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| User Info | April 1st Roundup: GM And More in forum [Ticker] | |||
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Genesis Posts: 66462 Incept: 2007-06-26 
Royal Flush! 
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http://market-ticker.org/archives/917-Ap....
---------- I used to play flute; I wonder if I can play a fife? I incite prosecutors to create "Bubba Sausage Parking Lot" projects Darrell Issa has a middle finger and knows how to use it - Me 2009-04-01 08:49:18
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Ludwigvonmises Posts: 240 Incept: 2008-10-10 
Michigan
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Excellent ticker Gen......as usual!! 
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2009-04-01 09:03:52
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Zek157 Posts: 10 Incept: 2009-03-05 
Arlington Virginia
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It always amazed me back in 2004-05 that the loan to income ratios were ignored. I used to buy old houses to renovate and rent. Around the same time people started buying them without regard of cost to fix and potential income. They were going to rocket to the moon, so what did it matter if they were not positive. My #1 rule was it had to make a couple bucks with a reasonable rent. Bt late 2004 we stopped looking entirely because they never made sense outside of a speculative nature. There will be howls of protest going back to the old standards because it will kick back prices once 80% of the mortgage pool will be gone, but that's what it will take to get on a sound footing. Prices will fall back anyway imo. 2009-04-01 09:17:04
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Judgesmales Posts: 1784 Incept: 2008-02-05
Las Vegas
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Quote:One must wonder if Gettlefinger and the union "brothers" really are brothers at all, or whether the last 20 years has made them, once the most-feared political constituency in America, yet another neutered political has-been incapable of anything beyond a bad parody of carnival barking. Now that's good writing. There's a lot of distilled insight and expertise in that sentence. Not many have it, and fewer still can express it that well, especially on the Internet. Well done, KD. ---------- "CNBC? What's that? My TV stops at Channel 13 like it's supposed to." -- Artie, Larry Sanders' producer Last modified:
2009-04-01 09:23:10 by judgesmales
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Asimov Posts: 21229 Incept: 2007-08-26
east tennessee Online
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The group of foxes guarding our henhouse won't eat other foxes till the chickens are gone.
---------- It's justifiably immoral to try to deal in a moral fashion with an immoral entity. If you trade based on what other people say, you will lose money. Especially what I say. I won't be held responsible. Festina lente. 2009-04-01 09:24:04
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Themortgagedude Posts: 3343 Incept: 2007-12-17
saint louis
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I see I am still unable to change your mind on reasonable downpayments. It is not the downpayments of 5% that cause the problems - but rather the layering of risk with lower downpayment, lower credit score requirements, neg am loans, no income verification, seller downpayment assistance, no retention of risk by those making credit decisions, etc. I find that if my customers make a 5% downpayment of their own cash that default is rare. That is in a midwestern city that has had little of the drastic valuation increases and declines. Without all the other pieces to the puzzle we would not of had the drastic swings that have led to the defaults. The two main things that need to be driven out for good are stated income loans and DPA. 5% down with fully underwritten files and proper mortgage insurance is acceptable. Speaking of mortgage insurance isn't it time a few of them fail? I thought they would fail leading to the failure of FNM and FRE. Had that a little backwards. ---------- Since September it's just gotten colder and colder. There's less daylight now, I've noticed too. This can only mean one thing - the sun is going out. In a few more months the Earth will be a dark and lifeless ball of ice. 2009-04-01 09:24:19
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Treebeard056 Posts: 196 Incept: 2009-01-31
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Right on Karl . . . Ron Smith (WBAL - Baltimore) posted this paper written by a former IMF economist (The Quiet Coup)- I think it details our fate fairly well unless the action you and others recommend is taken. It also explains why the the administration and congress are unlikely to act until its too late: http://www.theatlantic.com/doc/print/200.... 2009-04-01 09:24:28
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Genesis Posts: 66462 Incept: 2007-06-26
Royal Flush!
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Quote:5% down with fully underwritten files and proper mortgage insurance is acceptable. No its not because that house is instantly upside-down by 7% at closing (two commissions + closing costs) if it has to be foreclosed and sold. The buyer should be the one taking that risk, not the lender. You are borrowing at a rate that is very close to that of a sovereign in terms of interest cost. As a consquence your risk of loss on that loan should be similar to that of a sovereign, and the only way to do that is to post a 20% down payment. This sort of distortion of risk:reward is why we get credit bubbles. It either stops or our economy will not recover on a durable basis, with any such "apparent" recovery in fact being false. Period. 5% down payments are acceptable with a margin of 500 bips over the 10 year swap. They're not with a margin of 100 bips over the 10 year swap. I'm tired of the carnival barking from the RRE industry. This is a bankrupt argument and I've demolished it dozens of times - neither you or anyone else can argue with the math. ---------- I used to play flute; I wonder if I can play a fife? I incite prosecutors to create "Bubba Sausage Parking Lot" projects Darrell Issa has a middle finger and knows how to use it - Me Last modified:
2009-04-01 09:35:34 by genesis
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Noodleman Posts: 404 Incept: 2008-11-01
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me thinks gettlefinger has been hustled into the proverbial back room and forced to attend a 'come to jesus' meeting with barry and the boys. i envision the sargeant at arms dressed in a medevial garb holding a cat o' nine tails and blocking the doorway. you won't see any organized 'civil disobedience' on part of the UAW. Fine by me as long as they don't selectively weed out the UAW. This has to be extended to all public and private unions. They've outlived their usefulness.
2009-04-01 09:31:03
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Txin1880 Posts: 788 Incept: 2009-02-25
Texas
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Excellent dissection of the current situation. Unfortunately, I think the President and current crop of sycophants must show they are the smartest people in any given room, and can "fix" things without doing all those things you mention, which mere normal people would have to do. So, this: ---------- OBAMA: "You know, if -- frankly, it's not really something I've followed closely. I didn't even know that ACORN was getting a whole lot of federal money." 09/20/2009 "Blow up your TV, throw away your paper. ~ John Prine 2009-04-01 09:35:13
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Markytom Posts: 179 Incept: 2009-02-19
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Good thing SOX was passed after Enron to prevent any financial shenanigans by corporations. I'm just amazed at how the government, law enforcement, the SEC, Congress, etc. selectively investigate and prosecute people and corporations, and completely protect others. And the blatant lies and hypocrisy. Awful. It's hard to admint but after this last couple of months it's clear that the US has truly become a banana republic. Thanks for all the tickers (and other bloggers' posts) for exposing the raging corruption. 2009-04-01 09:37:45
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Themortgagedude Posts: 3343 Incept: 2007-12-17
saint louis
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You've got points Gen, but look at default rates and the ability of MI companies to cover the losses and still earn a profit prior to 2000. The numbers will show you that 5% down and mortgage insurance works. The expansion into 3% down and evolving into 0% down, led to the demise of a profitable industry in mortgage insurance. I'll rest my case there and concede I can not change your mind.
---------- Since September it's just gotten colder and colder. There's less daylight now, I've noticed too. This can only mean one thing - the sun is going out. In a few more months the Earth will be a dark and lifeless ball of ice. 2009-04-01 09:40:24
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Randy123 Posts: 1382 Incept: 2008-09-24 New Jersey
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L bottom in housing will be decades as it should.
---------- Mliu is my hero. Captain melamine. 2009-04-01 09:41:11
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Genesis Posts: 66462 Incept: 2007-06-26
Royal Flush!
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PMI is a sucker bet. It works fine during periods of growth but is suicidal during times when growth disappears. It is also a huge screw job for the consumer. Why not just charge 10yr swap + 500 bips for a 5% down payment? If the loan performs and equity builds over time refinance into a 15 year fixed at 10y swap + 100 bips after five or ten years? MI hides risk and enables fraud; the credit bubble originated after the 1981 recession TMD, not just in the last eight years. The MI "field of experience" is all based on a credit bubble of unprecedented proportion. The point of an interest rate similar to a sovereign is that the risk of loss should be similar to a sovereign. You can't get there by shifting that risk. Simply put, there should be no such thing as an upside down home loan financed on near-sovereign terms. If you're going to have a loss risk profile similar to an unsecured credit card loan (and any upside down home loan is) then you should have an interest rate similar to that of an unsecured credit card loan. ---------- I used to play flute; I wonder if I can play a fife? I incite prosecutors to create "Bubba Sausage Parking Lot" projects Darrell Issa has a middle finger and knows how to use it - Me Last modified:
2009-04-01 09:46:31 by genesis
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Gmf56 Posts: 123 Incept: 2008-10-30 coastal mississippi
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Quote:One must wonder if Gettlefinger and the union "brothers" really are brothers at all, or whether the last 20 years has made them, once the most-feared political constituency in America, yet another neutered political has-been incapable of anything beyond a bad parody of carnival barking. I don't have to wonder, I've seen it first hand. UAW - Michoud Assembly Facility. A large number of workers will not pay union dues, but will go to the union with all of their complaints. When contracts are re-negotiated leadership holds no meetings with members, members have no clue what is at stake, and most don't bother to try to find out. Those who do are met with blank stares. Each contract for the last 20 yrs has resulted in a reduction of medical and pension benefits. Union leadership endorsed it each time. Things did get a bit testier at the last one, as people were finally noticing that their standard of living had dropped. NASA announced last year that its contracts would be limited to 5 yrs, and that the current contractor would be excluded from the bidding. This will save all of the contractors a ton in pension obligations, so easy to see why they are on board. Next announcement was that a number of the contractor's employees would become direct-hire employees of NASA. All of them were supervisory positions. When the local union "leader" was asked, why doesn't NASA direct-hire the facilities workers, the union rep was totally confused! 2009-04-01 09:45:50
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Sloonie Posts: 401 Incept: 2008-04-16
waaaaay up North
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Great ticker, as usual. You are amazing, KD! Last modified:
2009-04-01 10:51:48 by sloonie
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Themortgagedude Posts: 3343 Incept: 2007-12-17
saint louis
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The mortgage credit bubble did not start in 1981. The bubble was caused by Wall Street finding a never ending supply of buyers for WHATEVER box of **** could be graded AAA by a ratings agency. Then it was just a matter of dumb money chasing after real estate profits enabled by bankers and mortgage brokers lending to anyone who could fog a mirror. Reasonable underwriting standards would have prevented the bubble. ---------- Since September it's just gotten colder and colder. There's less daylight now, I've noticed too. This can only mean one thing - the sun is going out. In a few more months the Earth will be a dark and lifeless ball of ice. 2009-04-01 09:57:02
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Genesis Posts: 66462 Incept: 2007-06-26
Royal Flush!
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Yes; 20% down, 36% DTI, 28% front end, all reps verified. You want less down or a higher DTI or looser standards? Cool - here's a loan at TNX + 500 bips. Do that, no bubble. Risk goes where it belongs. ---------- I used to play flute; I wonder if I can play a fife? I incite prosecutors to create "Bubba Sausage Parking Lot" projects Darrell Issa has a middle finger and knows how to use it - Me 2009-04-01 09:58:39
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Kuhio Posts: 203 Incept: 2008-12-31
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Damn, Karl I love your beautifully written & cogent essays. This one was spot on without any extraneous or superferlous information/points - perfect for J6P to understand & digest. I don't know about you, but I'm well past the caring stage - I guess that's the subtle, yet fatal, truth held in the math. This **** is going down no matter what attempts the PTB take to forestall the inevitable. There will be defaults and there will be bankruptcies; the system will continue resetting until a steady-state level is established. One point I would differ is with regards to unions. As most people know, by far & away the largest unions are in government & services. Since government debt is the last bubble, it stands to reason that government will be the last "industry" standing before it too contracts. Therefore, any bailout policy that keeps the FIRE game alive to protect government jobs & pensions is wholly supported by unions and their members. Last modified:
2009-04-01 10:06:58 by kuhio
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Lastchance Posts: 1008 Incept: 2008-11-19 Las Vegas
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"a creeping prickerbush" Wow. I haven't even heard that word since I was a mere youth growing up in the midwest. But it is a great analogy. I remember one of my chores was to cut the damn things back before they took over the whole backyard. Just like that pesky debt is doing right now. ---------- "Since banking is based on confidence, what happens when you destroy confidence?" Retired Admiral "Mike" McConnell 11/8/09 2009-04-01 10:10:23
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Templar223 Posts: 364 Incept: 2008-04-28
Champaign, IL
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Typo:Quote:The UAW and organized labor in general, long though to be the "favored" among President Obama Thought ============= Good ticker. You're a good man, doing your part to help educate the uninformed. Every little bit helps I suppose. The more people are educated, the sooner we can have this "reset", IMHO. John 2009-04-01 10:13:20
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Sp Posts: 47 Incept: 2008-02-26
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We now have a white collar sector punishing the blue collar sector for the white collar's excessive manipulations.
2009-04-01 10:30:00
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Pelle031 Posts: 137 Incept: 2009-03-24
Philly burbs - PA
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Great Ticker again Sir. From what I've read through the years, the UAW has never really been considered 'brothers' much with the "big unions". They truly have always been kind of out on an island and their leadership that just never really 'got it'. They suffer from a lot of the same delusions as other unions have over the years but they, along with the 'big' three companies, have been sheltered from reality. I really do feel for the membership here because their lives are about to be turned completely upside down. 2009-04-01 10:36:52
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Quickexit Posts: 167 Incept: 2007-07-05 Icee cold!!
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Gen, Have you attempted to organize or cooperate with any unions in any way? 2009-04-01 10:42:55
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Themortgagedude Posts: 3343 Incept: 2007-12-17
saint louis
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TMD  Gen Don't think we'll ever agree on this one. Good to know that I don't agree with everything you type. Just most all of it.
---------- Since September it's just gotten colder and colder. There's less daylight now, I've noticed too. This can only mean one thing - the sun is going out. In a few more months the Earth will be a dark and lifeless ball of ice. 2009-04-01 10:50:02
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