Irvine Housing Blog

If the hedge fund is a good idea why not let the government run it?  Sort of a way for them to dig out of debt while saving the housing situation.  IHB for prez:)

Seriously, a couple of years ago (mid2007) when the first round of help for foreclosures were being discussed, my first thought was:
“why not just let the homeowners rent their house and that keeps it out of foreclosure”

I never put the sell it back to them later idea there, but most people argued that homeowners turned renters would feel that they are not making the money they thought so would either trash the place or be poor renters. 

Seriously how can you trust somebody to rent (when it takes 6+ months to kick them out) if they have a history of stopping payment?

In addition, the change to renter (which I personally have done after selling my house a couple years ago due to relocation) could allow for greater location flexibility (I want to live closer to the city or my job) and finding a better deal for their money. 

If you had a deal to pay $3K/month for you $1.5M (purchase price, now work ~$1M) it is too good to be true.  Problem is you could find similar houses for the same price and wouldn’t be as tied to your current home.

There are plenty of examples to choose from, where a company/industry has the fiduciary duty to make profits, not worry about who is getting burned by it:

It is the fiduciary duty of the health insurance companies to make the most money that they can - deny coverage to unhealthy people or those with the greatest risk of problems, dispute claims as long as possible, etc. are tools to get there.

The banks are out there to make money for themselves, not to get 15% returns for pension funds.

If your hedge fund idea works by chewing up the bad decisions of the banks, let them enjoy the feeling.

Joy Shenn reports in an April 29 Bloomberg article, that decisions by homeowners to walk away from mortgages they can afford, are accounting for more defaults, according to Morgan Stanley. About 12% of all mortgage defaults in February were strategic, up from about 4% in the middle of 2007, analysts led by Vishwanath Tirupattur wrote.

I enjoyed the Couple With Photo captioned: We bought so much stuff had great vacations, cosmetic surgery, and the house paid for it all ... I would have added in there ... boob job ... but that may be too-much, like in bad taste, but it would be the truth.

You relate: When the purchase option came to me, I saw the short trade and the huge incentive to walk away it creates. It frightened me. What concerns me the most is the pressure this will put on banks for principal reductions. Principal reduction without foreclosure is the worst of both worlds—it rewards HELOC abusing squatters without doing much to lower prices. It would be less expensive for the banks than having the Cartel Crusher convince everyone to default because they can control the damage and prices will remain higher with fewer sales, the current status quo.

My response is that the current status quo will not be maintained. Solyent Green Is People is coming very soon, most likely October, November or December of this year, due to liquidity evaporation, when equity and bond values collapse and interest rates literally skyrocket, just like they did in Greece. People will not be able to obtain access either money market accounts or brokerge acounts, because of liquidity issues, real estate values will plummet, and a hyper-inflation rush will come to currencies and consumer goods.

Doug Noland in Safehaven.com article relates the landmark date of Tuesday April 27, 2010, that being the day the dislocation unfolded in the European Credit default swap market, which portends serious issues for sovereign debt markets globally. Mr Noland relates: There’s hope that European policymakers and the IMF can come up this weekend with a credible plan for Greek aid. I would tend to believe that the “genie is out the bottle” and that global markets are in the early stage of adjusting to new uncertainties and risk realities. Many that have planned on using derivatives markets to hedge future market risks may begin to reevaluate their approach to risk taking and management.
http://www.safehaven.com/article/16619/tuesday-april-27-2010

I believe even if the asset bust and hyperinflaiton rage were not to occur, the economy will tank from here on out, as stocks and bonds, fueled by yen carry trade investing, investment bank purchases, and the Federal Reserve TARP facility have ended, now that Goldman Sachs is being investigated for criminal wrong doing. We are going into a double dip recession, as the homeowners tax credit has expired, and higher consumer spending in Q1 still lacks vigor, the consumers will not bounce back with sustained strength; there is not enough underlying economic strength to catapult economic growth beyond 3.2 percent.

For individuals, wealth and liquidity, can only come by physical ownership of gold coins, and gold at BullionVault.com, and by renting a residence rather than buying one; strategic default is the way of the future.

(1) Goldman Sachs Krusher LLC.

I figure that Goldman Sachs is already on the ball on this.  Not only are they likely shorting their own stock but they likely also have access to a billion bucks with which to start GS Krusher Inc… in this case, I hope they do sell a mutual fund on it because I want in.

(2) A mortgage over a MIL. 

Not so long ago (couple of years) the LA Times had an RE article where smug real estate agents were proclaiming that “10 MIL” were the new “1 MIL” because 1 MIL was sooo commonplace.

Now, I just can’t wrap my head around that.  Never had.  What would the payment be on a 2MIL mortgage.  Even on a teaser rate that would have to be 10K a month?  That’s insane.  I mean, even if I made 500K a year I would not want to pay so much in mortgage payments.  Given our tax laws it’s a counterproductive way of using your money.

OTOH… maybe these fools were really gaming the market… drive up the prices, stop paying, save money and then invest in GS Krusher LLC…

(3) TRidge BBQ anyone?

Since these morons are squatting and we’re gonna pay for it, I figure us peons own the place.

That’s a nice BBQ out by the “casita”.  So I say we load up on fine prime steaks and wine from Costco and we march on up to this fine chateau and help ourselves to OUR fine BBQ facilities. 

I mean, if they call the cops, we’ll tell the cops about the stunt these people are pulling and we invite them to some filet topped with stilton cheese and brown sauce.  Offer them sparkling water with a twist of lime.. since they can’t drink while in duty.

Bring some cake so the squatters can eat their own cake, not our steaks.

IrvineRenter,
The “banks” are officially owned by the shareholders, but the banksters run the banks and get first feeding at the trough.  If the banks win, the shareholders are rewarded but not before the banksters get their majority cut.  If the bank loses, the shareholders are left holding the bag, but the banksters are rewarded with retention bonus and resetting of options for another near guarnteed win for the banksters.

The hedge funds you describled will be owned by the banksters of GS and other banks, the majority ownership will not be the shareholders of GS.  It will only become shareholders of the banks when the profits have been squeezed out and the properties are a liablity instead of an asset.  At that time the properites and/or hedge funds will allow investment by pension funds.  Just another round with a different name or business model.  You can’t pay people 10 million and expect real profits for the shareholders and healthy economy.  There’s just too much incentive for manipulating the books and making bubbles in the stock market.

I’m absolutely flabbergasted at the number of $3,000,000+ mortgages. 

How easy was it to get these mortgages? 

I’m reminded of the Hollywood HELOC abuse post where the long term owner (probably without sufficient income) was able to refinance to over 3 million.

I guess if a strawberry picker could get a $700,000 loan, then someone making 100k could easily get a $3MM loan?

WTF is right!

“Did you know that almost 80% of the BMWs and Mercedes on the road are leased?”

I own my BMW outright. It has 97,000 miles, but I figure it has another 100,000 miles in it. Then I can buy another cash with what I have saved driving this one into the ground.

You are become Death, the Destroyer of Worlds!

(Oppenheimer’s A Bomb Bhagavad Gita reference)

“Did you know that almost 80% of the BMWs and Mercedes on the road are leased?”

Where did you get this information IR?

“Did you know that almost 80% of the BMWs and Mercedes on the road are leased? That is pretending.”

I laughed so hard at that, I farted…

So TRUE, in SoCal.
The best PLACE to be a PHONEY.