan O’Neal of Merrill Lynch left with $161 million."</p>

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<p>Maybe I missed something, but didn’t lots of those folks with adjustable rate mortgages get to live in houses far larger and appealing than those they could have rented at the same amount, and get to right off all that mortgage in addition? I mean, didn’t they already receive a massive subsidy?</p>

<p>Yes, it is terrible that they have to move, but far worse is the plight of the poor fixed income or low-income renter who say his/her rent skyrocket as a result of the rising prices.</p>

<p>Am I missing something? (since the cost of my mortgage is barely a multiple of my health club membership, I’m probably out of the loop.)</p>

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<p>You didn’t miss a thing.</p>

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<p>“…, but far worse is the plight of the poor fixed income or low-income renter who say his/her rent skyrocket as a result of the rising prices.”</p>

<p>Down 150 miles, south of you, the rent for apartments did not increase or increased only slightly in these years. As you observed, people move out of apartments and rentals, and created an excess of rentals.</p>

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<p>thisoldman, did you watch the clip?</p>

<p>Grant is a permabear (always bearish). </p>

<p>There is a saying. Every squirrel finds an acorn.</p>

<p>Grant might have found his acorn.</p>

<p>Goldman Sachs says the US is going to be in a recession. Now I see that Goldman says Japan is in a recession.</p>

<p>Does Goldman want lower rates or do they see something?</p>

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<p>“As you observed, people move out of apartments and rentals, and created an excess of rentals.”</p>

<p>Ah, but 60 miles north of me, all those apartments and rentals turned into condos (sold with adjustable rate mortgages, and with the mortgage interest written off at taxpayer subsidy), and rents skyrocketed. It seems to me that the folks who got into the condos got a real steal for a bunch of years, and now will benefit again if rents drop. </p>

<p>But again - I could be wrong; my mortgage is so low I can’t even get a plane ticket to visit my d. for the amount I pay monthly.</p>

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<p>Isn’t W great (washington & wm) !!</p>

<p>“It seems to me that the folks who got into the condos got a real steal for a bunch of years, and now will benefit again if rents drop.”</p>

<p>Rents are beginning to rise and new apartment construction is happening down here. Those foreclosed “renters” now must move somewhere and foreclosed or underwater properties don’t go onto the rental market.</p>

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<p>I was amazed at the attitude of some of the people interviewed. They seemed to think that walking away from a mortgage was no big deal and it wasn’t their fault that they couldn’t afford the mortgage anymore. I hope the lenders come after those people to collect and that they never get mortgages again.</p>

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<p>The blame-somebody-else-for-my-own-actions crowd is already at work. This is pathetic.</p>

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<p>[US</a> blacks see ‘financial apartheid’ in subprime crisis](<a href=“http://www.breitbart.com/article.php?id=080127181914.e1z8r2hd&show_article=1]US”>http://www.breitbart.com/article.php?id=080127181914.e1z8r2hd&show_article=1)</p>

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<p>Of course, the biggest bailout is going to the Merrill Lynch/Goldman Sachs’ of the world. That’s what the interest rate drop is all about. The bailouts for the overwrought home borrowers (if it happens at all) will be small potatoes. </p>

<p>Meanwhile, the majority of minorites remain renters, and continue to subsidize the mortgage interest deductions for the rest of us. (not that I have one worth talking about; it’s folks with really, really big houses who get most of the subsidy).</p>

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<p>The bulk of the big losses are highly concentrated in a few markets that were popular with the speculators–Miami condos, Vegas, and parts of California and Arizona. The fac tthat these areas are decimated has little impact on all the other markets except for the loss of mortgage liquidity and the overall neagtive talk about real estate. A different group of speculators is now swooping in and buying up the excess for 50% of the original price expecting the market to turn around in a few years and renting them out in the meantime. You’ll see very good rental deals in those cities if you have any reason to be there.</p>

<p>The rest of us can just enjoy our homes and watch things work themselves out nationally. </p>

<p>Rent in Seattle is certainly up over the recent past. It was not so long ago that rents went down 10-20% and stayed there after the dotcom bust. Nobody complained then except the owners. The condo market is now softening so I think the conversions will soon slow to a trickle. There are a fair amount of rentals under construction and a few condo projects have changed over to rentals due to slack demand.</p>

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<p>[UBS</a> adds $10 bln in write-downs, gets hefty cash injection - MarketWatch](<a href=“http://www.marketwatch.com/news/story/ubs-take-further-10-bln/story.aspx?guid={15C6A75F-FE8C-42A4-A24C-DFC139EEB881}]UBS”>UBS to take further $10 billion subprime write-down - MarketWatch)</p>

<p>Actually Goldman Sachs isn’t one of those investment banks that will need a bailout–not like Citigroup, UBS, Morgan Stanley, Merrill Lynch.</p>

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<p>Foreclosures cause a lot of problem for a neighborhood, even if you aren’t one who gets foreclosed. Empty houses, dying lawns, garbage left lying around, low values for your own property (if, heaven forbid, you should have to sell because of a job transfer)…There’s one house in our neighborhood that the bank took back. I can only imagine how bad it would be if you lived in a neighborhood where the bank took back 9 or 10 houses.</p>

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<p>“Actually Goldman Sachs isn’t one of those investment banks that will need a bailout–not like Citigroup, UBS, Morgan Stanley, Merrill Lynch.”</p>

<p>Fair enough - but Goldman Sachs benefitted from the rate cuts, etc. just like those needing the bailout. The bailout for home borrowers (if there is one) will be relatively small potatoes, and I can continue to subsidize the mortgages of the folks who sit on GS’ board. (Nothing new there.)</p>

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<p>The only reason they increased rates was because they were afraid of inflation and the economy overheating. Now the conditions have changed and they have adjusted rates to reflect the current reality. You might call it a bailout but it is also adjusting to the current facts. </p>

<p>Also given the maximum mortgage is $1,000,000 for deductions, I doubt you are paying much for the GS board given that prices of homes they would want in NYC are starting over $10,000,000. Nice rhetoric though. You might be helping out the second year analysts. They only make around $500k and are buying the $1,000,000 condos which means about 900 sf in a good building.</p>

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<p>A million is well more than I made in 15 years. I’m not complaining about what I make (I’m perfectly comfortable, thank you). I am complaining about subsidizing those who don’t need it (at the expense of those who do).</p>

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<p>Razor; who needs a mortgage when they got student loans as a deductible expense and which you don’t need a low end threshold for deductibility. :>)::</p>

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<p>and the fed dropping interest rates screws those of us that actually have cash to put in the bank. One bank I get CDs from dropped their rates 1% overnight. </p>

<p>How many ways can Uncle Sam figure out to take from the same people. </p>

<p>Oh yeah, that $600 I’m supposed to get is going to make up for all that…</p>

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<p>Maybe the Fed is telling you to invest a bit more aggressively.</p>