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A time capsule of the greatest financial mania in the history of mankind, told in real-time by regular folks and patriots. May future generations better understand the madness of crowds, and how power and money corrupt.
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24 comments:
Laid-Back Lenders
A oft-heard theory regarding the foreclosure situation goes something like this: the overabundance of risky mortgages may cause a lot of defaults, but lenders won't be able to afford to foreclose on too many borrowers. Therefore, lenders will be more flexible than they have been in housing busts past, allowing delinquent borrowers more time or easier loan terms to help them get back on track.
We can test this theory fairly well using available data. But first, a terminology refresher. A Notice of Default (NOD) is a letter sent to a delinquent borrower saying, in effect, "pay up or else." A Notice of Trustee Sale (NOT) is filed upon the occurrence of the "or else" -- when the lender takes back the home. The law dictates that the lenders can't take back the home and file the NOT until three months after the sending of the NOD.
That three-month delay is not by any means set in stone, but it seems to be a fairly typical timeline between an NOD and the ensuing NOT. Thus, by dividing the number of NOTs filed in a given month by the number of NODs filed three months earlier, we can get a rough idea of how many lenders are actually going through with the foreclosures they've threatened against delinquent borrowers.
The graph to the right displays the outcome of this exercise. The yellow line is the number of NOTs as a percentage of NODs three months prior. For reference I've also included the raw number of NOTs in red, expressed as usual as a percentage of San Diego's labor force in order to adjust for population growth.
So far, the oft-heard theory looks to be right. When NOTs first reached 0.04 percent of the labor force in 1993, 54 percent (by our inexact model, mind you) of defaulting borrowers were being foreclosed upon. The number of NOTs has just passed .04 percent for the first time during this downturn, but only 45 percent of defaults are going to foreclosure.
Perhaps lenders are being more flexible after all. Then again, I've heard anecdotally that the sudden spike in foreclosures (note the comparitive steepness of the recent rise in foreclosures compared to the early 1990s) has the lenders operationally backed-up. If this is true, then there could just be a larger-than-usual delay between NOD and NOT.
There's another wrinkle to consider: this time around, a lot of the "lenders" are actually the varied holders of structured mortage credit derivatives. The layers of separation between creditor and borrower may allow for less flexibility in working out delinquent loans. This doesn't seem to have been the case so far, however. It will be interesting to check back in on the relationship between NODs and NOTs in the future, but for the time being, the evidence supports the theory of the laid-back lenders.
http://www.voiceofsandiego.org/
articles/2007/07/05/toscano/
900notices070507.txt
Does this mean its gonna get crowded under my bridge?
This clown says mortgage brokers are not regulated....
I am a broker and we are heavily regulated....
The banks developed these loan products and pushed them through the market...
Are we to say "no mr. consumer....you can't do this 100% loan" when they are flooded all over the market the last 5 years.....by the banks....
make no mistake....The banks caused this...we pushed their product....
Yes, but we'll always have Girls Gone Wild!!!!!!!
Money quote from Ms. Morgenson: "It's not going to be pretty."
HA HA HA!! Yeah a housing crash is underway.
Condo sales were up more than 20 percent from June 2006, according to Northwest Multiple Listing Service data released Thursday.
The median Seattle condo price in June was $300,000 -- up 9.8 percent from a year earlier, compared with an 8.4 percent rise in the median house price.
A 9% increase in prices. OK if that is the new definition for a housing crash, then yes you are right we are in the midst of a crash.
Vice-A-Versa??? What an idiot.
Laura Vella said:
These videos are great.
Maybe now the sheeple will believe there is a crash hearing it from a Pulitzer Prize author.
I totally dig Gretchen. She knows what's going on. Shame more people won't see this - if only because there's not a hint of tin foil hat about her.
Financial Engineer. Now that sounds like a smart career choice.
Hmmm who should I believe a Pulitzer Prize winning author for the NY Times whose a recognized expert in the financial world
http://www.nytimes.com/ref/business/bio-morgenson.html
OR
Some anon who points to the last bastion of the bubble before RE deflation ripples through to its economy:
Anonymous said...
HA HA HA!! Yeah a housing crash is underway.
Condo sales were up more than 20 percent from June 2006, according to Northwest Multiple Listing Service data released Thursday.
The median Seattle condo price in June was $300,000 -- up 9.8 percent from a year earlier, compared with an 8.4 percent rise in the median house price.
A 9% increase in prices. OK if that is the new definition for a housing crash, then yes you are right we are in the midst of a crash.
July 06, 2007 12:28 PM
After this all plays itself out and some high level Wall Street financial banks go under it will be people like this anon that will be viewed as the tin foil hat crowd!! GO GRETCHEN GO
Save her a place on the "HP hot housing chicks callendar"
Bill moyers on Girls Gone Wild???
This was the best interview I've heard yet to tell the true problem. Financial engineering! Everyone wants to be rich! They are listening to the propoganda from the news media. You got to have a $1 million house, and then go out to find the money to pay for it! This is going to end really badly! I have already collected on several bets that real estate will go down the first half of this year. Only one dead beat didn't pay, said he had no money and was going bankrupt due to his ARM housing gamble! Go figure! Does anyone want a piece of this bet for next year?
I told you so! And there's more to come!
Very straight forward with NO BULLSHIT!!!!!!!!
anon: "OK if that is the new definition for a housing crash, then yes you are right we are in the midst of a crash."
Let's see, Seattle median home price up a whopping 0.2% YOY, and inventory up 51.3% YOY. Maybe this isn't a crash, but it sure the heck looks like the beginning of one.
Great video, very simple, succinct.
Alot of blame to go around!
Whatever happened to, 'If you can't afford it, you can't buy it'!
Just because I make 45k a year means I can buy a million dollar home.............hmmmmm?
I'm not a brain scientist or a rocket surgeon but, I know I can't afford something in that price range and have to get real about this!
Am I the only one too stupid to figure this out?
She also makes an excellent point that it is absolutely crucial that the government NOT step in to help the lenders and investors. The system will correct itself if we just leave it alone.
Yes, there will be pain, as there should be after so much irresponsible lending and borrowing. But that pain is the only way for the system to learn from this folly.
We must allow the banks, investors and borrowers to burn their hand on the stove - otherwise they will never learn.
In the long run, the problems with the system will work themselves out. What we do NOT need is paternalistic 'papa knows best' government intervention to help out the poor homeowners (and, by the way, the banks, lenders and investors).
Great video, thank you. Saved to my favorites, and shared with my friends and family.
At least the robber barrons of the previous Gilded Age produced useful, tangible goods. "This Gilded Age is about pushing paper around."
Hah! What have we come to?
There is no reason to laugh, or
be cynical about the housing catastrophe.
Regardless of what you may believe, this will affect *your* pocket book as well in the form of higher banking fees, utility fees, and other forms of taxation.
As was pointed out in Bill Moyer's interview, so much of our economy was based on the speculative paper wealth created in the housing market.
Now, that the housing market has essentially collapsed, what do we have to replace it with that is sustaining over the long term?
If you have children, I would be very concerned for their future as well, since they will be the ones saddled with so much of the debt created by this current generation
of irresponsible lenders and borrowers.
Anonymous said...
HA HA HA!! Yeah a housing crash is underway.
Condo sales were up more than 20 percent from June 2006, according to Northwest Multiple Listing Service data released Thursday.
The median Seattle condo price in June was $300,000 -- up 9.8 percent from a year earlier, compared with an 8.4 percent rise in the median house price.
A 9% increase in prices. OK if that is the new definition for a housing crash, then yes you are right we are in the midst of a crash.
Good piece breaking it down to simple bites for the people.
She should have included the masses in the cast of blameworthy characters. If not housing, something else would likely separate many of the bubble buyers from their money as long as they maintain the financial ignorance that they displayed recently.
Wall street may be an enabler, or even a pusher, but the masses are the addicts. They need a new concept of "rehab" here.
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