Monday, March 29, 2010

Housing Dump

The housing front has been reporting some wild goings on and I don't know what to think. Bank of America is going to wipe out some three billion dollars of debt by writing down the principal of homes underwater and simply reducing principal to new assessed values. The US government is taking on more housing debt burden and despite all this frenzied activity there are rumblings of further chaos to come.

I myself have started down the road of attempting a refinance of our home which has sunk in value to some degree, not as bad as many perhaps, but we did the right thing, put 25% down and secured a sensible 5.8% thirty year loan. Now our down payment has vanished, our home is still worth less than we owe and banks are taking us all for an economic ride. I am pissed If my wife and I, decidedly small enough to fail, pay our bills why do we have to subsidize our very own mortgage lender to the tune of trillions of dollars? And Wells Fargo now says it will owe no Federal taxes in 2009 thanks to all the bailouts and losses and bonuses no doubt. Grr!

With that thought in mind I read Ilargi's sour reflections on Automatic Earth and I found her comments to be full of sense, as unpleasant as they may be. One salient fact that I had previously considered is that any loans refinanced will be recourse loans meaning any defaults will be recoverable by any assets available, not just the house itself. And why would that be an issue?

Well, it will be a huge issue if, as Ilargi suggests house prices may drop another 50% from where they are now. The FHA has six million practically non performing loans under it's belt and all plans to kick start a recovery depend on home values remaining stable and possibly rising. If as she suggests, house prices drop, the whole recovery thing will implode. Why implode? Because the US Trasury is having trouble selling bonds and it seems interest rates may be forced to rise. With interets rates rising and house values likely continuing to dump...things implode.

The thing about house prices is that they depend on employment- no duh!- and employment is at Depression levels no matter what our leaders tell us. House prices can't bounce back with more than 25% of the population unemployed or under employed. This whole ten percent figure is malarkey. And Shadow Statistics still shows true unemployment around 22% all told, a much more realistic figure, free as it is from the bonds of political necessity.

So what happens when rosy predictions meet hard reality and house prices slide and the government has no ready cash and people with recourse loans decide the game isn't worth the candle and walk away from their new low, loans? The answer to that question is swinging in the wind because no one in charge apparently wants to face that problem just yet. Let us hold our breaths, collectively and do the same. Perhaps Wells Fargo will tell me, thanks for the bail out and go fuck myself-no refinance for me! That will spare me the bother of trying to figure out if a re-finance is good thing or not, and will perhaps make it easier to do the walk of shame when my bank makes it the only form of protest left.

3 comments:

The Annonymous said...

Anonymous here:

The spot on comment - "Because the US Trasury is having trouble selling bonds and it seems interest rates may be forced to rise. With interets rates rising and house values likely continuing to dump...things implode" - points out the central gov't's continued need to add higher rpm motors to the currency printing presses to fund their populist vote buying apparatus - "free (whatever) is a 'right' in this country"... what they can't 'take' they print... to the point where no one wants our currency.... so, up go interest rates.

How folks continue to believe the laws of economics don't apply to us is baffling.. when there are countless real-world examples of their efficacy.

Sigh...

Jack Riepe said...

Dear Editor:

I wanted to preface my remarks this evening with just a brief note on how much I enjoy your political writing. It is by far something that allows you to uncloak your soul and release a light that is generally focused and clear. You do have terrible Trotsky-like inclinations, but manage to keep these in check for the most part.

I regret that I do not have more time to spend responding to these issues, but I am thoroughly jaded with national politics and the whorehouse that sits atop Capitol Hill. I am astounded that anyone would see this country return to the happy economic policies of the past that got us here in the first place.

My position on the great Obama Inaction Figure, now offered with a new self-serving feature, is well known. It is exceeded only by my distaste and distrust for the equally ineffective Republicans, whose heads are now lozenged-shaped from being up their asses for so long.

But that is neither here nor there. I have created a special "Alternative Destinations" section on my blog, and have added this column to wha will become a very short list of non-moto distractions.

This is small tribute to a man of your vision... But tribute nevertheless. Don't let it go to your head.

Fondest regards,
Jack • reep • Toad
Twisted Roads

PS: I've had a small medical setback this past week, which has put me off my oats. One disease is apparently not enough.

Anonymous said...

Not sure if you allow links to related articles. Here's one that addresses the B of A announcement.
Hard to believe they have probable non-altrustic alterior motives.
http://www.rickackerman.com/2010/03/mortgage-rescue-more-like-an-a-bomb/