All Downhill From Here, Baby!

I like the way Ben Jones characterizes the progression of this crash. It looks the same everywhere, no matter all the fools who delude themselves with: "It won't happen here." It will happen here. It is happening here. Every location that sowed the wind of the real estate bubble, will reap the whirlwind.


It looks like this...

First, the multiple bids end.
Second, sales slow and inventory builds.
Third, builders offer incentives.
Fourth, the resale market also start offering incentives, burying St. Joseph and probably praying to St. Jude, or bargaining with their gods to get them out of this mess and they will never fool with real estate again.
Price cuts and more price cuts.
Rinse and repeat.
Prices eventually stall when seller wishing prices drop to what they owe, and no fool has rushed in to bail them out.
Foreclosures spike.

All downhill from there, baby.

Sonoma Valley Pre-foreclosures

(click pictures to enlarge)

Sonoma Valley Foreclosures on the Auction Block

Sonoma Valley Bankowned Properties

Slacker Blogger

Hi All,

Mea Culpa for being the housing bubble's slacker blogger. There have been many other time consuming projects at the job that pays me.

Additionally, I just haven't felt that what is happening now is anything unexpected. In fact it is expected, predicted and pretty much yawn material.

We already knew we were right about the last 5 years (at least) of real estate prices being disconnected from fundamentals. We already knew that the housing market was nothing more than Fools and Greater Fools playing pass the potato. We already knew what was going to happen when the Greatest Fools of all found themselves holding the potato and it turned into a big bag of flaming poo right before their eyes.

You know, on that note... why don't the stupid ever know they are stupid?

We knew that without all the toxic financing, jumbo loans, IO, suicide loans and take it in the butt products, this market would never have existed at all. The price run ups never would have happened. The disconnect between incomes of residents and prices of houses would never have happened.

We know that 40-50% of the price of current homes is totally unsupported.

Why didn't the Stupid Bell go off in the heads of the Ponzi participants?

Ah, well, those who fail to learn from history is one of the greatest history lessons for the rest of us.

Did you see this?


The Associated Press. “Wells Fargo & Co. President and Chief Executive John Stumpf said Thursday the housing market is experiencing its worst decline since the Great Depression.”

“Stumpf said…that rapidly declining housing prices are likely to put even more pressure on delinquencies and defaults. ‘I don’t think we’re in the ninth inning of unwinding this,’ Stumpf said, relating the declining housing market to a baseball game. ‘If we are, it’s going to be an extra-inning game.’” “Stumpf said the downturn resulted in part from ‘froth, unscrupulous lenders, (and) borrowers who got too greedy. In 2006 the music stopped.’”

You got that right Johnboy! No, we are not in the 9th inning. First pitch just went out. Game just started. Grab your popcorn and get cozy. It is gonna' be a while.

Press Democrat
“‘In so many ways, what we’re seeing today was caused by all this crazy borrowing and lending,’ said economist Christopher Thornberg, who has repeatedly warned of a looming real estate crisis. ‘I can’t emphasize this enough. This was imminently predictable.’”

“No one takes responsibility for the inflated incomes that many borrowers submitted to justify a mortgage, especially in 2005 and 2006 after three years of soaring home prices. One lender’s review of 100 loans made without proof of income found that nine out of 10 applications overstated the borrower’s income.”

“There’s a greater than 50 percent probability that the financial system ‘will come to a grinding halt’ because of losses from mortgages, Gregory Peters, head of credit strategy at Morgan Stanley, said.”

Larry Mizel, CEO of M.D.C. Holdings, put it, ‘Everyone forgot that there are cycles in housing.’ Since builders have ‘borrowed demand from the future,’ says Burns, the industry is in the second year of a 3-to-5-year correction."

"When the downturn ends, he says sales activity will correct back to 1995 levels.

From Bloomberg. "Losses from the falling value of subprime mortgage assets may reach $300 billion to $400 billion worldwide, Deutsche Bank AG analysts said."

From Reuters. "Blackstone Group president and chief operating officer Hamilton James said on Monday that the subprime mess that hit Wall Street banks appears to be getting worse. ‘The subprime black hole is appearing deeper, darker and scarier than they thought,’ James said.

"(**PDF Alert**) This chart shows the resets peaking in March 2008. Guess what is going to happen to the jackholes wishing, hoping and clicking their heels for things to improve in the Spring?

From the report: "2. What happened in 2004? The relationship between Californian house prices and disposable income as a multiple of long rates broke down in 2004; we believe that aggressive sales of ‘affordability products’ (e.g., subprime, option ARMs, home equity loans), which spiked in 2004 (see Exhibit 2), drove Californian home prices well-above levels supported by economic conditions."

"Now that the secondary market for these affordability products has all but evaporated, we expect home prices in California to return to normalized levels (i.e. levels implied by current and forecast disposable income in California as well as U.S. ten-year treasury yields); this implies a 35-40% fall."

Yawn! Yes, that means you Sonoma County. Especially you!

“Joseph Stiglitz, a Nobel-prize winning economist, said the U.S. economy risks tumbling into recession because of the subprime crisis and a ‘mess’ left by former Federal Reserve Chairman Alan Greenspan.”

“‘Alan Greenspan really made a mess of all this. He pushed out too much liquidity at the wrong time… He encouraged people to take out variable-rate mortgages,’ Stiglitz said in an interview in London today.”

“‘That game is over,’ Stiglitz said. ‘As house prices are going down, people are not going to be able to take more money. We are looking at a major slowdown.’”

“Stiglitz, who stepped down as the World Bank’s chief economist in 2000, and now works as professor of economics at Columbia University, estimated U.S. consumers borrowed up to $950 billion last year against the value of their homes to finance spending.”

Meanwhile in Sonoma County, the median dropped nearly 12 percent.

"Sonoma median price drops to 473K per DQNews. Back to October 2003 levels folks."

Thanks Fred!

"Sonoma County’s housing downturn deepened in October, when sales tumbled to a 16-year low."

"The median resale price fell for the 16th consecutive month returning prices to levels not seen since October 2004." (still HIGH and solidly in bubble mania territory)

"Sales are declining across the Bay Area, but Sonoma County has been among the hardest-hit places in the region." (You ain't seen nothin' yet)

"The housing downturn is worse in Sonoma County and other counties on the Bay Area’s edge largely because more homeowners relied on risky loans to purchase homes around the market’s peak and may be forced to sell. Soaring foreclosures have led to tightened lending requirements that push out some buyers." (edited to remove realtwhore spin)

'“We’re still trying to work through the inventory and the bad loans. said Rick Laws, Santa Rosa manager for Coldwell Banker."

"At the end of October there were 2,597 (this is what realtwhores are claiming. MLS says something different) houses for sale in the county, October’s highest level since 1992, when the county was last in a housing decline."

"The housing market's decline has accelerated as other economic indicators are worsening across Sonoma County, increasing the chances the region will dip into a recession."

"What began as a correction from an eight-year run of record home sales and price increases has been made worse by soaring loan defaults and tighter credit, the consequences of loosened mortgage lending standards."It's becoming a drag. There is a rising risk of recession," said Steve Cochrane, regional economist for Moody's Economy.com."

"Chris Thornberg, a Los Angeles economist, said rising unemployment and housing's tumult are hammering the state's economy, including Sonoma County. There is now a 75 percent chance of recession by early next year, he said."

'"This thing is already in the process of creating a recession in California," he said. "Consumer spending will be the ultimate driver, but consumer spending slows because of housing price declines. It is housing that is the show stopper."

'"Home sales have been falling for more than two years in the county and price declines have kicked in the past 15 months, yet the economic blow is just beginning to hit here." (Right on the money, baby)

"Sinking home sales have triggered layoffs by mortgage and construction companies in the county and real estate agents are leaving the business. Those job losses have helped drive up unemployment to 4.5 percent, up from 3.7 percent a year ago. Moody's estimates unemployment will be 4.3 percent next year."

"The local economy is expected to get worse before it gets better as the housing downturn deepens."

"We are in the heart of the storm. I think there's still more pain to be felt," said Greg Jahn, who tracks the economy as chief investment officer for Exchange Bank. "That leads to less jobs in the housing industry, less consumer confidence in the ability to go out and spend. It's just a vicious cycle."

"Housing markets in regions with higher concentrations of those loans, (read: Toxic Loans) including Sonoma County, already are suffering even deeper defaults and foreclosures. But housing's decline is taking an even broader toll on the economy as falling home values lead even homeowners not facing the loss of their residence to take a closer look at their finances."

"The latest national consumer confidence survey hit a two-year low this month. Conditions are no better in Sonoma County. The region's economy may not bounce back until 2009 because the mortgage mess is expected to extend housing's downturn, Cochrane said."

"Once a symbol of Sonoma County's housing boom, Bellevue Ranch is now emblematic of hard times in neighborhoods across the region.More than 20 of the 35 homes for sale in Bellevue Ranch are on the market either because banks took them back or owners must sell to avoid foreclosure."

"Many homebuyers bet values would continue to rise, allowing them to refinance into more stable, longer-term loans. But the downturn beat some of them."That's one of the biggest risks of this whole mortgage mess, that it can infect house prices broadly in neighborhoods," said Steve Cochrane, regional economist for Moody's Economy.com."

"For Sale" signs on every block and a handful of vacant homes are the only apparent signs of stress in a neighborhood that otherwise looks like any new subdivision in Sonoma County.

Number of purchases made by homebuyers and investors using high-rate subprime loans:

2004: 400 purchases 4.4 percent of all first mortgages
(California rate was 7.2 percent)

2005: 1,657 purchases19.5 percent of all first mortgages
(California rate was 28.9 percent)

2006: 1,148 purchases19.2 percent of all first mortgages
(California rate was 30.1 percent)

Top five subprime purchase lenders in Sonoma County, 2004-2006:

Long Beach Mortgage Co., Anaheim, $232 million
Status: Absorbed by parent Washington Mutual in September

New Century Mortgage Corp., Irvine, $148 million
Status: Chapter 11 in April

Fremont Investment & Loan, Brea, $109 million
Status: Closed subprime arm in March, Massachusetts sued for predatory lending in October

First Franklin Financial,San Jose, $105 million
Status: Sold by parent National City Bank to Merrill Lynch in 2006

WMC Mortgage Corp., Burbank, $72 million
Status: Closed this month

Percent of Latino homebuyers using subprime loans:

2004: 9 percent
2005: 44 percent
2006: 41 percent

Percent of non-Latino buyers using subprime loans:

2004: 3 percent
2005: 10 percent
2006: 12 percent

Subprime homebuyers by ethnic origin

Latino:
2004: 152
2005: 867
2006: 560

Non-Latino:
2004: 166
2005: 564
2006: 489

Ethnic origin not listed:
2004: 82
2005: 226
2006: 99

Subprime borrowers in Sonoma County strained their pocketbooks to get a first mortgage. Buyer's loan compared to their income (median spread):

2004: Sonoma County: loan 3.3 times larger than income
(U.S.: 2.3 times larger)

2005: Sonoma County 3.4 times larger
(U.S.: 2.6 times larger)

2006: Sonoma County 3.1 times larger
(U.S. Not available)


bwahahahahaha!!! This one cracks me up and is just as false forthe Alt-A and Prime borrowers too. Remember the auditor above who in auditing the loan documents found the income reported to be false in 9 out of 10 applications?

All that data is based on what was reported according to the loan documents in terms of income to loan ratio.

We already KNOW 9 out of 10 of the applications had the income falsely inflated. They were fraudulent. They falsified the income so they would meet the traditional lending standard and stay within the fundamental expectation of housing being 3x income.

The impact of investors on the market, 2004-2006:

15 percent of all purchases, prime and subprime.

3,594 investor purchases,$1.5 billion.

Many home buyers used subprime second mortgages to make their downpayment, consolidate debt or take cash out:

2004: 823 second mortgages, $67 million. Average loan size: $81,510

2005: 1,364 second mortgages, $138 million. Average loan size: $101,060

2006: 1,144 second mortgages, $119 million. Average loan size: $103,881

Number of prime and subprime loans, both first and second mortgages, used to buy a home:

2004: 10,211 prime, 1,223 subprime

2005: 7,867 prime, 3,021 subprime

2006: 5,931 prime, 2,292 subprime

Number of prime and subprime refinances, both first and second mortgages:

2004: 19,579 prime, 882 subprime

2005: 17,312 prime, 1,709 subprime

2006: 12,746 prime, 1,862 subprime*

First mortgages with an annual percentage rate (APR) of at least 3 percentage points over U.S. Treasuries of similar duration, and second mortgages at least 5 percentage points higher.

Sources: Sonoma County Recorder's Office, Traiger & Hinckley LLP, Home Mortgage Disclosure Act records, U.S. Department of Housing and Urban Development, Federal Financial Institutions Examination Council at www.ffiec.gov/hmda/default.htm


Reluctant buyers and tightened mortgage lending combined to drag down home sales in a nine-county region around San Francisco Bay last month to the lowest level in more than 20 years, a real estate research firm said Thursday. It was the slowest October since DataQuick began keeping records in 1988.

Many lenders have tightened underwriting guidelines in recent months amid rising home loan defaults and foreclosures, which rocked the secondary market for mortgage-backed securities.

"Angry disputes are erupting between struggling homeowners, who claim they didn’t understand the terms of their loan or the risk they were taking, and lenders and loan brokers, who say they fully informed all their clients and point with pride to the many homeowners they helped get a loan."

"As stressed borrowers seek help, every link in the chain of loan production is coming under attack, from the borrower, to the real estate agent, to the mortgage broker, to the lender."

"Some say that their broker put them into the risky loan just to earn a higher commission. Latino borrowers say their weak English skills made them particularly vulnerable. Small investors say they followed advice to borrow from their home and buy a rental or two and now they will lose everything."

“Lenders had a fiduciary duty to do the right thing for their people,” said Bob Accornero, a real estate broker with Creative Property Services in Santa Rosa. “Lenders needed to get warm and fuzzy with their people and say, ‘Can you really do this?’ That’s what they didn’t do.”

"The breakdown of trust between borrowers and lenders is already forcing changes to the way home loans are made, and more are on the way. Lenders are tightening standards that once allowed borrowers to get a subprime loan without documenting their income, proving employment, having decent credit and coming up with a down payment."

"Not in dispute, though, is the heartache striking families and small investors across the North Coast and nationwide as they lose homes to foreclosure."

'“In so many ways, what we’re seeing today was caused by all this crazy borrowing and lending,” said economist Christopher Thornberg, who has repeatedly warned of a looming real estate crisis. “I can’t emphasize this enough. This was imminently predictable.”'

"While many Americans benefitted from the loan opportunities, others abused them, an outcome that’s becoming painfully clear in Sonoma County where foreclosures and fingerpointing rile the industry."

“The lenders are trying to make the biggest mortgages they can. It’s up to you to say, ‘Wait a minute. I don’t think that makes sense for me to bite off this much,’” said Harper, whose service has seen a 300 percent increase in demand for housing counseling this year. People don’t ask enough questions, he said.“Simply because a lender tells you that you qualify for a certain amount doesn’t mean you can afford it,” he said.

(Don't buy stuff you can't afford, Stupid!)

"Nearly one out of five homes sold in Sonoma County during the easy-money years of 2005 and 2006 was bought with a high-risk loan, triggering a chain reaction of financial misery that has rippled through the county’s housing market all the way to Wall Street."

"For many, the American dream of owning a home has turned into a nightmare of sinking home values, forced sales, empty houses and ruined credit. A growing number of homeowners are locked into rising mortgage payments they can no longer afford and trapped in a home worth less than they paid."

"Already, lenders have seized 630(cq) houses this year, up from 129 in all of 2006, guaranteeing that 2007 will be the bitterest year for homeowners since the county began keeping computer records in 1964."

"Another 400 troubled properties are on the market, and lenders are threatening 300 homeowners a month with foreclosure if they can’t bring their loans current. Last year lenders averaged 93 foreclosure threats a month."

"Nor is there any hope that the shakeout will soon be over."

"Next year interest rates will adjust upward for the first time on many of the 1,148 properties bought with risky loans in 2006. One-fourth of these homeowners could lose their homes, the U.S. Department of Housing and Urban Development said." (See PDF for reset schedule)

“We are going to have waves of foreclosures,” said economist Christopher Thornberg, who tracks the Sonoma County economy and predicted the current real estate crunch. “This thing has a long ways to go before it shakes out.”

"Most high-rate borrowers in 2005 and 2006 said they had annual incomes between $100,000 and $200,000."

"However, many borrowers exaggerated their incomes to qualify for loans, sometimes at the direction of their brokers and lenders. During the housing boom, many lenders did not require borrowers to submit documents proving they earned enough to afford the monthly payments."

(so we know those who lied, which is 9 out of 10, could not afford the home they were buying. As their toxic loans reset they will be even less able to feed their alligator.)

"Rippling outward, hundreds of mortgage and real estate workers in Sonoma County are losing their jobs. Dozens of lenders nationwide are bankrupt, or laying off thousands of people, and those that remain have stopped lending except to the most creditworthy borrowers. Meanwhile, pensions, 401(k) plans, mutual funds and banks are losing billions of dollars, as the mortgages they hold lose value."

(oops... all these lost jobs can't be good. people without jobs might find it hard to pay their mortgage.)

"In Sonoma County in 2005 and 2006, prices jumped 69 percent in three years." (again... due to lax lending standards, the madness of crowds, and fools and greater fools anxious to play the musical chairs ponzi scheme where debt = wealth. How you like me now, huh?)

"Many people, with good credit and bad, grabbed whatever loan terms they could get just to snag a house before prices and interest rates escalated beyond their reach. Many took adjustable-rate loans, even though interest rates were rising."

"Their plan was that home values would keep going up and they would refinance out of the high-rate loan in a couple of years."

"They were helped by sales people who raked in six-figure incomes getting borrowers to accept high-rate loans, and by lenders who made a bundle selling the high-yield loans to Wall Street investors unaware of the risk. Interest rates on these loans have turned out to be 2 percent to 3 percent higher than a conventional loan."

"Some buyers dearly wanted to own their own home. Others simply wanted to get rich quick. Some didn’t understand the terms of their loan or the risk they were taking. Others just hoped they could get in and get out before the bubble burst."

"The unraveling of years of easy money, fueled by record low interest rates and promiscuous lending, has begun."

'“A lot of people were gambling, playing the revolving refinance game. Now that the music has stopped playing, all sorts of people are standing with no chair. These people are in big, big trouble,” said economist Thornberg, who is the founding partner of Beacon Economics in San Rafael and Los Angeles."

Blogger's Comment:

Something I have noticed that will only add to the pain and the time it takes for reality to set in here in Sonoma County... is the realtwhore PR engine, the Press Democrat seems to take the position that the bubble was really confined to 2005- 2006 and caused really by the Latinos and a few others taking out Subprime loans.

Oh my, but they do like perpetuating stereotypes here don't they? As long as they keep reporting like that, the Boobus Sonomanus will pretend it is not happening to them. It is. It is happening all over the county because fundamentally the high majority of people buying were playing a ponzi scheme where they bought houses they could not afford. Indeed, my prediction is the subprime components are going to turn out to be but a drop in the bucket here in Sonoma County.

It will turn out that the biggest boobs, fools and greatest fools will be the stupid people who had good credit scores, but still made stupid decisions to take out loans for more than they could afford to repay. Those will be the ones that bring it all crashing down. Of course, they will even then, try to blame it on someone with tanner skin than their own. Such is the way of Sonoma County.

Ssshh! The Show is Starting...

Remember how so many blowhards quoted in the Sonoma County excuse for the press touted that the only other downturn of significance was in 1993 and 1994, when prices dropped a total of 4.2 percent over those two years? And they advised reluctant buyers to not wait for more prices to drop because it wasn't going to happen?

August was the 14th consecutive month of median home price drops in Sonoma County.

Darlin' we are only singing the national anthem of this ball game. Make yourself comfortable, and stay away from falling knives. You ain't seen nothin' yet!

"In Sonoma County, home sales tumbled 24.8 percent in August, compared with a year ago. The price for a typical Sonoma County home dropped to $505,000 in August, down from $550,000 a year ago, an 8.2 percent decline. The figure includes new and resale houses and condominiums."

"Housing's downturn has hurt Sonoma County in particular because of a widening gap between incomes and home prices, pushing more first-time buyers out of the market. Increasingly stringent loan qualifications are taking out even more buyers as lenders tighten the money supply with mortgage defaults soaring."

"Slowing sales mean homes are sitting on the market longer. In Sonoma County, supplies have risen to their highest levels in more than a decade."

"Mortgage defaults, the first step in the foreclosure process, are at their highest level in Sonoma County since at least 1992, according to DataQuick Information Systems, a La Jolla firm that tracks real estate trends."

"The soaring number of foreclosures is forcing more homes onto the market as banks attempt to sell houses. Foreclosure resales accounted for 6 percent of all home sales in the county in August, up from 1.5 percent a year ago."

Between April and June 2007, Sonoma County homeowners who lost their homes in foreclosure proceedings were up 806 percent from a year ago.

"A year ago, 88 percent of homeowners in default were able to avoid foreclosure by bringing their payments current, refinancing, or selling the home and paying off what they owe. Today, only 55 percent of homeowners in default are able to hold onto their houses, DataQuick reported."

Even with the decline in median price, it still outstrips incomes of many buyers, making the county one of the nation's least affordable regions.


Facts at a Glance

* The typical monthly mortgage payment for Sonoma County buyers in August was $2,251.


* The median price of a home is still unaffordable for more than half of Sonoma County families.

* The approximate median family income in Sonoma County in 2005 was $58,330.

* Around Sonoma County, an entry-level home is $525,970. The minimum qualifying income for that is $105,960 -- with a minimum of 10 percent down.

Percentage of Sonoma County home buyers choosing some form of I/O, Negative amortizing and adjustable-rate mortgages (this includes subprime, Alt-A & Prime)

2003 - 36.8%
2004 - 59.4%
2005 - 69%

Prices doubled for the typical Sonoma County home between 2000 -2006. But the mortgage meltdown has turned a spotlight on the role loose lending standards, greed, stupidity and pixie dust financing played in the buying frenzy that drove up home prices. Market value for your Sonoma County $hitbox did not rise. Speculation and Greed fueled the ponzi scheme that has been the housing market.

Welcome to the real world, Baby.

More Facts:

* Employment peaked in Sonoma County in 2001 at the end of the tech boom when the county had 196,700 payroll jobs.

* By 2003, the economic downturn had wiped out 7,600 of those jobs. (we were already in a recession in 2003, yet the housing bubble continued to boil with greater fools still rushing in, and the surge in exotic financing due to the unaffordability of prices is proof in the pudding)

* Through 2005, only 2,400 jobs had returned.

* As of the end of 2006 Real Estate accounted for 13% of the jobs in Sonoma County. 40% increase from 5 years ago. During the last 5 years tech and manufacturing were losing jobs. We are still below the number of jobs in 2001 and the non- real estate related jobs we have gained have been lower paying mostly service sector jobs.

* The Press Democrat study found that 58 percent of the new jobs created between 2003 and 2005 paid below the average wage.

* By October 2006 the county lost 3,100 jobs
"Plunging sales led to construction layoffs and job losses in real estate, financing and other housing related areas.

"It seems like Sonoma County is one of the weakest economies in the Bay Area. There's hardly any job growth to speak of. That's essentially the basic building block of the economy," Steve Cochrane, an analyst with Moody's Economy.com said."

Unemployment in Sonoma County climbed to 4.6 percent in July 2007 -- its highest rate in two years -- as the local economy felt a loss of jobs in the real estate and home loan industries.

'"We may be seeing some early signs of layoffs in the financial area," said Ben Stone, who heads the Sonoma County Economic Development Board."

"At the end of July, National City Mortgage laid off 40 workers at its Santa Rosa call center. Another 60 company employees will lose their jobs by September. The layoffs followed earlier cuts at National City and other Sonoma County mortgage centers."

"The housing sector slowdown led to a loss of 450 financial services and construction jobs in Sonoma County in the first half of 2007, according to Moody's Economy.com, which tracks local employment."

Look Out Below!!!!

The idea that things are going to get back to "normal" Real Estate - wise seems to have bitten the big one today with a report issued by my favorite group of fiction writers, The National Association of Realtors.

After thoroughly blowing smoke up everyones collective ass for the last several years, they finally might be getting a handle on reality.
The National Association of Realtors' revised monthly prediction calls for U.S. existing home sales of 5.9 million in 2007, down from 6.5 million last year. The forecast was below last month's prediction of a 6.8 percent drop.

This year's sales would be the lowest since 2002, when sales hit 5.6 million. Home sale prices this year are forecast to drop 1.7 percent to a median of $218,200.

Seems that those suicide loans to risky borrowers have finally come home to roost, that and jumbo loans, that is anything over 400k or so are almost impossible to get. Now given that most houses in these inflated times have been going for prices way above anything that would be considered a Jumbo Loan it doesn't seem that sales are going to go up again any time in the near future unless prices fall substantially.

Next year, the trade group expects existing home sales to climb to 6.3 million. It forecasts new home sales will fall 24 percent to 801,000 this year and 741,000 next year.

The forecast comes as delinquencies among borrowers with weak, or subprime, credit have risen dramatically over the past year, and other loans are showing weakness as well

Seems that the suckers who've been gobbling up this bad paper faster than a bag of lead laced snack foods from China have finally gotten smart and closed the checkbooks. This, just as the fit has hit the shan, as my gramma used to say. Actually she used to say the shit has hit the fan, but I was trying to be polite.


Last week, the NAR said pending sales of existing homes fell in July to the lowest level in nearly six years as borrowers struggled to finalize home purchases, particularly in expensive areas.

Investors around the world have been spooked by the U.S. mortgage market's problems, amid uncertainty about how much they will grow. The Federal Deposit Insurance Corp. estimates that 2.5 million mortgages given to borrowers with weak credit will reset at higher rates and sometimes dramatically higher monthly payments by the end of next year.

Which brings us to the issue of all those mortages that were given away out there during the boom. Seems that one can't put an ad for a "Miracle Product" on TV or Radio anymore that claims it will grow hair, bring world peace, cure cancer, etc. unless it's for real and can deliver on it's promises. The days of the snake -oil salesman have gone, unless that guy on the back of the buckboard is offering you a sub-prime mortgage.

Now that the barn door is swinging wide open and the horse is eating the neighbors petunias are they starting to realize that "Hey! All those sleazy mortgage ads??? Well, they might be like...illegal????!"

What? Really? No shit.

The U.S. Federal Trade Commission said Tuesday that some advertisements for home mortgages might be deceptive and even violate the law.

The FTC said it had warned mortgage brokers and lenders, as well as media outlets carrying the advertisements, that the claims appearing on Web sites and in newspapers, magazines, direct mail, e-mail and faxes might be unlawful.

Warning letters were sent to more than 200 advertisers and media outlets, the FTC said in a statement.

Wow. That's big of them. Just in time too, or like who knows what might have happened? I mean people could really get in trouble with these wonky financial instruments, ya' know??? We wouldn't want that to happen. I mean that could lead to a bailout or something where we'd all have to pay for their mistakes and.......never mind.

The warnings stem from a nationwide review this summer of ads that failed to adequately disclose other important terms of home loans, the FTC said.

Questions of whether lenders inappropriately pushed home mortgages onto subprime borrowers -- those with poor credit histories -- are at the heart of the turmoil in that market.

Lawmakers and regulators are debating whether the federal government should oversee independent mortgage brokers and lenders.

Gee. Do ya' think???

So what're the Powers That Be planning on doing about all this? According to the Detroit Free Press, nothing.

The last thing somebody who couldn't pay the mortgage would expect is a tax document in the mail that proclaims they magically got an extra $20,000 in income they never touched.

But that's exactly the tortured tax picture that faces many troubled homeowners in Michigan and elsewhere.

Thousands of families could face an unexpected tax hit if they went through foreclosure, worked out some unusual deals with the bank to refinance or sold homes for less than the outstanding debt.
"This really adds insult to injury where someone is in a situation where they get hit with a tax bill on top of having to lose their house or refinance at a lower value," said U.S. Sen. Debbie Stabenow.

So they're just figuring this out now?

So Senator Stabenow wants to cut these guys some slack, and change this tax rule temporarily...that is untill the next bubble

It's one of those tax rules that not many people know about because home values have typically gone up, not down. Yet, it's a tax issue that now could have great impact on families throughout the country.

Yes, houses have always gone up ...that is when they haven't gone down.

Brother, Can You Spare A Housing Job?

House prices weren't the only things on the uptick over the last few years, the number of people that moved into housing related jobs also soared. For the last few years it seemed that the answers to the massive job loss following the dot com bubble and the attacks of 9/11 were to be found in the housing industry. Just as in past periods of irrational exhuberance, when the most unlikely people were found peddling stocks, trading bonds, and getting money for start-ups, the housing bubble brought it's own share of get rich quick stories. The overnight RE gazillionaire, the woman who made a bundle flipping houses, the kid from Quiznos' who started writing mortgages, or doing appraisals...or I could go on.

Well, the gravy train has finally de-railed and many of those who found themselves eager participants in the pile on are now piling on to the unemployment line.

Since the start of the year, more than 40,000 workers have lost their jobs at mortgage lending institutions, according to recent company layoff announcements and data complied by global outplacement firm Challenger, Gray & Christmas Inc. Meanwhile, construction companies have announced nearly 20,000 job cuts this year, while the National Association of Realtors expects membership rolls to decline this year for the first time in a decade.

It's an employment collapse that threatens to rival the massive layoffs in the airline industry that followed the Sept. 11, 2001, terrorist attacks, when some 100,000 employees lost their jobs.

"It's far from over," said Bart Narter, a senior analyst with Celent, a Boston-based financial research and consulting firm. "The subprime lending collapse will continue to ripple through the financial sector."

This job loss train wreck is not slow motion by anymeans. These mortgage lending companies are folding their tents faster than a snake-oil salesman with a tar and feather toting mob on his tail.

"These kind of mortgage lenders just sprung up like mushrooms and grew like men," said John A. Challenger, chief executive at Challenger, Gray & Christmas. "They staffed up and now you have a bust."

America's largest mortgage lender, Countrywide Financial Corp., began an undisclosed number of layoffs this week. Last week, Arizona mortgage lender First Magnus Financial Corp. shut down its operations and laid off nearly 6,000 workers. On Monday, Capital One Financial Corp. said it would shutter Greenpoint Mortgage, its wholesale mortgage banking business, and lay off 1,900 employees.

"It's only been weeks," Challenger said. "These companies are acting remarkably quickly, stopping on a dime."

It's called leaving town one step aheade of the sheriff, with a smidge of the evacuation from our embassy in Saigon thrown in for good measure.

"It was pretty much a free for all in the office, people taking paper, stuff HomeBanc wouldn't need," he said. "I don't feel like HomeBanc did anything. It was a perfect storm of a bad housing market."

Two of Clark's friends have already landed jobs with Countrywide. Another found work with an affiliate of First Magnus, and was almost immediately laid off again. Roach plans to open his own lending business, focusing on commercial business loans and originating home loans himself.

That's sort of like transfering by dinghy from the Titanic to the Andrea Doria.

And, it's not just the mortgage lenders who may be seeing some job losses. This news story today reveals that four top banks hit up Uncle Sam for some WAM this afternoon, to the tune of 500 million each. seems they had a few bucks in Countrywide themselves. In fact they funneled about 2 Billion bucks into Countrywide jjust today. So lemme see, they're borrowing money from the Fed to put into Countrywide????!!!

In a joint statement, the latter three banks said they decided to borrow the money to demonstrate "the potential value of the Fed's primary credit facility" and encourage its use by other banks.

"Simultaneous action by these four institutions -- at the same time, on the same day, for the same amount of money -- suggests that the move is intended to have some symbolic value," said Aaron Gurwitz, co-head of portfolio strategy at Lehman Brothers Investment Management Division. "But it may also be a way for them to make money."

Yeah. That too.

The Bonfire of the Housing Vanities

Savanarola take note. The days of the 1 million dollar starter house appear to be over. Those of us who goggled and gasped in disbelief at the lying fraudulent don't ask don't tell no doc , no down payment mortgages have now been justified. They have rolled up the free lunch counter and taken it away, no more seconds.

So then why did house prices rise in almost every county around here even as the sales numbers dropped faster than Lindsay Lohans' Seven For All Mankinds ? Simple, when the lower end ie: first time buyer is effectively knocked out of the box the only thing left is the higher price house.

The median price was $738,500, up 7 percent from $688,955 a year ago.
The median rose because a greater proportion of expensive homes were sold, said Andrew LePage, an analyst at DataQuick. Tighter lending standards after the subprime loan debacle have knocked many entry-level buyers out of the market because they lack down payments, good credit or solid income proof. "If you yank out a bunch of low-cost sales, then guess what happens to the median?" he said.
"The higher you go up the price ladder, the more stable (the market) appears, with the big caveat that things could change, even if temporarily, in August because of the credit crunch," LePage said.

Remember kids, these are Jluy figugres we're talking about. Stuff from before the market went all medieval on everyones ass. Good times.

Jumbo loans are't going to save the day either .

In the latest developments in the mortgage market, "jumbo" loans above $417,000 have become more expensive and harder to get, and more lenders are falling by the wayside. All of that could hurt the high-end sales that have been strong up until now. Because sales typically take a month to close, the fallout will not be reflected until data are collected for this month and next.
"We anticipate it will be an especially weak August because of all of this," LePage said. "A lot of people are waiting."

That is an understatement.

Ok. So the median price is going up everywhere even as the sales languish. Everywhere but three places.

Despite the drop in sales, median home prices rose in all counties except San Joaquin, Solano and Sonoma. In San Joaquin County, the median home price dropped 13.6 percent to $380,000.

Hey! I thought everybody wanted to live in Sonoma. Stuff never goes down here, right??? Maybe those now hard to get jumbo loans had something to do with it...or not.

Most of the Bay Area reported sales drops year-over-year in the single digits. In Contra Costa County sales dropped 24 percent, and in San Joaquin County sales dipped 43.1 percent. San Francisco reported the only rise in home sales — 4.1 percent.
Foreclosure sales accounted for 4.5 percent of the state's July's sales activity, up from 4.1 percent in June, and up from 1.5 percent in July of last year. DataQuick said they have not had a large impact on regional sales.

Not yet they haven't. Just wait.

The Vallejo Times Herald has some figures in an article about what's going on housing wise.




Interestingly enough, they have different foreclosure sales figures, different by quite a large margin.

Home sales were down 21.9 percent last month compared to July 2006, and down 8.1 percent since June, the firm said.

Statewide sales have decreased for the past 22 months on an annual basis.

Meanwhile, the median home price in California in July dipped slightly to $478,000, down 0.2 percent from $479,000 in June.

Foreclosure resales accounted for 7.8 percent of sales in July, up from 2.0 percent in the year-ago period and from 7.0 percent in June, the firm reported.

For some reason my feeling is that over in Vallejo they got it right. Maybe they just have more common sense over in Vallejo, maybe they're just more grounded.

In all, 7,423 new and resale homes and condos were sold last month in Alameda, Contra Costa, Marin, Napa, Santa Clara, San Francisco, San Mateo, Solano and Sonoma counties.

Sales have decreased on an annual basis in that area for the past 30 months.

It's not just realtors hurting this week, but builders too, who've been feeling the pinch for awhile. The term Perfect Storm is now being bandied about.

For California's home builders, it has gone from a perfect storm to a pathetic one.
Each week, it seems, there is more bad news as potential buyers stay away in droves. A recent wave of discounting has lured some shoppers to subdivisions, where a backlog of unsold dwellings await ... something ... anything.
But the price cuts, ranging from $10,000 to more than $150,000 on $1 million-plus homes, have yet to turn many of the looky-loos into buyers, according to anecdotal information from homebuilding executives.
"This is the first recession (in the housing market) that isn't being driven by job losses," said Steve Delva, president of the South Bay division of Standard Pacific Corp., a major Northern California builder. "Somebody called (the housing bubble of 2005-06) a perfect storm of cheap interest rates, a lack of supply and rampant speculation. Then, when the air went out of the bubble, everybody turned back into pumpkins."

The thing that jumps out at one in this article is the term the first housing slump that hasn't been driven by job losses. That I think is the missing link. For a long time I have been wondering about the true unemployment figures. There were massive job losses after 9/11 and the tech bust. I personally know people, executives, who lost there jobs in the last several years and were unable to get new employment. They're now "consultants". Who they are consulting with remains a mystery as the way ends are being met is not with consulting fees but with credit cards, and money being pulled from rapidly appreciating houses, that are appreciating no longer.

So I surfed on over to the BLS....that is the Bureau of Labor Statistics and found some interesting numbers. Officially they talk about unemployment figures at about 4.5 %, but if everything is counted in the numbers are much higher.

Table A-12. Alternative measures of labor underutilization

HOUSEHOLD DATA HOUSEHOLD DATA

Table A-12. Alternative measures of labor underutilization

(Percent)



Not seasonally adjusted Seasonally adjusted

Measure

July June July July Mar. Apr. May June July
2006 2007 2007 2006 2007 2007 2007 2007 2007


U-1 Persons unemployed 15 weeks or longer, as a percent
of the civilian labor force....................... 1.4 1.4 1.5 1.5 1.4 1.5 1.5 1.5 1.6

U-2 Job losers and persons who completed temporary
jobs, as a percent of the civilian labor force.... 2.2 2.1 2.4 2.2 2.1 2.2 2.2 2.2 2.4

U-3 Total unemployed, as a percent of the civilian
labor force (official unemployment rate).......... 5.0 4.7 4.9 4.8 4.4 4.5 4.5 4.5 4.6

U-4 Total unemployed plus discouraged workers, as a
percent of the civilian labor force plus
discouraged workers............................... 5.2 5.0 5.1 5.0 4.6 4.7 4.7 4.8 4.9

U-5 Total unemployed, plus discouraged workers, plus
all other marginally attached workers, as a
percent of the civilian labor force plus all
marginally attached workers....................... 5.9 5.6 5.7 5.7 5.3 5.3 5.3 5.4 5.5

U-6 Total unemployed, plus all marginally attached
workers, plus total employed part time for
economic reasons, as a percent of the civilian
labor force plus all marginally attached
workers........................................... 8.8 8.5 8.6 8.5 8.0 8.2 8.2 8.2 8.3

NOTE: Marginally attached workers are persons who currently are neither working nor looking for work but indicate that they want and
are available for a job and have looked for work sometime in the recent past. Discouraged workers, a subset of the marginally attached,
have given a job-market related reason for not currently looking for a job. Persons employed part time for economic reasons are those
who want and are available for full-time work but have had to settle for a part-time schedule. For further information, see "BLS
introduces new range of alternative unemployment measures," in the October 1995 issue of the Monthly Labor Review. Beginning in
January 2007, data reflect revised population controls used in the household survey.


Now I may be math challenged but those numbers don't look to me like anything close to 4.6 %

My guess is that the credit crunch that's going on right now, is finally going to shake out those unemployment numbers and stop people lying to themselves. One can only "consult " with air so long, whatever goes down, also goes up.

Sub-Prime Patty Meltdown, Or How Those Subprime Mortages Keep Coming Back Like A Bad Hungarian Dinner...

The Dow has gone looking for the Titanic this afternoon as the French get antsy about all those wonky subprimes they invested in, and who can blame them?

Wall Street plunged again Thursday after a French bank said it was freezing three funds that invested in U.S. subprime mortgages because it was unable to properly value their assets. The Dow Jones industrials extended its series of triple-digit swings, this time falling more than 380 points

The safe has been dropped into the middle of the US Credit Market and the real tsunami hasn't yet been felt. The only Ripples we're talking here is the cheap wine the brokers are going to be drowing their sorrows in. The days of Chateau Mont Helena are gone. Welcome to the real world, and the reality based financial community.



A move by the European Central Bank to provide more cash to money markets intensified Wall Street's angst. Although the bank's loan of more than $130 billion in overnight funds to banks at a low rate of 4 percent was intended to calm investors, Wall Street saw it as confirmation of the credit markets' problems. It was the ECB's biggest injection ever.

The Federal Reserve added a larger-than-normal $24 billion in temporary reserves to the U.S. banking system.




There's only so long that one can live in denial. Even Cleopatra had to get off her barge once in a while. This situation is more than Joe, and Jane Doe with the suicide loan or the giganto HELOC swimming sideways toward the drain. It impacts the prudent and the imprudent alike. Worldwide.

The ECB's injection of money into the system is an unprecedented move, said Joseph V. Battipaglia, chief investment officer at Ryan Beck & Co., adding that it shows that problems in subprime lending are, in fact, spilling into the general economy.

"This is a mini-panic," he said. "All the things that had been denied up until this point are unraveling. On top of this, retail sales were mediocre, which shows that indeed, the housing collapse is affecting the consumer."

Yeah, and that includes even those of us who've sat this dance out. The band is packing up, don't look at us to pay the tab.
I was particularly struck by this little incident when the "other" Cramer had his own meltdown last night.



If you want to get a general idea of things just watch the little birds that have been living off the dung on the housing rhinos back for the last five years. Can you say Hakuna Matata!

In another sign of credit market trouble, Home Depot Inc. warned that the sale of its wholesale business might bring in less than expected. The world's largest home improvement retailer, which also cut how much it intends to pay to repurchase stock, said volatility in the stock, debt and housing markets has led to the possible repricing. Home Depot fell $2.01, or 5.3 percent, to $35.79, and was the worst performer of the 30 Dow components.

But American International Group Inc., one of the world's largest insurers, on Thursday reassured investors that it remains comfortable with its exposure to the subprime lending market as an investor, lender and mortgage insurer. AIG, which reported a 34 percent jump in second-quarter profit late Wednesday, said it has enough cash and liquidity and "does not need to liquidate any investment securities in a chaotic market."

AIG fell $2.18, or 3.3 percent, to $64.30.

Of course this headline probably didn't help.
Mortgage delinquencies, defaults spreading: AIG

Let me get this straight, they're not worried about anything, and yet they're warning their investors. Ok.

While saying most of its mortgage insurance and residential loans were safe, AIG made a presentation to analysts and investors that showed delinquencies are becoming more common among borrowers in the category just above subprime.

Although acknowledging the "significant declines" in subprime securities, Chief Executive Martin Sullivan said AIG's tight underwriting standards had minimized losses and he was "poised to take advantage of opportunities" in the mortgage market.

But it was clear the overall market was getting worse.

"We are experiencing stress in the Midwest markets where jobs have been lost and we are now seeing it in Florida and California," said William Nutt Jr., chief executive of AIG's mortgage insurance arm.

Everything's A-OK, except where it's not.

Yeah, and other than that how did you like the play Mrs. Lincoln?

it's Not Foreclosure, It's Just A Little Gas!!

Foreclosure as part of the digestive process?? What a novel way of stating things. That's is however just what was said today by one of the RE Economic gurus who's been telling us that there was no bubble.

G.U. Krueger, an Irvine-based economist, said default activity may slow once weak subprime loans work their way through the system. There could be “a quick kind of flushing out, a kind of a storm that passes quickly.”

Dude, ever hear of the concept Binge and Purge. He needs to talk to the Olsen Twins.

The San Diego Union Tribune, is telling "homeowners", not to panic. Sure things, look a little "worrisome" right now but they'll soon clear up. Sort of like that worrisome little hole on the good ship Titanic, or those worrisome little ice caps that're watering down the ocean.

Home foreclosures in San Diego County continued a troublesome climb into record territory in June, but analysts say the number has yet to reach a threshold that creates a drag on real estate prices or the economy.
DataQuick Information Systems reported yesterday that during the first half of 2007, San Diego County had 2,896 foreclosures compared with 445 during the first half of 2006, a 551 percent increase.

That sets a record dating to 1988, when DataQuick began tracking foreclosures, researcher John Karevoll said. “A steadily increasing portion of those who get notices of default now are being foreclosed on.”

If they don't consider a 551% increase in foreclosures a sign that there's gonna be a lot of property to move then I've got a bridge to sell them.....,plus a few thousand condos.

Of course they love to brush all of this off as just a small glitch, nothing to see here folks, just move along .
University of San Diego economist Alan Gin said a recession could make the foreclosure problem much worse, but he said there is less than a 50 percent chance that one will occur. While foreclosures are “still a small part of market,” the spike in defaults is worrisome, he said.

After all, though housing may be hurting everything else is ok.....right?...right? RIGHT??!!

Stocks plunge; Dow down more than 310,

Whoopsiedaisy, guess he didn't see that article.

Wall Street suffered one of its worst losses of 2007 Thursday, leading a global stock market plunge as investors succumbed to months of worry about the mortgage and corporate lending markets. The Dow Jones industrials closed down more than 310 points after earlier skidding nearly 450.

Investors who had been able for months to largely shrug off discomfort about subprime mortgage problems and a more difficult environment for corporate borrowing finally decided it was time to sell after the Commerce Department issued another disappointing home sales report.

Recession, recession, did anybody order a recession?

Wall Street extended its steep decline Friday, propelling the Dow Jones industrials down more than 500 points over two days after investors gave in to mounting concerns that borrowing costs would climb for both companies and homeowners. It was the worst week for the Dow and the Standard & Poor's 500 index in five years.
Investors cast aside a stronger-than-expected read on the economy and maintained negative sentiment that dominated Thursday when the market shuddered amid worries over the U.S. mortgage and corporate lending markets. Investors globally took flight from equities, shifting cash into safer investments in Treasury bonds.

The pullback Thursday and Friday wiped out $526.1 billion in shareholder wealth from the stocks in the Standard & Poor's 500 index.

But I thought the GDP sounded so good, I mean sturdy, robust, encouraging. What happened? Could it be that maybe people like, just stopped believing them, cause maybe they were, oh I don't know, say....LYING?! After all these were the guys that though housing was so cool, condos were so cool, irrational exhuberance was so coooooooooool.
Yeah.




"I think we're going to have continued sideways movement with 100 point up-and-down days," said Frederick, referring to the Dow's back-and-forth movements.

"The 14,000 level is going to be tough for this market to get back above," Frederick said.

I hate to break it to you Freddie my man but the only thing that moves sideways is a dead fish as it circles the drain...oh yeah, and a snake. But I guess that wouldn't really apply , would it?

More wisdom from Freddie.
"You look at a 300-point Dow day and it seems like a big day but from a percentage viewpoint it's not a big move," Frederick said
Right, like standing on the ledge 5 stories up, is nothing like standing on the ledge 30 stories up, really it's not that big a move.

You've Got Mail!!!

that's what a lot of Californians are finding in their In Boxes as Foreclosure Rates Soar.

Not since the bad old days of the early/mid ninties have so many hit the bricks with so much bad debt. All that buying frenzy that was pumped up last summer is now coming home to roost, or not home, since most of the buyers are soon going to be out of their houses. For those on the things are looking up bandwagon, waiting for that biiiiiig bounce back to the glory days..well don't count on it since 53 THOUSAND foreclosed houses is butt load of inventory to unload.

A total of 53,943 "notices of default" were recorded statewide last quarter, up 15.4 percent from first quarter, and 158 percent from the April-to-June period in 2006, according to DataQuick Information Systems. The notices are the first step in the foreclosure process, and are typically sent to homeowners who've failed to make their mortgage payments for a few consecutive months.
"A lot of the loans that went bad last quarter were made at or just beyond the cycle's peak," between summer 2005 and summer 2006, said Marshall Prentice, DataQuick's president. "Appreciation rates for most of that period were in the double digits and lenders let many households stretch their finances to the max, and beyond. It's that pool of `beyond' mortgages that the market is working its way through."
Yeah, in other words look for prices to go back up sometime around the time of the next Ice Age.

So what exactly is the percentage of rise in those little pink notices tacked to the door? Try 799% more than this time last year. That's what the LA Times is reporting.




That's a hella lotta homes just sitting out there, and it isn't just the housing market that's feeling the pinch. It was more than Rupert Murdochs' pending take over of the Dow-Jones and the WSJ that sent the market into free fall yesterday.

A sagging real estate market and tighter lending standards are exacting a growing toll on Californians, forcing them from their homes in record numbers, figures released Tuesday show.

Foreclosures soared to 17,408 for the three months ended June 30, an increase of 799 percent from the same period last year. The current rate handily exceeds the previous foreclosure peak set in 1996, when the state was in the final throes of six-year slump.

Separately, Countrywide Financial Corp. -- the nation's largest mortgage lender -- reported a sharp rise in delinquencies, even among customers with good credit. That sent shivers down Wall Street, helping to trigger a 226-point plunge in the Dow Jones industrial average.

So what will all this mean for the rest of us out there who may not have participated in this bubble? Nothing good I venture to say.


"The economy will bend further under the weight of the mounting housing and mortgage problems, but it will not break," said Mark Zandi, chief economist at Moody's Economy.com.

That's what passes for optimism these days. Others are more downbeat.

"All the artificial stimulus housing gave the economy is going to go away," said Rich Toscano, a financial adviser with Pacific Capital Associates in San Diego who runs the popular Piggington.com real estate Web site. "There will be individual pain for people who made the wrong decisions. We all may end up in a recession."

Hey, don't sugar coat it or anything.

The good news, as seen by Toscano: "I don't envision a 'Grapes of Wrath' scenario where we all have to pile in the family car and look for harvesting work."

Wow, I like feel sooooo much better.

The other factor at play here, is this doesn't just affect the high risk borrower, it goes waaaaaaaay beyond that, as many have said it's moving into Alt A paper.

"In the beginning, we were thinking the foreclosures were going to be limited to low-income, high-minority neighborhoods targeted by predatory lenders," Cadavid said. "Now we're seeing a shift to the middle class."

That assessment was bolstered by Countrywide's warning that a rising number of its mortgage customers were behind in their payments, including mainstream borrowers.

The Calabasas-based company said that 4.6 percent of its good-credit customers with lines of credit or home equity loans were at least 30 days delinquent, up sharply from 3.8 percent three months ago. A year ago, the rate was 1.8 percent.

So for those who have been talking about a "soft landing" and things "rebounding", look out below!

It's Not Identity Theft, More Like Identity Rental.

Paging George Costanza! We have Vandelay Industries
on line one, at least that's what it seems in this New York Times article. Back in the day when people were complaining about the Seinfeld finale instead of the Sopranos finale , one of the main characters attempted to fake employment.He claimed to be working for Vandelay Industries as a
Latex salesman, although he is only trying to be hired by Vandelay Industries, the fake latex company which holds Jerry's phone number, so that he is still able to obtain unemployment checks, because that qualifies as legitimately looking for work.

What's going on out there in the "reality based community" isn't that far afield from the old days of Seinfeld. Here's a comeon that would warm the cockles of George Costanzas' heart.

Want to buy a home, but hampered by bad credit, an empty bank account or no job? No problem!

That may sound like an exaggeration of a late-night infomercial. But it is, in effect, the pitch that a number of Web sites are making to consumers, saying insolvent home shoppers can be made to look more attractive to lenders.

The sites, for example, offer better credit scores by hitching customers to a stranger’s credit card, or providing them pay stubs from a bogus company. One has even offered a well-stocked bank account to rent for a month or two.

Industry experts say these sites, which are relatively new, played a role in fueling the rampant mortgage fraud that has caused a huge spike in loan defaults in recent months because people bought homes they could not afford.

“There is a whole underground world — an online cottage industry — that has grown up that allows anyone to commit mortgage fraud,” said Constance Wilson, executive vice president at the financial fraud detection firm Interthinx.

I was reading an article online the other day about a company that sells commencement addresses to high school valedictorians, there are companies that sell term papers, and even fake degress from prestigious "uncredited universities" where one could even claim to be a "marine biologist" (Georges' dream job). It appears that it's now possible to ride through life on a magic carpet on fake paper.
When one looks at the numbers involved in this fraud how can anyone question the rising tide of foreclosures that are being predicted.

An examination of loans made last year, including prime and subprime, in which some sort of fraud occurred, showed that incidents of false tax or financial statements had risen to 27 percent from 17 percent in 2002; fraudulent verifications of deposit had climbed to 22 percent from 15 percent four years ago; and false credit reports rose to 9 percent from 5 percent in 2002, according to a report issued this spring by the Mortgage Asset Research Institute based in Virginia.

If any documents were required, it was unclear whether the bogus documents were created by do-it-yourselfers or whether they turned to the products and services sold over the Internet.

Excactly how does this little gambit work? Weeelllllll.....

One site, RaiseCreditScoreNow .com, offers to add a person to four separate $20,000 credit lines with 10 years of “perfect payments” for $4,000 (although they do not have access to the actual credit line). Doing so could increase an individual’s credit score by as much as 200 points in 90 days, the site says, and make the difference between qualifying for a home loan or not.

People with strong credit scores and a reliable payment history of at least 24 months on various credit accounts can be paid up to $1,000 for each person they add to the account as an authorized user, the site offers.

Several lawyers said it was unlikely that this practice was illegal, although many warned it could open the person renting out their credit card lines to fraud or identify theft. Attempts to contact the Web site were unsuccessful.

Yeah, I'm sure they were. I'd love to meet the doofuses they talk into renting out their good credit for these purposes. I can't imagine anyone wioth a decent credit record that would need 1000 dollars that badly.

Offically, the term is called "Piggybacking" and of course it's "technically not illegal" which explains a whole lot of what we're seeing out there. Of course the FICO people have now gotten wise and in a world beating case of closing the barn door after the horse has not only gotten out, but won the Triple Crown and gone to stud, declare:

Last week, the Fair Isaac Corporation, the company that developed FICO credit scores, said it was trying to shut down piggybacking.

Starting in September, Fair Isaac said people who were added to someone else’s credit line would not benefit from the secondhand credit history in its formula, which is used by the three major credit bureaus.

“There is going to be no way to get around the new system,” said Ron Totaro, vice president for global scoring solutions at Fair Isaac.

I think the operative word for this is "trying". If that's the best they can do they deserve everything they get.

However, this whole mess speaks to a bigger problem. If there has been fraud on this wide a scale, then our lawmakers are going to have to worry about more than just catching the bad guys pulling off the capers. They are going to have to worry about the lawabiding taxpayers out there for whom piggybacking was a ride that ended at the age of 5. Those people are not going to look fondly on any "Mortgage Bailouts"that come out of their pockets. After all, just because you've gotten away with robbing my bank it doesn't mean I have to help you carry the safe to the get-away car.