"Ohio had the highest number of home foreclosures in 2006,"

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...only a small portion of the mortgage market. Further, this article has some interesting stats...


"A study by Michael Youngblood for loanperformance.com found "the default rate of subprime securities originated in 2005 rose to 5.1 percent in August 2006, at 20 months of age." That was substantially lower than the 9.7 percent default rate after 20 months on comparable securities issued in 2002.

Sensational stories invariably cite figures from the Mortgage Bankers Association showing that 13.3 percent of subprime borrowers were late making their payments at the end of 2006 and that 4.5 percent face foreclosure. Yet those same figures show, as Jeff Brown noted in The Philadelphia Inquirer, that "more than 86 percent of subprime borrowers are not late in payments, and more than 95 percent are not in foreclosure."

Christopher Cagan of First American Core Logic estimates that foreclosures will amount to less than 1 percent of mortgage lending."

Seems to me,Ohio has been mentioned quite a bit the last few years as being one of the worst states for foreclosures, bankrupsies, unemployment. And then, in Ohio's small minded way they keep doing things to make it all worse - like (yes, I'm saying it AGAIN) passing a stupid smoking ban that will destroy more small businesses & cause more unemployment & foreclosures. Just very shallow & short sighted of the whiners who just don't want to smell a bit of shs - it will be the death of Ohio's economy. And we will be able to thank all of you who voted for the ban. Maybe Toledo has to become another Flint, Michigan before people realize that - by then it will be too late. Also, small minded Ohioans who oppose casinos. I've heard that High St. in Columbus is a ghost town now since the ban - used to be hopping. Gumbos has been sold - Club Sin couldn't survive the ban; Tangos has laid off all but about 6 waitresses, tips took a huge dive. Personally, I think Ohio & this entire country was doing better, people were happier, less violence, crime until the 90's. This country is going to hell & Ohio is showing the way.

Note well that at 15% of the national foreclosures, the combined population of OH and MI are about at 7.6% of the nation itself, meaning that we're at double the foreclosure rate that we should be based upon per-capita.

There are currently 365 foreclosures in Toledo at this time, with the total of foreclosures, pre-foreclosures, bankruptcies, FSBOs, tax liens and other 'deals' producing almost 22000 records for Toledo.

Toledo's median home price is just about exactly 2.5 times its median income, which is is sensible. Historically, a home must be purchased for the x2.5 multiplier or less, or the buyer is in financial danger. Homes in the bubbly areas (all of CA, WA, some parts of WI, prosperous parts of TX, all of FL, Boston, NYC, all of AZ, Chicago, etc.) are around x8, meaning that millions of people there will face foreclosure no matter what we do. The highest-rated areas (primarily in CA and FL) have x12 multipliers. To be succinct, California is fucked; the median income in CA is $51K, yet the median home price is $500K.

YET ... Toledo still has a housing bubble when you consider that the median income is still trending downward, but the "realtwhores" are still trying to pump up prices. I've heard the subprime market is tightening up credit standards, but as has been pointed out many times on the housing-bubble blogs, the subprime lending market is continuing to widely advertise their exotic (e-Toxic?) loans. Are standards really tightening, or is it all just a PR gig to keep the asset-speculation bubble expanding?

The next sector that must fall is the Alt-A market, where high FICOs dominated the financial argument while no-doc, stated-income (often called a "liar loan") and option ARMs were still used extensively. Since the subprime is imploding (at least, allegedly, but prices ARE falling), then there is a shrinking pool of "Greater Fools" to use subprime cashouts in order to climb into the Alt-A ranks. Since the Great American Housing Bubble was simply a Ponzi scheme, the inability for Alt-A-ers to cash themselves out from below will naturally expose the terrible weaknesses in how THOSE mortgages were underwritten.

Mags may be downplaying the terrible extent of the problem, but it's a fact that most buyers can't survive it when their ARMs (as Greenspan urged them to buy in 2004) adjust and they have to come up with 20% to 100% more of a monthly payment. Sure, they can re-fi as the realtwhores assured them, but if the home prices fell -- and they HAVE -- that generally becomes impossible. Too many people are finding out that they cannot qualify for the loan they already have, on the current, tightened credit standards. Re-fis are not going to save these millions of twits. They shoehorned as much house as they could into their incomes, and now the time has come to demonstrate how fundamentally foolish that really was. There were not "homeowners" -- they were homeDEBTORS.

Politically, we're still in outright denial. The Congress (with equal naturalness) is simply ignoring the Alt-A issue. I guess by Spring 2008 we'll have to hear Senators "Clintoon and Dodo" (as they're running quite a comedy routine right now) start squawking about Alt-A and how "nobody saw it coming". Dodd himself as Chariman of the Senate Banking Committee (fer crissakes!) is trying to get America to believe that not only didn't he understand the ramifications of the Housing Bubble, but that he was unable to even read newspapers to find out that Greenspan did everything he could to push BubblEconomics to the max.

Aaand after that, it will be the turn for the prime mortgage market to express itself via a mea culpa. More hilarity in the Senate will ensue.

To put this all most blatantly: compared to telling the public the truth about the incredible weaknesses in the American mortgage industry, the mainstream media -- being heavily dependent upon ad revenue supplied by realtors -- simply lied and omitted during the last 5 years or so. Instead of people commonly putting down 20% for a mortgage, the minimum downpayments dropped steadily. Zero-down loans are now depressingly common. These loans were made simply because the owners expected not to live in them for 15+ years, but to "flip" them for a profit. The home vacancy rate in America is now at an unprecedented 2.7%[

OK - I deal with this for a living and would like to interject a little balance here.

First - I, personally, am a little miffed at the term "realtwhores". I think a generalization is being made about a group of people that is unjust. Yes - there are unethical people in all career choices, but in general a Realtor is held to a standard that few understand.

Secondly - MOST Adjustable Rate Mortgages hold a conversion option. Based on the adjustment date of the note, this could be anywhere from 12 months to full adjust. The cost of the conversion is generally $250 to $700 and converts your note to a fixed rate at the current posted rate. Many people choose to ride the lower adjustable rate to the end. This is not the Realtor's fault, nor the fault of the bank.

Thirdly - Foreclosures ARE prevalent in NW Ohio. But they are not necessarily precipitated (sic?) by the alleged 'housing bubble' or the inference that Realtors are guiding folks into disaster. This mess is PRIMARILY prefaced with unemployment and a loss of income. Without jobs to keep folks solvent, then financial collapse takes its toll.

Let me give you a couple examples of typical conversations with both home-buyers and home-sellers.


RE Agent: What type of home are you interested in?
Buyer: 3 bedrooms with a big yard and it HAS to have a garage and be in a GOOD neighborhood.
RE Agent: Have you been to see a bank or mortgage company to make sure you are in a position to buy a home at this time?
Buyer: Oh yes! We are pre-approved for $125,000.
RE Agent: OK - then we have this (searches MLS for appropriate homes) that we can work from, or we can expand the search to other areas.

***Note: Buyer goes home and searches the internet. Calls the agent the next day insisting that they want to see 123 Main St. even though it is listed for $150,000. Agent agrees in hopes that when he/she shows up with an amortization sheet these buyers will realize that they can't afford this home.

Buyer: Oh this is perfect! We want to make an offer!
Agent: You do realize that this is way beyond your approval, don't you?
Buyer: Yes - but we can borrow the difference from (parents/uncle/grandma) and make it work!

***At this point the Agent has a couple choices...they can babysit the buyers and assume the role of parent, or they can reaffirm their feeling that this is not a good plan. Either way, the buyer controls the situation and will do whatever they want, with or without you.


Agent: Well, Mr/Mrs Jones, after seeing your home and checking the comparable sales in the area, the numbers show that your home should be priced at $150,000. Is that in line with what you had in mind?

Seller: OH NO! We have put so much into this house! We just KNOW that it should sell for at least $200,000!

Agent: You DO understand that this is a very soft market, don't you? That home prices are down, and the buyers pool is rather small at the moment?

Seller: Yes - but our neighbor sold his for more than that!

Agent: And when did they sell? It didn't come up on the comps from the last year.

Seller: That was about 4 years ago, but it wasn't in near as nice a shape!

***Note: Ultimately, the homeowner sets the price. The agent has the option to walk away from the listing, but then that would be like giving away business and it doesn't do much for your professional rep either.

Personally, there are times when I've told sellers that they should consult with another agent because I am not comfortable listing the home for what they THINK it's worth.

Also, keep in mind, that if I take that listing for more than I truly believe it will sell for I am still going to pay for advertising, marketing, open house time, etc. REGARDLESS of whether the home sells or not. The seller does not assume those bills, I do. So to agree to market something that's not realistic is nuts.

The bottom line is this:

If someone buys a home and then loses their job, there is a distinct possibility that they will lose their home as well. It sucks. But that's the reality of it if they are unable to find a job.

And, keep in mind, that people don't call the Realtor when they lose their job so that they can get a jump on bailing out before they reach the point of foreclosure. They wait until the sheriff has come to the door with the legal notices and THEN they call and want miracles. At that point it's almost impossible to help them.

Using the same website that GuestZero used to state (or allude to) that there are 22,000 foreclosures in Toledo, I did some digging on that site and came up with:

If you un-check the boxes for FSBOs, tax liens, and Deals, you are left with Foreclosures/Pre-Foreclosures/Bankruptcies.

The numbers, according to this site, are as follows (by zip code)

43602 4 bankruptcies
43604 1 foreclosure, 7 bankruptcies
43605 50 foreclosures, 82 bankruptcies
43606 25 foreclosures, 64 bankruptcies
43607 29 foreclosures, 121 bankruptcies
43608 31 foreclosures, 63 bankruptcies
43609 46 foreclosures, 88 bankruptcies
43610 9 foreclosures, 25 bankruptcies
43611 19 foreclosures, 56 bankruptcies
43612 37 foreclosures, 112 bankruptcies
43613 31 foreclosures, 96 bankruptcies
43614 11 foreclosures, 52 bankruptcies
43615 19 foreclosures, 128 bankruptcies
43617 12 bankruptcies
43620 7 foreclosures, 10 bankruptcies
43623 12 foreclosures, 42 bankruptcies
43624 2 bankruptcies

Hence, inside the City of Toledo there are:

339 Foreclosures
940 Bankruptcies

While these numbers do not, in any way, minimize the impact of loss of income and loss of homes, I hope it will serve to balance a little of the thought process behind the discussion.

The zip for my area, 43608, had lower than I would have expected numbers that 43615.


downplay the numbers, just point out that it isn't a crisis as is being presented. The sub-prime issue has an impact, but it's not a crisis (except for those who are actually in the foreclosure process).

I don't disagree with the overall concern for the housing bubble, but in the end, individual responsibility comes to mind...if you buy a house for more than you can afford, you're likely to lose it when any number of things happen (loss of job, etc.)

I don't want any government bailout. And the companies who were dumb enough to issue loans to people who couldn't really afford them are going to suffer - some are even looking at bankruptcy. They assumed the risk and they'll have to pay the piper.

I am not downplaying the defeat of foreclosure when it comes as the result of circumstances beyond control - i.e. unemployment, death of a spouse, etc.

I do NOT feel that the government has any role in bailing out those that are seriously over extended.

And the lenders that designed all these quick and easy finance programs that are full of hidden 'catches' should be strung up by the SEC and the banking commissions.

Yes - the ease of those programs provided me with a few extra home buyers, but I also suggested that some of them seek another agent because I didn't want to be part of the setup for them to fail. And some were truly in a position, and on track, to be able to obtain a home and keep it. I've since received a few thank yous for that.

Being as I work in, and with, this stuff all the time I see (first-hand) what is done and the manipulating of paperwork that can occur in order to achieve a sale. I, personally, am more interested in building and retaining a client base that feels I did right by them, than just selling houses for the sake of a dollar. I guess I'm one of the wierd ones.

****wondering ---- could that be the reason why I don't see myself leaving a large estate to someone??? :)

to GZ. I didn't read closely enough. I stand corrected.

But the rest of my statements stand.

Fair enough?

The Fast Eddies in the get rich quick real estate scam need to get their just deserts. When you lend money to people who have no documentation, who may be illegal aliens without citizenship or those with bad credit then eating the losses should be the consequences. We did this once before with the savings and loan industry. This could be a good deal for those who do have cash on the side and want to pick up a house at a value.


I think that this last year was the first year of a 3 year problem. When I was buying my house, (03) they were marketing ARM's in a big way. The housing market was up.

In 2006 a large percentage of those mortgages saw an increase in the interest percentage. I realize that ARM's are structured in different ways - but most ARM's begin their upward cycle in 3-5 years.

What we are seeing is just the first of those who could not make it past the first increase. Many will deplete their savings before conceding defeat.

Carols the government played a huge role in the ARM business. Greenspan himself made this comment: "Indeed, recent research within the Federal Reserve suggests that many homeowners might have saved tens of thousands of dollars had they held adjustable-rate mortgages rather than fixed-rate mortgages during the past decade," among many other great arguments for alternative forms of mortgages over fixed rate mortgages. Google for Greenspan and alternative, adjustable, mortgages, finance. He is a BIG believer in this stuff. Campaigned mighty hard for it.

While he was doing this, his decisions kept the prime steady and not increasing. One of the consequences of this was that people gained confidence in the prime holding it's own and were more agreeable to listening to these 'alternative' ideas about mortgages.

The thing is rotten from the ground up. We're going to see incrementally larger numbers of foreclosures over the next two to five year.

There isn't any one party to blame - no head to put on the block - but there is not any group in this that can say their hands are clean either. You deal in your business ethically - so you think everyone else conducts themselves in the same way. They don't. Not all of them - and maybe not the majority.

The lesson for me here is to make very sure that I deal with ethical experts that I can trust. Be it a realtor, a banker - anybody.

If you're here to tell me it's my fault - you're right. I meant to do it. It was alot of fun. That's why I have this happy smile on my face.

"Once again, I blame the education system for producing (1) people too stupid to properly understand their mortgage..."

Just some thoughts. The educated in the world, have a good job, stable home life, maybe a Bachelor's degree and the future looks promising.

Corporation makes changes, downsizes, intelligent person has a an ARM as at the time it was good, planned for the future, saved money like the educated would and then life through a curve ball, lost job through no fault of the educated one, family health issue came up, devastated savings and so on.

Did the education save them?


for years the appraisers were either handed a copy of the purchase contract which clearly showed the contract price, or were told by the lenders that they "need to hit $^^^^^^^^ in order to pull the deal together."

There have been some recent changes proposed that would eliminate revealing the proposed purchase price to appraisers so that legitimate values could be established. I am part of that committee in Columbus and believe strongly that it will become law. At least here in Ohio.

Since I deal primarily with first time buyers and investors, both residential and mixed use commercial, (not flippers!) I am very careful to make sure that my clients don't set themselves up for failure. Because we all know in the end that if a client fails it will be through no fault of their own, it will be that evil Realtor that led them into this horrible deal.

Appraisers have a hard job, believe it or not. If they play along with the banks and mortgage companies then they are unethical and crooked. If they show up and tell you that the property you are willing to pay $100,000 for is truly worth $75,000 then they take a bashing from the client. And if the deal collapses due to appraisal and failure to renegotiate the contract, then the 'blame train' fills up with Realtors, lenders, buyers and sellers. And keep in mind - if the appraiser goes to the property and does his job, only to watch the deal fall apart, there is a very good chance he/she won't get paid. Unless there is a provision in the lenders agreement that says the cost of appraisal is borne by the purchaser, there is a strong possibility there will be no paycheck coming.

On the theory of Investor/Flippers and ARMS - yes they use them a lot. But many have gotten caught in a seasoning issue that will not allow for inflated post rehab pricing. The timeline for seasoning this kind of loan is anywhere from 1 - 2 years. For the flipper that grabs a 2 year ARM to maximize profit, he may be making those payments on his own because in a property background search it will show that he/she bought the property for (example) $25,000 in Sept. '06 and in April '07 puts it on the market for $90,000. First time buyer sees the 'new and improved' house and the price fits in their budget. I do a property background search and see that ownership and values don't match. The lender looks at this, too, and says that until the seller has owned this property for a MINIMUM of a year that they won't agree to lend money on it. This has slowed the 'flipping' industry quite a bit here in Ohio.

"for years the appraisers were either handed a copy of the purchase contract which clearly showed the contract price, or were told by the lenders that they "need to hit $^^^^^^^^ in order to pull the deal together."

Still going on and could we get more info on the legislation being proposed, please.


as the right hand gal to one of those wormbugs, I'd just say be careful about painting large segments of people with a wide brush.

THIS particular investor/wormbug has completely rebuilt a 3 bedroom home, putting in nicer features than he has in his own home.

We have been having dialogues about home owners who will now be renters, (largely the most likely tenant at this point in time, in this area) - what the median income is in the area to be sure that whatever family lands there will assuredly be able to afford their housing.

We've had two discussions about security deposits that included talk about the situation that a family who has experienced foreclosure would find themselves in. And could these families afford a deposit? We are thinking no, or if so, surely not much of one.

Anyway - everybody is not a John Ulmer - a property flipper. Some people enjoy taking something that needs some love and making it into a place a family can be happy in.

And Toledo needs more of these people buying houses that need some love and turning them back into real homes.

If you're here to tell me it's my fault - you're right. I meant to do it. It was alot of fun. That's why I have this happy smile on my face.

of the Ulmer variety. The cost to many families who are IN Westhaven homes right now is going to be huge.

These are people who bought homes on land contracts, usually with large down payments, and are making their payments in good faith. (Their interests rates are at 10% or higher so they have paid ALOT on these places).

The result is that the homes will be foreclosed on and those people will be evicted. They don't get their money back either. They've largely been overlooked in the judicial process and by the receivers. And on the business end of things I guess I can understand this, there isn't really anything to be done to help these people, but it really breaks my heart.

If you're here to tell me it's my fault - you're right. I meant to do it. It was alot of fun. That's why I have this happy smile on my face.

By Jody Shenn

"March 22 (Bloomberg) -- The subprime credit crunch is beginning to ensnare even borrowers with better credit.

Lenders are increasingly refusing to lend to homebuyers who can't make a down payment of more than 5 percent, especially if they won't document their income. Until recently such borrowers qualified for so-called Alt A mortgages, which rank between prime and subprime in terms of risk. Last year the category accounted for about 20 percent of the $3 trillion of U.S. mortgages, about the same as subprime loans, according to Credit Suisse Group."



GZ said:
Instead of calling them "investors", let's use the more honest term: repulsive wormbugs.

Whew! OK - let me see if I can put together a reasonable response to this one! ;)

*Note: The following is related from personal experience.

Property description: Built 1912, 2 family, in reasonably decent neighborhood.

Auditors Value (100%): $91,000

I paid: $43,500
Initial costs: purchase $43,500, eviction of drug dealing tenants - $1500, gutting two apartments/disposal of debris - $600, clearing old utility liens - $400.

Keep in mind, this is before any improvements are done.

Now to the improvements!
Renovate two kitchens - $2500
Bare bones remodel of downstairs bath - $3500 (includes repair of outdated plumbing)
Renovation/update of upstairs bath - $1800
New flooring/carpet downstairs - $2300
New carpet upstairs - $900
New interior doors both floors - $300
New door locks and interior hardware - $250
New windows downstairs - $2100
New lighting fixtures - $300
Replacement of ALL outlets and switches to code - $250
New exterior doors for downstairs - $800
Repair of drywall, paint, ceiling texture - $400
Rebuild of stairway - $550
Driveway gravel - $250
Proposed deck for upstairs unit (2007) - $650

And there are a bunch of little items that don't fall into a specific category. Things like insurance, water bills, etc.

Do I call this an investment? Yes. I have invested a fair amount of money, a chitload of time and sweat, and am proud of the result.

Is this so I can put it on the market and 'flip' it? Nope! It's so that in 12 - 15 years it is totally paid for and the rents that it generates will supplement my Social Security (assuming that there will still be SS!), and 401K.

I am blessed to have two extraordinary tenants that take as much pride in the building as I do. They tend to the lawn, do their own landscaping at their expense, and are always on time with the rent. Truly above the curve in the rental market, by and large.

Did I undertake this project so that I could slap $50 worth of paint on it and put a sign in the yard for $80,000? No. It's a longterm investment with a defined purpose.

Had I put a sign in the yard I would call myself a wormbug!

Believe it or not, there are many investors (Not wormbugs!) that are investing lots of money, time and aggravation in trying to preserve the housing stock in Toledo. As is the norm, bad news sells and we (the blind public) are only informed about the evil scammers that pervade an otherwise legitimate enterprise.

Keep in mind - anybody that lives in a rented unit would not have that option if someone, somewhere, didn't INVEST in the property.

We have a three family building in our neighborhood and it had a family that was dealing drugs out of it and the police were by many times.

The owner was an elderly couple which had the building built in the 70's.

The building was sold to a couple who bought it as an investment to add to their holdings.

They put many hours into the building and many dollars and stills searching for tenants for it after weeding out those that did not qualify and they have been resistant to renting to Section 8 tenants as they have and there has been trouble with some of the tenants.

I wish there was more of these types of investors for the north end as some seem to be; buy, rent and then forget about it.


many scumbag (my interpretation) investors. They purchase at a low price, do a minimum of cleanup, then rent to the first person to come up with a deposit. Then they go back to their upscale existence and forget about it as long as those rent payments show up.

That is not responsible landlording, nor is it responsible investing.

I screen potential tenants - all the way through a criminal background check, a credit check, an eviction filings check, etc. It's not cheap to do this, but in the long run it certainly has saved me some money. Evictions are expensive and can be long, drawn out processes.

My tenants sign a Drug Free Housing agreement and the contract states, in plain language, that any documented drug activity, be it theirs or a guest of theirs, will result in them becoming PAST tenants. I don't tolerate it, refuse to tolerate it, and I let them know it. If they have a problem with the concept they need to look elsewhere.

If you would like to email me I'd be interested in what part of the North End you are referring to. There is much going on that is not publicized and perhaps I could help with your issues.

Email me at: invest4toledo@bex.net just put neighborhood concerns in the subject line so I don't trash the mail.

Step 1 (current): Fool investors into funding the bailout, to wit:

Ohio Plans Bonds to Bail Out Homeowners Strapped by Mortgages

Step 2 (pending): Once Step 1 fails, legislature borrows money itself through another bond issue.

Step 3 (pending): Once step 2 fails, legislature raises an existing tax rate, or issues a new tax, in order to continue the funding process.

Step 4 (pending): Having failed miserably at all these faux fix efforts, the legislature gives up and hopes that their terms will allow them to sail past the housing crash into the era when speculation can allow another bubble to form.

This is a (IMO) very well written article on the topic. (Some bunny sent it to me :-)~


If you're here to tell me it's my fault - you're right. I meant to do it. It was alot of fun. That's why I have this happy smile on my face.

GZ did it again!

In reality, he's David LIAReah, the head lobbyist for the Realtwhore Mafia.

Ya know, I've tried to understand where all your anger comes from, but it certainly is hard to pin down.

You are a bright young man, but sometimes you seem so focused on bitterness that you can't seem to realize that people have a job to do and even though you don't like the job they do, it's theirs. And they are good at it. Dr. Lereah is excellent at his.

As for that 'realtwhore' reference again............I am a REALTOR. A damned GOOD REALTOR. And I think that you are back to generalizing, and that's a dangerous thing.

**and you are cut off from any more coffee...

from personal experience :-)

That when you get angry enough to attack - your message is gone. Nada, zip - a fart in the wind. You no longer have a voice.

I know this because I have come completely unglued several times since I discovered the blog world.

It's amazing the assholes that have access to a computer and an internet connection.

Gee whiz...did I say that out loud???!!!!

If you're here to tell me it's my fault - you're right. I meant to do it. It was alot of fun. That's why I have this happy smile on my face.

Here is mine.

If you're here to tell me it's my fault - you're right. I meant to do it. It was alot of fun. That's why I have this happy smile on my face.

If you're here to tell me it's my fault - you're right. I meant to do it. It was alot of fun. That's why I have this happy smile on my face.

If anyone still thinks that David Lereah is some sort of straight shooter about what he's doing, take a frickin' gander at this little quote of his, as a true representative gem from the Great American Housing Bubble of the 2000s:

'06 STATEWIDE STUDY: Toledo region hit hard by foreclosures

She has very recently had the opportunity to easily talk someone into listing a property. It wouldn't be in this persons' best interests to do so, at this stage, for several differing reasons. Instead, she took the time to talk over all the options for this property, all of which nets her nothing. Now. But she made a customer for life.

Just wanted to verify she does walk the walk. :-)

If you're here to tell me it's my fault - you're right. I meant to do it. It was alot of fun. That's why I have this happy smile on my face.

If you're here to tell me it's my fault - you're right. I meant to do it. It was alot of fun. That's why I have this happy smile on my face.

... then make sure it's incorrect. No, Carol, I didn't 'allude' anything of the sort; I did say:

What do you mean? Of course it's a crisis. The pool of subprime buyers was supposed to cash out the Alt-A buyers who were supposed to cash out the prime buyers, and they all kept trading upward, leading the disgusting McMansion trend. Since the national real-estate market is now effectively a Ponzi scheme, once the pool of lowest buyers actually stops arriving in such numbers, the entire mortgage market will 'seize up'. Look at how quickly those subprime lenders went under (as is still happening).

Once the subprime disaster fully matures, the Alt-A market will show a similar crash next. Then come the primes.

This will take a good amount of time to happen. In 2006, about $500-600 billion in ARMs reset. In 2007, $1000-1500 billion will do so. A similar amount will adjust in 2008.

I've heard some people exclaim "well, they'll just re-fi, and that'll fix it", particularly to convert to a fixed-rate mortgage ... but that won't work in many cases. Too many cases, as it stands. The home prices will drop, which by itself will make it impossible to re-fi. But there's a larger issue here -- too many of the ARMers got into their ARMs since they could NOT afford to make the full, fixed-rate mortgage payment in the first place. Converting them to a fixed-rate mortgage will throw them into bankruptcy immediately, leading to foreclosure.

If anyone thinks that all this is "just a tiny part of the market", please do the math. In a 3-year period ('06-'08), about $3 trillion in ARMs in America will adjust. At the present time, the median American home price is about $250K. That means that at most 12 MILLION households will have to start paying more money (and in too many cases, a LOT more) for their mortgage payments. There are only about 110 million households in the US. Hence, at most 1 in 9 households will undergo financial upheaval. That's HUGE.

I did like the exposition you made about the mechanisms of unrealistic sellers and buyers. They're only indulging in the "wealth effect", aren't they?

There are many problematical actors in the Housing Bubble. We have sellers, buyers, realtors {wink!}, appraisers, lenders, regulators, builders, and finally 'the man behind the curtain' -- the buyers of mortgage-backed securities (MBS) who allowed lenders to pretend there was less risk all along. That's a HUGE population of people who generally need a good smack.

The worst job in the world to have had in the last 5 years was to be an honest appraiser (HA). HAs have been showing up on the Housing Bubble blogs and have tried to relate how hard it is for them to stay in business. Lenders call them outright and tell them what they expect the appraisal to be. Why is this not criminal or investigated? I have no idea -- except to posit that the regulators have also been highly complicit in this huge Ponzi scheme.

Did you agree with my approximate numbers on the number of homes in Toledo and the effect of the foreclosure rate? We were enduring 1%+ YOY bankruptcy rates here in Toledo for 6 years running. It doesn't seem unreasonable to assume that we could have a similar YOY foreclosure rate.

Greenspan said his pro-ARMs statement in 2004, I believe. His Fed had been lowering the prime rate to nearly zero, steadily since 2001. So, his words made a strange kind of sense; if people had been buying on ARMs (normal ones, at least) since 2001 they could have had their mortgage payments track Greenspan's rate decreases, thereby saving money (at least, for that period).

HOWEVER! ... Greenspan's Fed rather promptly began raising rates. Yo, check it. Hence, he was knowingly urging people to get into ARMs while he KNEW the prime rate would rise in the short term (3-5 years). As we old-time West Toledoans like to say: what a fucking asshole!

Past that point, ARMs became restructured into the monstrosities they are today, that are designed for flippers. In short, using the modern ARM (and the worst of the bunch -- the option ARM) you can pay well below the sane minimum monthly payment for a period of 2-7 years, and then the payment must rise steeply to cover your years of underpayments. (Note that I call them "underpayments" -- unfortunately, the realtors and lenders do NOT.) Since flippers had sold that home well before the 2-7yr period, then we can see what happened. Like a game of musical chairs, but involving millions upon millions of home-buyers, eventually the music stopped ... and it becomes more and more apparent that there were far too few chairs (i.e. affordable homes) than players (i.e. homedebtors).

Once again, I blame the education system for producing (1) people too stupid to properly understand their mortgage, and (2) people vicious enough to be the realtors, appraisers, builders, lenders, MBS-investors and regulators, who specifically acted (or in the regulators' case, didn't act) to let all this happen. If carols is the exception, she only tests the rule.

Carol said: "There have been some recent changes proposed that would eliminate revealing the proposed purchase price to appraisers so that legitimate values could be established. I am part of that committee in Columbus and believe strongly that it will become law. At least here in Ohio."

I'm sure that that will do nothing but trip up the newbies in the industry. Strike me down if I'm wrong, but the usual 'playas' in the RE business will just resort to codes. There's more than enough information for both lender and appraiser to know what the comp (comparable price) will be, and then the lender can still use distinct phrases for how much over the comp the appraisal must be. So, the dipshit regulator or auditor that comes along and tries to determine if appraisal fraud took place, will only see an email that looks like this:

"Borrower John Smith wants me to pass along that you look over the property at 1234 West Streetway Blvd and ensure there is a sound first floor."

The phrase "sound first floor" is just a code for "5% over comp". For 10% over comp, the code would be "sound second floor".

We really can't stop lender-appraiser collusion until we're willing to jail people on the basis of price. Since that's a slap in the face of all the little RE moguls and asset-Capitalism in general, it'll never happen.

Carol said: "Since I deal primarily with first time buyers and investors [...]"

Please stop calling them investors, Carol. You can do what you want, but that 'investor' attitude is why we have an unprecedented 2.7% nationwide vacancy rate right now (and as I said before, producing such an excess that we now have about 3 empty homes for every homeless person in the USA). Too many people were encouraged to buy homes that they had no intention of living in. A home is not an investment. It's a place to stay warm, dry and secure in for about 30 years, and more. Sure, it'll appreciate in value over time, but history shows that this value string closely tracks incomes. That's a secure investment, but for the ROI chasers, it's also a very poor one. In essence, although I'm a wailing single voice lost in the darkness, we should not encourage people to turn necessary commodities into speculative assets, since all THAT does is rape the common population in order to mint a few more millionaires.

Instead of calling them "investors", let's use the more honest term: repulsive wormbugs.

There was one thing I considered, then rejected, to add to my wormbug rant. That one thing was:

"Now Kateb is going to come on here and berate me for my characterization of home renovators, 'cuz she knows one and he's a great guy."

My wormbug comment was not me talking about home renovators, since largely they are the type that takes a home that is run down and dilapidated, hence low priced, and then renovates it to such quality that it commands the median price. True, I do have some issues with that, since if too many renovators use their crazy cash to make low-priced homes rare, then there will be an artificial destruction of the cheap-home market. But such a market destruction is supposed to be a rare event. I was talking about FLIPPERS. Those repulsive wormbugs take perfectly OK homes and then with one paint-coat-slappin' later, expect a 10%+ price increase in the home within 6 months.

The difference is simply between people who bring up depressed values due to home condition, and another set of people who demand more value out of the home for no rational reason.

Literally, real home "investors" should be rare beasts since the long-term market of homes trends alongside incomes, hence maybe 2% per year. When they appear like locusts (and the ones streaming of California in the last 3 years have been called "equity locusts") then there is simply a housing bubble and the common man is just getting screwed. Imagine, if you will, having 10-20% down like a sensible person, with a good FICO and all your income history ready to present -- and you're outbid by an easy 5% by some flipper fucker who has a bank right behind him giving him that loan for 100% LTV, lower FICO, no-doc, stated income, etc. Imagine being outbid CONSTANTLY by con-men with blood money. That spells social destruction right there.

... and that's exactly what's happened in the major bubble areas of the nation for the last 3-5 years at least. As home prices rose steeply from speculation pressure, soon enough the sensible people who wanted to put a downpayment into the equation were progressively unable to. Sure, you could come up with a 20% downpayment for a $150K home, but that same amount of money is only a 6% downpayment when the flipper fuckos bid up the property to $450K. There are many starter homes in San Diego for $600K -- so who the hell really had $120K (20%) for a sensible downpayment? The problem just fed upon itself. Bid out of the market, the sensible buyers were either roped into "suicide loans" of just sat out of the market, leaving lenders and realtors with even stronger impressions that flippers ruled the market.

Gaaah! Now I'm too honked off to write anymore. :^P

I will be in Columbus in a couple weeks for a 4 day session where the issues of 'fair and legitimate' appraisals will be addressed further. When I return I will be happy to post the details of the proposed changes to the profession.

And to GZ - yes this will serve to trip up the 'newbies', as you said. BUT - the word fraud, and the criminal penalties that it carries, will serve as a huge broom to clean up those that have become comfortable in 'embellishing' the numbers. Add the closer monitoring of mortgage applications and finance options and you may wind up with an industry that polices itself.

Kate's link is to an article by David Lereah, the chief economist for the National Association of Realtors.

In reality, he's David LIAReah, the head lobbyist for the Realtwhore Mafia.

While the market was seizing up in 2006 (leading to 45 dead lenders so far), he was "calling the bottom" of the market every month. It sure is funny how these lobbyists (i.e. professional, paid liars) went instantly from denying there was a housing bubble, to affirming that the bubble had already popped and it was now safe to buy (i.e. ridiculously bid up) homes again.

Anyone particularly curious about what David LIAReah is all about should check into the site "David Lereah Watch". I hardly need to say anything more than that site has already addressed ... but since we all know GZ, I'll go on just a bit more.

David LIAReah is the kind of guy that, when paid to, will expound at length upon the virtues of being warm in the winter, while you were running around on fire from a gasoline explosion or something. Calling him an "economist" is only the next step required to fully divorce economists from science and to place them firmly in the realm of advocacy (basically, as PR flacks).

Take this sample paragraph from Kate's link:

Carol, you have to learn to disconnect. If you act according to the NAR Code of Ethics then you basically have nothing to worry about. If you're a damned good realtor, then your customers will know that regardless of anything I say. Unfortunately, there are just too many thousands (likely, tens of thousands) of realtors out that there who push people into overpriced homes using toxic loans. They say they abide by the NAR Code of Ethics, but just don't, and there's little that's been done about that so far. They don't reflect on YOU. However, they do reflect on the REIC (Real Estate Industrial Complex). Your industry is simply too fraudulent, and that fact alone should merit your anger, not anything I might say.

David Lereah may be excellent at his job, but his job is basically to be a fraud, and he's defrauding the nation's people. Are you defending his frauds? I hope not.

In fact, one would think that such a high-flyer economist might have foreseen something as huge and abrupt as the subprime mortgage collapse. About 45 lenders have gone out of business in the last 6 months. Where did David LIAReah make note of that event in the previous years? The answer is that he did not; he was too busy using his faux economist title to pump buyers into signing loan terms they could not afford. Like we faced with a President sitting in a classroom oblivious to a terrorist attack, are we just going to accept also that the "Chief Economist" of the NAR just missed seeing such a collapse? When do we start holding professionals responsible for knowing their professions?

In fact, why is David LIAReah even paid? He's certainly NOT being paid to be an actual economist. I can only conclude that he's paid to lie to the public about the housing market. Hence, he merits my contempt.

My anger can't be hard to pin down once you see a person's ARM adjust by so much this year that they have to send a "jingle letter" to the lender. Housing has been artificially and unsustainably inflated through asset speculation. Just because a fraud had a lot of people acting in concert to make it happen, doesn't mean that the fraud can be dismissed. The housing bubble concentrated wealth with no regard to the quantity and merit of the work performed to achieve said wealth, and has driven the middle class further into the lower class (once debts are taken into account).

I've half a mind to simply clam up and let this bubble get worse. That way, people will be in such financial distress that my horde of cash will become even more royal than before. ("Cash is king.") But that's just being mean. Toxic loans in real estate are producing a great economic disaster. That I'm personally insulated from that disaster has no moral bearing on the topic. As conscientious citizens, we should warn the public and prepare for what effects much come anyway. If after that, signing a toxic loan for an overpriced home still strikes you as a smart thing to do, then knock yourself out.

What exactly is the status of Westhaven? Are they still doing business? I thought they weren't allowed to anymore, but I frequently miss things.

I ask because I heard some disturbing news this morning, that my neighbors across the street are planning to refinance their mortgage with Westhaven.

Based on what I've heard and what I've observed, I suspect this couple is in over their heads and I'm wondering how deep the hole they're digging themselves is going to get.

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