Wednesday, February 14, 2007

Don't You Just Love the "Don't Worry, Be Happy" Real Estate Headlines?

All is hunky-dory and prices are stabilizing, if you read the Mortgage Bankers Association's latest weekly survey.

don't worry, be happy
[Thanks to zbrzeznys.com for the picture.]

But what they're not telling you is this:

There are 24 mortgage providers that are rumored to be in trouble, according to implode.com, and they are relisted in an article at seekingalpha.com entitled "Latest Count of Major US Mortgage Lenders That Have Croaked Since about Dec 2006" as follows, with their commentary in brackets:

"1) Wells Fargo
2) HSBC Household Finance [rumored to be up for sale]
3) New Century [restating '06 earnings downwards; major shareholder lawsuits]
4) Countrywide [reportedly in talks with Bank of America (may not be credible)]
5)Fremont
6) Option One [H&R Block; up for sale]
7) Ameriquest [owned by ACC; shut most offices, settled with 30 states over predatory lending]
8) WMC [subsidiary of GE Money]
9) Washington Mutual [closed 80 branches in late 2006]
10) CitiFinancial
11) First Franklin [acquired by Merrill Lynch from National City for $1.3bln]
12) GMAC [Major layoffs in ResCap]
13) Accredited Home
14) BNC [Lehman bros. subsidiary]
15) ChaseHome Finance
16) Novastar
17) OwnIt, 2006-12-07 [partially-owned by Merrill and BofA]
18) Aegis [recently closed two subprime operations centers]
19) MLN, 2006-12-29 [reportedly bought out by Lehman]
20) EMC
21) ResMAE,2007-02-13 [in bankruptcy; being funded by Credit Suisse]
22) FirstNLC 22) Decision One [owned by HSBC; rumored to be up for sale]
23) Encore [being acquired by Bear-Stearns]
24) Fieldstone [closing 7 of 16 ops centers, debt renegotiated through 2007-01-31]"

Do you see your lender among them?

And what I see is also this:

Those people who have enough money to play around in hedge funds and in the stock market and elsewhere, or who have pensions that are being managed by persons who have control over trillions of our money, may not be terribly affected by the news that thousands of households are now in bankruptcy or foreclosure.

But I, ever the "bleeding heart libertarian" as Tim Worstall calls us, think it is a crime.

This is not entirely the fault of that poor fool who will be parted from his money no matter what we do. This is the fault of those who have furnished the means for this liquidity bubble, and of those who abuse the credit leveraging systems now in place. Together, they have created the wherewithal for the mortgage industry to give these poor fools the credit that got them so far up Foreclosure Creek.

These poor victims should never have been offered a mortgage. And I'm not blaming the mortgage industry entirely, because the mortgage industry is a group of enterprises that do what comes naturally, i.e. they lend money. And the money is just sitting there waiting to be lent. These companies go about their business of making a profit, as indeed they should; so if the money is there, there is no reason they should not take advantage of it to make even more profit. And there is so much money available, that they let their guard down along with their pants and their lending parameters. (One caveat: I'm not including in this excused group those companies who have not obeyed the rules regarding reserves, like New Century and perhaps others.)

How can the plight of thousands of wage earners who got sucked into this housing maelstrom go unnoticed? How can we stand by and watch the smarty-pants of this world deprive the little guy of his very livelihood, because of artificially lowered credit criteria and unsafe loans? It's a crime, and someone must take the blame.

The last of the superfluous bucks stops at the door of the Federal Reserve, and at that of other global central bankers like those of Japan and China, who can't leave their money supply alone but rather insist on experimenting with interest rates and other credit-creating instruments in a futile effort to save us from THEMselves [sic.] I mean by this that they got their (our) economies into these tight spots in the first place, and now they want to get us out by making things worse. (For a more detailed discussion of how they do this, see my earlier posts here and here and here.)

Another buck or two stop at the portals of our legislative branches, at the feet of the spendthrift government officials who are so eager to buy votes that they can't even balance our budget, preferring to spend us into debt. We've been lucky enough as a nation to have a reprieve for as long as it lasts -- we're still the least bad investment choice, for the moment -- but at some point we'll have to pay the piper or go out as the latest, largest, and most powerful nation in history to have followed all the others down into ignominy.

(As you can see, my feathers are a bit ruffled today.)

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