A HousingPANIC message to the failed Housing Gamblers of America: You made your bet, you lost, now send in the keys and run

Hey, you made a bad bet and you lost. You lied about your income and took out a no-down, no-doc, interest-only, teaser-rate, piggyback negative amortization loan (good god does anyone remember 30 year fixed?).

You bought a mansion you had NO BUSINESS living in at your income level, you bet prices would go up and instead they cratered, and now you can no longer make your reset payment.

Who cares!!! You're not the bagholder! Hedge funds, foreign banks, US taxpayers, insurance companies and people all over the world are! But not you, no way no how!!! Party time!!

So just walk away. Send in the keys. Jingle mail. Ah, the American Dream!!!

Since there's no such thing as personal responsibility, ethics or morals anymore in America, you get off scott-free. Just walk away, stop hemorrhaging cash, and try to keep as many of your ill-gotten gains as you can.

I hope you transferred some of your cash-out-housing-ATM-refi-loot to unmarked Swiss bank accounts. I hope you bought lots and lots of stuff that you can now put on eBay. And a few years from now, don't forget to pull the same scam again!

Sleep tight!

Hey, wanna break the law and commit blatant mortgage fraud! Here's another cash-back-at-close deal in California

This cash-back-at-close scam happened everywhere in America, especially in the bubble cities, and continues today. Why work for a living when you can just buy a house, suck $50,000 or more out of it under the table, tax free, and then just walk away.

Hundreds of billions, if not trillions, are being lost. Crime paid, and pays, big time. Millions will go unemployed. The economy will be devastated. And the Federal Reserve, Congress and Bush Administration fiddled while Rome burned.

$350000 $$ Laguna Investment Property--$50K Cash Back At Closing $$

Beautiful Investment Property: * 3 bedroom * 2 bath * 1400 sq feet * Great Tenants * Elk Grove School District Seller is moving out of state and is very motivated!! Seller is offering $50K cash back at closing. If interested, please call Eddie @ 408-893-6607.

HousingPANIC Stupid Question of the Day

This one's a bit harsh but needs to be asked...

Should poor people with limited income, inconsistent work and credit histories and no chance of paying the loan back have been allowed to buy $500,000 houses with teaser rate liar's loans on interest only terms with no money down?

Follow-up question - what were Countrywide and IndyMac thinking?

(Disclosure - I'm short IndyMac, and not in favor of people living beyond their means)

At this point in the housing crash, HP recommends everyone see "The Pursuit of Happyness"

Just read Casey Serin's latest post (he's alive) to get a glimpse how tough it's gonna get on a personal level for millions of people during the crash.

I also would like to point HP'ers to our official charity, the Denver Rescue Mission, which helps the homeless in foreclosure-central Denver Colorado. Please think about giving, even if it's just a couple of bucks.

The housing crash is here folks. There's no denying it. Lives will be ruined. Families will be torn apart. Crime will soar. The divorce rate will go through the roof. Bankruptcy will become a way of life. Neighborhoods will be decimated.

And the builders, mortgage brokers, bankers and realtors got paid all along the way. Never forget that.

Bloomberg: Subprime `Liar Loans' Fuel Housing Bust

Nice to see some in the MSM waking the f*ck up. My only question is - WHAT TOOK SO DAMN LONG?

Meanwhile, the undisputed champion of liar's loans - IndyMac - reports tomorrow. Will they come clean? Or will they continue to lie and spin on their way to bankruptcy? (yup, I'm short IndyMac!)

April 25 (Bloomberg) -- Cheating on mortgage applications is so widespread and so seldom punished that it's fueling an increase in foreclosures that will prolong the housing slump, said Robert W. Russell, counsel to the director of the Office of Thrift Supervision, which oversees savings and loans.

Borrowers and brokers commit fraud when they exaggerate the applicant's income, qualifying the borrower for a home he otherwise couldn't afford. Such fraud robbed lenders of an estimated $1 billion last year, according to data collected by the Washington-based Mortgage Bankers Association and the Federal Bureau of Investigation.

``Misstatements about employment and income are being made every day,'' Russell said. ``The brokers are just putting down on paper what the underwriters would require. There are borrowers providing false information as well.''

Loans that require little or no documentation of income soared to $276 billion, or 46 percent, of all subprime mortgages last year from $30 billion in 2001, according to estimates from New York-based analysts at Credit Suisse Group. Homebuyers with those loans defaulted at a 12.6 percent rate in February, compared with 1.5 percent of fully documented prime mortgages, said San Francisco-based First American LoanPerformance, a mortgage consulting group.

A 2006 study cited by the Mortgage Asset Research Institute showed that almost 60 percent of stated income loans were exaggerated by at least 50 percent.

``Everyone calls these loans `liar loans' because we know these people were lying,'' said Jim Croft, a spokesman at the Reston, Virginia-based Mortgage Asset Research Institute.

``The loans were available to anyone with a pulse,'' said Greg Bass, a former account executive in Austin, Texas, for subprime lender Long Beach Mortgage Co.

``When everyone was eating up the subprime market, it was great to be in the business,'' said Josh Tullis, sales director for A. Anderson Scott Mortgage Group in Falls Church, Virginia. ``In the heyday, I knew guys who went from making $2,000 a month working 60 hours a week at McDonald's and they'd come over here and work 15 hours on a loan and make $4,000.''

FLASH: Morningstar analyst does the math, figures IndyMac is sitting on an unannounced $1.0 to 1.5 billion loss - on just 2006 Liar's Loans (Alt-A)

OK, I've seen enough. I'm getting even shorter on Monday on NDE with put options - probably some May as well, as they have to come clean soon on what they know. Or go to jail. Yes, the market is fixed, and yes, they may choose the "go to jail" route, and short term there could be a short squeeze on NDE since so much of the float is short, but sometimes you gotta bet on what you know. And if I know one thing, it's that Alt-A (Liar's Loans) and IndyMac are F'd.

IndyMac's market cap is $2.1 billion, net tangible assets of $1.8 billion, and their cash on hand is $541 million. Taking a $1.0 to $1.5 billion loss is a killer. I don't see how they survive. Plus their business model is ruined - the days of funny money are over.

Note - at time of writing I'm happily short NDE.

This is a bit wonkish, but I hope you read the whole article if you want to understand the Alt-A meltdown and IndyMac's terrible position... And pick through the numbers and story and tell me why I shouldn't short harder on Monday.

If you have picked up the paper in the past month, you know that the subprime (also called nonprime) mortgage business has blown up in recent weeks. New Century Financial, one of the largest players in the industry, filed for bankruptcy protection on April 2.

At first, it seemed like the problems were confined to the low-quality subprime business, mainly stemming from firms that were funding mortgages with short-term borrowings. However, we're starting to see problems creeping into higher-quality mortgages, and as a result, we've identified two short-term risks for our bank coverage universe.

If a bank chooses to sell the mortgages, we estimate, in a worst-case scenario, that the loans will sell for just 98.64% of their value. Add the cost of making the loan and selling it for a 1.36% discount, and a bank will take a real and immediate hit to its income statement.

The largest impact would be at Indymac NDE , where writing Alt-A mortgages to sell into the secondary market is its primary business. We estimate that Indymac would lose almost 3 times what it made in 2006. Investors should note that this is just an exercise; in reality, Indymac would stop writing loans if all it could do is sell them at a loss.

The following table shows some of the top Alt-A originating banks, and our estimate of the earnings impact if forced to sell all of their 2006 originations at this severe discount.


Estimated Earnings Impact of Alt-A Liquidation

2006 Alt-A Originations / Estimated Loss / % of 2006 Earnings
Indymac NDE $70.2 billion / $954 million / 278%

According to our calculations, this is a minimal risk for many of the diversified banks. The thrifts and banks with large mortgage operations, like Indymac, Washington Mutual, and First Horizon, have greater exposure. We worry about these banks, but believe we used a worst-case scenario to show the maximum loss they could incur.

Estimated Worst-Case Scenario for Alt-A Mortgage Repurchases

2006 Alt-A Originations / Bad Loans / Estimated Loss / % of 2006 Earnings
Indymac NDE $70.2 billion / $6.243 billion / $1.561 billion / 455%

FLASH: Mortgage Defaults Spread Beyond Sub-Prime Loans

Silly analysts. Silly Bernanke. Silly Mozilo. Silly Greenspan. Silly Lereah.

It's not just subprime, and they know it. Here comes The Great Alt-A Meltdown (needs a sexier name, eh?)

Wall Street Journal: Mortgage Defaults Start to Spread

The mortgage market has been roiled by a sharp increase in bad loans made to borrowers with weak credit. Now there are signs that the pain is spreading upward.

At issue are mortgages made to people who fall in the gray area between "prime" (borrowers considered the best credit risks) and "subprime" (borrowers considered the greatest credit risks).

A record $400 billion of these midlevel loans -- which are known in the industry as "Alt-A" mortgages -- were originated last year, up from $85 billion in 2003, according to Inside Mortgage Finance, a trade publication. Alt-A loans accounted for roughly 16% of mortgage originations last year and subprime loans an additional 24%.

The catch-all Alt-A category includes many of the innovative products that helped fuel the housing boom, such as mortgages that carry little, if any, documentation of income or assets, and so-called option adjustable-rate mortgages, which give borrowers multiple payment choices but can lead to a rising loan balance. Loans taken by investors buying homes they don't plan to occupy themselves can also fall into the Alt-A category.

Data from UBS AG show that the default rate for Alt-A mortgages has doubled in the past 14 months. "The credit deterioration has been almost parallel to what's been happening in the subprime market," says UBS mortgage analyst David Liu.

Investor concerns about Alt-A loans are rising, according to Walter N. Schmidt, a mortgage investment strategist at FTN Financial Capital Markets in Chicago. A report from mortgage analysts at Barclays Capital in New York this week pointed to fraud as one reason for early defaults on Alt-A loans.

The mortgage industry is battling a rash of cases in which borrowers, loan officers and appraisers collude in providing false information to induce lenders to advance more money than homes are worth.

Arizona housing bubble and mortgage fraud funder shut down by regulators, 75 offices closed, untold damage done

Eagle First was just one enabler of the biggest ponzi scheme ever to hit Arizona, which as many of you know became the flim-flam-scam-o-rama-fake-economy-state during the Late Great Housing Bubble.

This company was just one of many unregulated mortgage broker firms promoting the "cash-back" fraud, and now that politicians and the MSM in Arizona have woken up to the fact that their housing market was all a sham, you'll start seeing company shut downs, arrests, new laws and one hell of a clean up.

Arizona property prices will crash 30% to 50% over the next 36 months, I am sure of it. Their 55% 2005 bubble was a fraud, a scam and a joke. Hundreds of thousands of REIC connected jobs will disappear, the Arizona economy will be devastated, and stucco home ghost towns all over Phoenix and Tucson will emerge.

And the walls come tumbling down. The money ain't gonna get paid back. The Great Unwinding is here.

Mortgage company shut down - Mesa-based firm caught in state's fraud crackdown

Regulators have shut down Mesa-based Eagle First Mortgage and its more than 75 Valley branches, citing illegal lending practices.The Arizona Department of Financial Institutions pulled the license of the mortgage firm and its broker, David Sanchez, last week.

Regulators described more than 100 illegal money transactions, loan activities and hiring practices. The firm, one of the largest that Financial Institutions has shut down, has until March 14 to finish any outstanding loans and close its doors

A wave of mortgage fraud started spreading across the Valley last year that could cost lenders millions of dollars and erode values and confidence in Arizona's real estate market and economy. Most of the fraud is coming from cash-back deals that involve obtaining a mortgage for more than a home is worth and pocketing the extra money. But there are other types of fraud such as faking and forging documents and lying about income and other personal information for loans.

It's estimated there are as many as 18,000 unlicensed people taking mortgage applications, negotiating rates and getting loan commissions statewide.

Donald Trump's buddy Kiyosaki knows what's coming, says get to gold and cash now

I can't stand the guy, I think he all about publicity and selling books, but damn, he's spot-on here. Just like he is about the entitlements disaster awaiting America, and some other great points. Don't throw the baby out with the bathwater they say. And if Mr. Real Estate, Mr. Donald Trump Buddy, says get to gold and cash, well, there's something there...

I wonder if he told The Donald?

Throwing Good Money After Bad - All booms eventually go bust.

We all remember the stock market crash of 2000, and most of us remember the real estate crash after the implementation of the 1986 Tax Reform Act. Today, many people are anticipating another real estate crash.

Unfortunately, despite our understanding of booms and inevitable busts, it's always near the top of a boom that "dumb money" buys in. Currently, this has set the scene for a potential market bust of which few people are aware.

About a year ago, I wrote a Yahoo! Finance column warning readers that the real estate boom was over. How did I forecast the end of the boom? I got my hot tip from the cashier at my local Safeway supermarket.

While she was tallying the cost of my apples, broccoli, and steaks, she handed me her new real estate agent's card and invited me to call her for my next real estate investment. Moments later, I was home writing that column. As my rich dad used to say, "When dumb money chases smart money, the party's over." Needless to say, many real estate agents and investors wrote me nasty notes.

For the next two years, I'm cautioning people to watch their ratios between good debt and bad debt, and keep liquid reserves such as cash, gold, or silver.

Good debt is debt that makes you rich. An example of good debt is the debt on the apartment houses I own. That debt is good only as long as there are tenants to pay my mortgages. If tenants stop paying their rent, my good debt turns into bad debt.

Most people don't have good debt -- all they have is bad debt. Bad debt is debt that makes you poorer. I count the mortgage on my home as bad debt, because I'm the one paying on it. Other forms of bad debt are car payments, credit card balances, or other consumer loans.

The good news is that during deflationary times, smart money reenters the market, so crashes are great for smart people with smart money. Instead of listening to the optimistic economists, then, you should eliminate bad debt and improve your debt-to-equity ratios on good debt.

HousingPANIC Stupid Question of the Day

Won't everyone be surprised that those unsustainable home price gains were 100% driven by fraud, deception and speculation?

50% up, 33% down and we're right back where we started folks... Oh, what a wild ride it will be...