Lenders and borrowers shoulder responsibility for the housing bubble. But do they share the blame equally?
Irvine Home Address … 14102 SAARINEN Ct Irvine, CA 92606
Resale Home Price …… $619,900
You're a rockstar (Baby!)
Everybody wants you
Player!
Who could really blame you?
We're the ones who made you!
Eminem — We Made You
Banks created their own nightmare. They turned good borrowers into HELOC dependent Ponzis, inflated a massive housing bubble, and now that prices are crashing, lenders are surprised at the behavior of borrowers. Each side feels they are being victimized by the other. Lenders are being left to hold the bag and absorb the losses, so they have suffered consequences for their actions. Borrowers lost their homes, so they have suffered too. Beyond enduring the consequences, each party bears some responsibility for what happened. But who deserves blame, and how much?
Back in January of 2010 I advanced the proposition that Lenders Are More Culpable than Borrowers. It's a great old read and a good refresher for today's featured article.
The writing today is challenging for me to deal with because I agree with the central point of this author's argument that banks are more responsible than loan owners. However, the reasoning she uses is faulty and based on emotional appeals. The real points in favor of her position are missed entirely (see link above).
Who's to Blame for the Mortgage Mess? Banks, Not Homeowners
By ABIGAIL FIELD Posted 6:30 AM 01/20/11
As the foreclosure crisis has escalated over the past several months, one overarching debate has been about who bears the most blame: homeowners or banks?
After everything I've learned and written about the foreclosure mess, my verdict is: The banks are responsible for 90% of the problem, troubled homeowners 10%.
After writing about this phenomenon for four years, my verdict is: 66% lenders, 33% borrowers, and 1% for the rest of us that have to pay for it because we allowed it to happen.
Yes, every foreclosure involves a homeowner not paying his mortgage.
This is the classic lead-in where you acknowledge very damning evidence against your position as briefly as possible so the impact falls flat. The fact that loan owners are not paying their mortgage is exactly why they bear responsibility in this mess. Nobody forced people to take out loans. Borrowers were responsible for their actions. I would say they are 50% responsible, but lenders bear more than half because they should have known better.
But every foreclosure also involves a bank that made the loan. And usually another bank, or several more, that profited from securitizing the loan. And still another bank, or several, that profited from servicing the loan.
Banks and investors made money. So what? Making money does not make one evil. The system was set up for banks to originate loans. They did this for a profit. 
Together, those banks have done three things that created the massive glut of foreclosures choking America's legal systems and laying waste to its real estate markets:
- They knowingly made millions of loans doomed for foreclosure as soon as the check was written.
- They deliberately and/or incompetently failed to modify many salvageable mortgages.
- They were so careless with their paperwork and processes that they've undermined the rule of law, clouded the title to untold numbers of properties and complicated the processing of the massive backlog of foreclosures that hurts the economically crucial real estate market.
Let's take a closer look at each factor.
Her first point is true. Lenders did knowingly make millions of loans that were doomed. Lenders did this because they were working on an origination model where they were compensated based on filling an order for a loan made by an investor. It was the investors who were demanding stupid loans that were doomed from the start. Investors demanded bad loans because the loans were often packaged into securities given AAA ratings by ratings agencies being paid by the syndicators to give them AAA ratings. The conflict of interest caused risk to be improperly priced and large amounts of money to flow into poorly underwritten mortgages.
Her second point about failing to modify salvageable mortgages is emotional pandering and nonsense. Many former loan owners find vindication in stories about how the evil banks failed to unilaterally change the terms of a contract to suit the borrower. It's easier for the renting-former-owners to rage against the system rather than feel responsible for a delinquent mortgage requiring modification.
Plus, the whole idea of a salvageable mortgage seems wrong to me. These borrowers are drowning in a cesspool and throwing them a life preserver in the form of a loan modification merely allows them to wallow in their own debt. Is it better to let them drown? I think so. After a foreclosure and bankruptcy, it is over, and they can rebuild their lives. Financial rebirth is a wonderful opportunity.
The emotional pandering is part of the left-wing political meme on this issue. The other political pandering to loan owners concerns robo-signer.
Her third point about procedural delays is off on many levels. First, she implies the procedural delays have hurt the housing market, but she isn't clear on what that means. Lenders have been creating and taking advantage of delays throughout the process in order to slow the flow of foreclosures. Lenders gain by having less inventory pressuring prices. Delinquent borrowers gain by more squatting time. Current borrowers gain by having prices remain higher than levels needed to clear the market. Those interested parties all benefit from delays. Renters and would-be buyers are the ones hurt by these delays, and their voices are seldom heard.
The facts aren't important to her point. She was merely making an emotional appeal to anyone who has gone through foreclosure. Renting-former-owners (RFOs?) think maybe their foreclosure was improper too? And maybe someone will give them a free house because of it?
What Happened to Underwriting?
Getting a mortgage isn't supposed to be as easy as getting cash from an ATM. Banks are supposed to make applicants prove they can repay loans before giving them. The process is called underwriting, and it's one of the most basic in banking.
Yet during the housing bubble, banks largely stopped underwriting in any reasonable way. Indeed, if the banks had been underwriting throughout, the bubble could never have inflated so much.
If you want to get a vivid and entertaining overview of the dynamics that eliminated underwriting, listen to Planet Money's interviews of people at every stage of the process, from making the home loan through its ultimate securitization.
The mortgages made without underwriting have lots of names: Low-doc loans (the borrower stated her income without proof, but proved the assets she claimed to own, or vice versa), no-doc loans (borrower stated both income and assets without proving either), NINJA loans (no proof of income, job or assets). They're all known as liar's loans. According to a recent Forbes article, in 2006 and 2007 liar's loans accounted for 40% of new mortgages, and more than 50% of new subprime mortgages.
The housing bubble would not have gotten legs in 2004 if it were not for Option ARMs and reduced lending standards. Prices were too high in 2004 (as evidenced by the fact that most markets trade below those prices even today). With a diminished buyer pool and higher prices, the market was nearing a top. Wall Street demanded mortgage-backed securities. To meet this demand loan balances would need to get larger and qualification standards would need to drop. The Option ARM allowed much larger loan balances, and the qualification standards were dropped sufficiently to meet demand. Demand was nearly infinite, and qualifications were nearly eliminated.
The Banks Knew Mortgage Applications Were Fraudulent
Now here's the thing: No one forced the banks to make those loans, even if the applicants were lying about their ability to repay.
People shouldn't be sympathetic to banks that effectively say: “Hey, we knew the applicants were lying and wouldn't be able to repay the loans. We didn't care because we didn't hold onto the loans. We offloaded the risk to investors through the securitization process. But so what? Blame the deadbeat borrowers for the volume of foreclosures today.“
That is a compelling argument. Deadbeat borrowers do deserve much of the blame. I peg it at 33%. 
Why is it fair to say the banks knew they were being lied to? Well, beyond the obvious — everybody in the business used the term liar's loan — the FBI warned about mortgage fraud back in 2004. And take a look at this 2006 fact sheet from the Mortgage Brokers Association for Responsible Lending that analyzed data from 2004 and 2005. By doing a quick check, the group found that 90 out of 100 stated-income loans exaggerated the applicant's income, and 54 of those loans inflated it by more than 50%.
Or consider this Chase loan officer's email acknowledging that he had made up an inflated income amount to make a borrower's debt-to-income ratio “work.”
By 2007, the FBI reported that industry insiders — loan officers, mortgage brokers, real estate agents, appraisers and lawyers — not wannabe homeowners — were involved in some 80% of mortgage fraud. The FBI calls that “fraud for profit” as opposed to “fraud for housing,” which is when a homeowner lies to get a house he can't afford. As Calculated Risk's Tanta showed in 2007, that distinction started breaking down as the absence of underwriting by the banks enabled both types of fraudsters to join forces.
Tanta also explained that in addition to being directly complicit in mortgage fraud, lenders engaged in massive cost-cutting efforts that gutted their ability to underwrite loans:
So many of the business practices that help fraud succeed — thinning backoffice staff, hiring untrained temps to replace retiring (and pricey) veterans, speeding up review processes, cutting back on due diligence sampling, accepting more and more copies, faxes, and phone calls instead of original ink-signed documents — threw off so much money that no one wanted to believe that the eventual cost of the fraud would eat it all up, and possibly more.
Beyond the idea that the banks knew, in real time, that they were making loans that couldn't be repaid, evidence shows that banks went a step further and tried to conceal that information from others.
Banks Hid Fraud by Shopping for AAA Ratings
Banks weren't the only entities to stop evaluating risk. Their key allies were the big three ratings agencies, Moody's, Standard & Poor's and Fitch. The ratings agencies put AAA ratings on securities that didn't come close to deserving that golden grade, in part by using outdated risk models that their own analysts complained inflated ratings. But why weren't the agencies worried about their professional reputations?
In 2009, professor and former financial regulator William K. Black used a paper from S&P to discuss how the banks and the raters chose not to look at the documents used to make the loans they were securitizing. Then Black cited a 2007 paper from Fitch to show why it mattered that no one was looking at the loan files, why it was at minimum willful blindness. (Willful blindness is trying hard to not know that the law holds you accountable for knowing.)
What was going on? According to 2010 testimony from former ratings agency executives and their emails, the agencies capitulated to demands from banks for AAA ratings on mortgage-backed securities even though they knew those ratings weren't deserved.
The banks had the leverage to get the AAA ratings they wanted because rating “structured finance products” — mortgage backed securities and the like — had become really profitable for the ratings agencies, and compared to other types of rated securities, very few clients issued them. So if those clients — the big banks — weren't pleased, they could simply “ratings shop” — that is, go from one agency to another until they got the desired rating.
In short, a large proportion of the foreclosures drowning the courts and the real estate market are a direct consequence of the banks' failure to effectively underwrite loans during the bubble. Those borrowers should have had — and today would have had — their loan applications rejected.
That is a good description of the shady dealings at the ratings agencies. 
Servicers Get Paid to Foreclose, Not Modify
But wait, you might point out, it's not just the dodgy liar's loans going bust. Foreclosures have spread widely throughout the “prime” mortgage market as well. Surely, the Great Recession, not the banks, is to blame for many of those foreclosures.
You'd be only partly right.
What's generating many recession-induced foreclosures is the relatively new model of mortgage servicing. Prior to the mass securitization of mortgages, the bank that made a mortgage was the same bank that serviced it. As a result, the servicing bank made its money from the mortgage interest, and the long-term repayment of the mortgage was key to its profit. So, a bank was typically willing to work out a mortgage modification with the homeowner to keep that income stream intact.
Of course, sometimes the homeowner was in such trouble that foreclosure made more sense. Foreclosures do happen even in real estate markets filled only with solidly underwritten loans serviced by the bank that made the loan. That's because bad things do happen to prevent a once-creditworthy borrower from repaying.
Unemployment is a big problem. But there are other problems like a borrower's adjustable-rate mortgage recasting to fully amortizing and their payment going up 50%. .png)
How many forecloses result from financial incentive and how many from incompetence isn't clear, but it's also irrelevant. The point is that a good chunk of foreclosures shouldn't happen because modifications make more money for the people the mortgage is owed to (usually, the investors in the mortgage-backed securities).
Simply put, if the banks had kept up normal underwriting and had modified mortgages (or approved more short sales) every time it made sense to do so, we wouldn't have the foreclosure volume, and thus delays, that we currently face.
Her contention that investors would make more from a modified mortgage is not proven. It is likely not true simply because so many modified mortgages fail costing the investors even more money. Since she is mistaken about what is best for the investors of the mortgage-backed securities (as if she cared) she is also mistaken in her contention that less foreclosure volume was in everyone's best interest.
The “Paperwork” Problems Aren't Meaningless
Now you might ask, in addition to volume-related delays, with so many foreclosures in the system, aren't defaulted homeowners to blame for gumming up the process? Aren't they just citing meaningless problems with the banks' paperwork so that they can stay in their homes for free, hurting everyone else in the process?
No.
Actually, yes. Attorneys enable squatters to game the system. The delays caused by this foolish procedural posturing stops a new family from moving into the property — a family likely to be paying a mortgage — which in turn hurts the lender.
While it's true that foreclosure defense attorneys want to slow the process to give their clients more time to relocate,
Bullshit! People are not looking for more time to relocate. How long does it take to move out? Two weeks? Three weeks, tops? This premise doesn't pass the sniff test. Attorneys enable squatters to game the system because squatters want them too. Squatters want to stay in a house with no rent and no payment. It is financial greed, pure and simple.
that doesn't mean the “paperwork” problems they're raising are meaningless. [actually, it does.]
For example, the banks' carelessness with the securitization of Massachusetts mortgages has clouded the title to thousands of properties. Foreclosure attorneys' use of nonlawyers in Pennsylvania may have clouded the title to thousands more. The use of a private, electronic database (called MERS) to track mortgages instead of recording them in government land records may have clouded yet millions more. And in any case, MERS is a legally problematic cost-savings strategy that has created only more confusion and delay.
Even homeowners who are capable of curing their default sometimes can't because banks' inaccurate record-keeping about how much the homeowners owe precludes the possibility. More outlandish problems have surfaced too: from multiple banks trying to foreclose on the same property, to banks foreclosing on homes bought with cash, to banks breaking into homes they haven't foreclosed on, to a bank ignoring its court-approved agreement to foreclose and demanding the money instead.
She has recounted every feeble story trying to give the robo-signer scandal legs. Each of them is pretty weak. None of this makes borrowers any less blameworthy for the housing bubble.
What Revelations Are Still to Come?
These cases are probably just the leading edge of a paperwork-problem tsunami. Even though these issues have been in the news for months, the official investigations and litigation are still in relatively early stages. Millions of foreclosures in nonjudicial states haven't gotten the scrutiny they deserve (except presumably as part of the 50-state attorneys general investigation), so who knows what will yet surface?
As major judiciaries force a closer look at bank documents, what will they find? The fact that all the major law firms advising on “typical” securitization deals didn't know that “assignments in blank” violated Massachusetts law is chilling. How many other states' laws were broken by the “typical” deal?
Moreover, everything we're seeing suggests the banks' papers for securitized loans are in total disarray. The note is in one place (theoretically), the record of payments on the loan (inaccurate as it may be) is in another, and the ownership of both the note and the mortgage may or may not be the same. When asked to produce securitization documents, banks frequently submit drafts and contracts without attachments. The attorneys doing the foreclosures are buried in volume, cutting corners themselves, and are unable to meaningfully communicate with their bank clients. Indeed, it may not even be attorneys doing the foreclosures.
Signs of this chaos abound, whether it's dead financial firms signing documents, banks changing their minds about who owns the loan in the middle of court proceedings, or attorneys unable to certify that the information in foreclosure complaints is true.
There is sloppiness in every industry. So what?
And What's the Fate of Mortgage-Backed Securities?
The banks also have a different type of mortgage “paperwork problem” relating to mortgage-backed securities. Will the banks discover that millions of mortgages they thought they had securitized instead stayed with them because they screwed up the paperwork to transfer the mortgages?
Massachusetts will be a leading indicator on that question because the “assignment in blank” problem may have prevented most of those Massachusetts mortgages from being securitized. Or if the securitizations technically succeeded, will investors still win suits against the banks or force them to buy back large volumes of securities because the papers the banks used to sell the securities were fraudulent?
The foreclosure paperwork problem damage the banks somewhat and the broader economy even more so, but the paperwork problem with mortgage-backed securities has the potential to trigger Bank Bailout II.
Whatever happens to mortgage-backed securities is irrelevant. Investors will demand a properly priced mortgage-backed security, and the market will find a way to supply that demand. After years of fighting the legal issues pertaining to buybacks will be resolved and the market will function again. None of this makes borrowers blameless.
No One Is Above the Law
But imagine for a second a world that doesn't exist — one in which the banks' foreclosure documents were all accurate, and their problems were simply a failure to abide by the rules that apply to everybody else? Shouldn't we blame the deadbeats for gumming up the system then? Many readers make comments to that effect on some of my reporting.
Yes, we should. Just like we should blame them now.
Let's flip the question: Why is it OK for the banks to ignore the rules? The rich and powerful and the ordinary Joe are all supposed to play by the same rules. No one is supposed to be above the law.
That is a straw-man argument. First, borrowers are not ignoring the rules. Deadbeat borrowers are exercising a contractual right to quit paying and surrender the property — at least the ones who are not squatting with the aid of an attorney. Flipping the question makes no sense, particularly when the original question was based on faulty observation.
The following points are false.
No matter whether it's America's real estate market getting crushed by millions of foreclosures that didn't need to be, or our real property records getting shredded through clouded titles, or
The following points are true.
citizens' tax dollars being used to bail out banks again, we're all paying for the banks “paperwork” problems.
And remember: We don't know yet just how big that bill is ultimately going to be.
We don't know how big the bills are going to be or who will ultimately pay them. As a taxpayer, you can be sure your name is on the bill.
She owned it for years, then she went Ponzi
Today's featured owner is another loss for a stupid lender, and another long-term home owner that went Ponzi and spent their home in just a few years.
My records don't go back far enough to find when they purchased the property. That often happens on properties owned since the mid 90s or longer. My first record is a HELOC she opened on 6/8/1999 for $67,000.
By 2002 she was fighting the urge to go Ponzi. On 3/5/2002 she refinanced her first mortgage for $287,000. This was likely a cash out transaction but still for much less than appraised value. In other words, she got a little kool aid buzz, but she didn't get enough to go crazy. On 11/4/2002 she refinanced the first mortgage again for $283,100. Since this is for a smaller amount, I surmise that she was at least trying to be responsible. She gave that up in 2005 and went Ponzi.
On 3/15/2005 she refinanced the first mortgage for $481,000 with an Option ARM with a 1% teaser rate. One can speculate on why she needed $200,000 in one lump sum, but she must have had bills to pay. Big bills.
Actually, she probably took the money simply because it was offered. With the Option ARM, she was likely told that their payment would go down and she would be given a check for $200,000. Not a bad sales pitch if you want to underwrite lots of mortgages. Once she went Ponzi with the Option ARM, the rest was merely whirling down the drain.
On 12/12/2005, blissfully unaware that she had gone Ponzi, she opened a HELOC for $100,000. The free money was flowing.
On 4/26/2006, with one last suck on the mortgage teat, the owner obtained a $647,000 first mortgage and a $80,000 HELOC to bring the total property debt to $727,000. The total mortgage extraction likely exceeded $500,000.
Oh, and she got to squat for a while too:
Foreclosure Record
Recording Date: 10/16/2009
Document Type: Notice of Sale
Foreclosure Record
Recording Date: 07/08/2009
Document Type: Notice of Default
At the most recent, the last payment she made would have been on March 1, 2009. In all likelihood she was delinquent far longer than that but the bank didn't bother filing the NOD.
Irvine Home Address … 14102 SAARINEN Ct Irvine, CA 92606 
Resale Home Price … $619,900
Home Purchase Price … $694,179
Home Purchase Date …. 12/16/2010
Net Gain (Loss) ………. $(111,473)
Percent Change ………. -16.1%
Annual Appreciation … -66.0%
Cost of Ownership
————————————————-
$619,900 ………. Asking Price
$123,980 ………. 20% Down Conventional
4.78% …………… Mortgage Interest Rate
$495,920 ………. 30-Year Mortgage
$125,161 ………. Income Requirement
$2,596 ………. Monthly Mortgage Payment
$537 ………. Property Tax
$0 ………. Special Taxes and Levies (Mello Roos)
$103 ………. Homeowners Insurance
$60 ………. Homeowners Association Fees
============================================ .jpg)
$3,296 ………. Monthly Cash Outlays
-$440 ………. Tax Savings (% of Interest and Property Tax)
-$621 ………. Equity Hidden in Payment
$226 ………. Lost Income to Down Payment (net of taxes)
$77 ………. Maintenance and Replacement Reserves
============================================
$2,540 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$6,199 ………. Furnishing and Move In @1%
$6,199 ………. Closing Costs @1%
$4,959 ………… Interest Points @1% of Loan
$123,980 ………. Down Payment
============================================
$141,337 ………. Total Cash Costs
$38,900 ………… Emergency Cash Reserves
============================================
$180,237 ………. Total Savings Needed
Property Details for 14102 SAARINEN Ct Irvine, CA 92606
——————————————————————————
Beds:: 4
Baths:: 3
Sq. Ft.:: 2268
$0,273
Lot Size:: 4,784 Sq. Ft.
Property Type:: Residential, Single Family
Style:: Two Level, Contemporary
Year Built:: 1973
Community:: Walnut
County:: Orange
MLS#:: S643944
Source:: CARETS
——————————————————————————
Most desirable floor plan with quiet end of cul-de-sac location. Adjacent to community greenbelt/park. Upgraded appliances with near new painted interior. Neutral colored carpet throughout.
This video has nothing to do with real estate, but I thought the artistry was fantastic, so I am sharing it here.
Every time I start feeling sorry for a homedebtor, all I have to do is watch this episode of ‘My House Is Worth WHAT?’
https://www.youtube.com/watch?v=WgqSd3-nBFU
And then I go to zillow, and look at the birdseye view to remind myself that she DID get the new swimming pool and the larger boat.
http://www.zillow.com/homedetails/2290-Bayview-Ln-North-Miami-FL-33181/43977708_zpid/
She probably has a $1,000,000 morgage now yet a NEW home down the street sold this year for $405,000.
Abbreviated version of the youtube video…
https://www.youtube.com/watch?v=3lQtBzq7CdI&NR=1
No need to really watch the whole episode.
The economics of banking is counterfeiting. We have been deceived into thinking that we were lent other depositor’s deposited funds. Banksters cause us to think that if we do not pay back those funds, the bank 16 and its depositors will be out the cash. Remember, all you borrowed was monetized credit, which your signature created – probably about $100,000.00 – 10% of which they extended back to you. You lent yourself the funds. Why are you paying back anyone? Ask a banker about this, as I did, and watch him stop breathing.
Well they didn’t spend the money on remodeling that’s for sure. Welcome to Irvine, time to buy your $600K fixer.
What did they spend the money on?
College educations paid in full for their kids?
A business that still has revenue and equity?
Gold?
A home somewhere else paid for 100% cash?
It’s clear they didn’t spend a dime on life comforts.
This is not a fixer. People use that term too frequently. It is somewhat out of date and has mismatching, older, low end (non-stainless) appliances, but I bet they all work. There are no broken windows. There is no leaky roof. All the interior walls are intact. There is a toliet and a sink. The kitchen cabinets are all there with all doors and drawers.
Now, admittedly, maybe you couldn’t hear me over the sound of the 5 freeway in the backyard. I SAID, MAYBE YOU COULDN’T HEAR ME OVER THE SOUND OF THE 5 FREEWAY THE BACKYARD.
In Irvine or anywhere a house like this would cost $600K, it’s definitely a fixer.
In areas where this house would cost $150K, I’d agree, it would not be a fixer. Keep the head down and finish the blue collar midwest life.
PR is right – as an affordable starter home for a lower middle class young family, it is really ok. For anyone who can actually afford a $600k house, it is badly lacking in just about everything beyond the non-leaking roof and intact walls and windows.
Excellent point PR
Trophy homes located in the quality areas of Irvine still command a premium.
In addition, there’s fierce competition among buyers looking to acquire a quality residence.
Nobody disputes that Irvine homes command a premium. That is evident in both rental rates and sale prices. The point in dispute is whether or not the resale house prices are inflated beyond what a premium should deliver. They are.
My point is that the market, both buyers and sellers dictate whether a premium or the extent of a premium is paid
It seems to me that there are plenty of buyers out there willing and able to what you term as “over pay” for an Irvine home.
When a quality home is undervalued or miss priced it most often results in a competitive bidding war, multiple all cash offers etc…
How long will it take IR to acknowledge this? It took him 2 years to acknowledge the Irvine price increases as a bear market rally. I expect by 2013 he’ll start acknowledge the continued high median down payments in Irvine, all cash multiple offers, TIC new building success stories in the heart of the greatest recession.. You can’t make this stuff up, it’s real.
“How long will it take IR to acknowledge this?”
Who cares what I do or do not acknowledge? The activity speaks for itself.
I point out the problems whereas you regurgitate Irvine Company sales points.
I am trying to figure out what is likely to happen to house prices whereas you are talking up the market in hopes of making your property value go up. It’s the main reason you have little or no credibility here.
I can’t believe that how badly some people are still missing the point here.
The fact that Irvine homes command a premium is not interesting. It’s obvious and not at all in dispute (despite your implication). The reasons for it are clear; there is nothing unusual about it that demands an explanation. It’s about as big a mystery as the fact that gold commands a premium over silver.
However, there IS something about Irvine home prices that is interesting and demands an explanation. It is this: the ratio of Irvine home prices to Irvine rents is quite high, both from a historical point of view and in comparison to many other regions of Southern California and the US. THAT, my friends, is what all the fuss is about.
Now, IrvineRenter and others are doing their best to explain this interesting circumstance. Those who are bullish on Irvine seem to be just ignoring it. I haven’t seen one Irvine bull offer up a halfway sensible explanation for what’s going on. Instead they just constuct a straw-man argument where they imply that the bears are somehow disputing that Irvine homes should cost more, then smugly refute it. Fail.
That about explains it. Very to-the-point, Bigmoney.
I think PR has cedibility, after all, he isn’t getting people to invest their cash in Las Detroit.
I’m MUCH more likely to give credibility to the person who isn’t looking to pick my pockets for business…..voluntary or not, I know what the goal is.
Can someone come up with the number of apartments available in Irvine? Can someone THEN come up with the number of TIC controlled apartments?
You will probably find that ratio absurdly high. And you wonder why rents are so high in Irvine when the rents are controlled/manipulated by ….the IRVINE company. (TIC)
Wow, what a surprise, the TIC extracts as much cash as it can from its host. SPOON!!!!
I have no credibility? My credibility increases every time people respond to my post with emotional nonsense.
After all I’m not trying to sell anything, I have nothing to gain at all. In fact, if anything I’d benefit from lower prices.
Your the one who has been trying desperately to sell something and turn this blog into money. If you are looking for someone who has vested interest, and who has lost credibility you need to look somewhere else. It’s more difficult to recognize.
Yeah, those 2010 New Home Collection sales are just TIC fluff points
Why not address what’s really going on?
Trigger happy FCBs out there scooping up properties.
For every one “opportunity” there’s 40 people lined up to bid on it.
I guarentee you that in 2007 and 2008 there were homes in Riverside County, Las Vegas, South Florida, etc that were well priced and got many bids. It didn’t mean that prices in those markets weren’t declining.
PR – Determine your credibility by seeing how many people you can get to invest in your idea, as if you had any. Any being ideas or credibility.
IR has investors and has successfully turned this blog into income. And you … well, about the only thing you have done is throw rocks from the behind a fence where no one can see you and no one cares.
Looking at the photos it would appear the typical Irvinite would want to gut the place, redo kitchen/baths, fixtures, doors, new carpet etc. Definitely a fixer, but for the Irvine premium price.
@Planet Reality: You’re right, because everyone who lives in the Midwest makes a living working a physical labor job.
Dumbass.
IR–good analysis, but you let the Fed off the hook. Your key statement is “Investors demanded bad loans because the loans were often packaged into securities given AAA ratings.” It would be far more accurate to say “Investors demanded high yield “safe” loans because the Federal Reserve ZIRP destroyed the value of their savings. And people wanted to buy homes because ZIRP made expensive homes appear affordable”
The Fed should have know what responsible, sustainable monetary policy should look like, so they deserve 50%. ZIRP made the whole thing happen.
Bankers deserve 40% because the should know what a viable 30 year home loan looks like. They clearly failed to do their job.
Borrows deserve 10%–not because they are innocent (they are clearly not), but because they were doing what the Fed and Bankers enabled them to do. Borrowers shouldn’t be expected to know what a viable loan looks like. Bankers were supposed to be the experts here.
ENM said
“Borrowers shouldn’t be expected to know what a viable loan looks like.”
I’m flying the bullshit flag on that one! Does anyone really believe that someone making $30k year doesn’t know they can’t afford a $800k mortgage? Of course they do…they might not “know” that anything above a 31% DTI is approaching insolvency, but the profligate spending on houses…c’mon.
People who give money out are expected to be responsible. It’s their fiduciary responsibility.
People who borrow money are expected to be irresponsible. There is an assumed default rate going into that relationship.
Human behavior is very easy to predict. If you give most people access to life comforts with no barriers, they will take those comforts. This is no different than a mouse going after the cheese in a mouse trap. The sailor gets off in a port town hits the bars and impregnates the local port women. Sure it’s irresponsible but it’s easy to predict.
The known irresponsible did exactly what the responsible should expect them to do. Now the responsible need to play by the rules. The banks were supposed to be responsible but that weren’t. Now the responsible tax payers pay. Again very easy to predict.
I’ll return the favor.
While your claim is certainly true, it’s the exception not the rule. The housing crisis wasn’t caused by people making $30K thinking they could handle $800K mortgages.
None of the case studies in IHB are like that. Rather, most of the time people buy homes they could have reasonably expected to afford, then slowly went ponzi afterward.
The global financial system should not be based on the financial IQ of the average American.
Wait, I disagree, the global financial system SHOULD be based on the financial IQ of the average. After all, they are the ones who have to live it. It just shouldn’t be RUN by the average. But then, those who are above the average – and in fact run the system – are predominantly interested in taking advantage of their “gift”… and the average.
If a counterfeiter counterfeits $$$ and lends it to us, do we have any moral or legal obligation to repay the loan? NO ! The law (statute) says counterfeiting is illegal and that we do not have to repay the counterfeiter. But the banksters are careful. The bank’s own published manual claims, “Money does not have to be issued by the government or be in any special form. Money is anything that can be sold for cash and which the banks accept as money”. Aren’t they a riot?
The story about Dan Mahowney who allegedly defrauded the bank out of several million $$$ and also the story about Frank Abegnale in his book Catch Me If You Can never took anyone else’s cash. Dan and Frank signed for every note they received. They created the funds themselves. No one lost any $$$, neither the investors in Mahowney’s case nor Pan Am employees in Abegnale’s case. I’ll bet to this day, both these
men think that they did something illegal. Yet, not one living soul lost any $$$ to either of them. The corporate entities pretended theft and had them punished in order to preserve and perpetuate the scam.
When you purchase something from a shop and then return it, why are they so intent on getting back
your receipt? No, not to prove you paid for it, because you can’t pay for anything. This receipt is the evidence of exchange. The goods don’t matter, any more than the principal on a ‘loan’ matters. All they want is the interest. Look at your minimum payment due on your credit card statement; its only the interest. The ‘loan’ doesn’t exist. They MUST pay the IMF the interest on the loan.
great reply, you are absolutely correct that the Fed has much of the blame to take. But when you give 50% to the Fed, 40% to the Bankers, and 10% to the borrowers you have nothing left for the Government…
Fannie, Freddie and all the bullshit everybody-deserves-a-home-policies have much to do with it as well.
In summary, all anti-free market policies are to blame.
The minions can trick most of the people who go to court. When I say that they do not want us to go to court, I mean they do not want US––those of us who are onto them––to go to court because we can expose their fraud, and so ends their deceit. By our not going to court, then “dishonour, delinquent, and incompetent” apply and this allows them to charge the trust and treat us as the slaves we really are, due to the cestui que vie trust (CQV). By going to court, we are liable to fall for the deceit, fraud, and entrapment. Either way, they make us liable for the charge. Sending an EDP, on the certified copy of the birth certificate, to Vital Statistics, prior to the court date, ought to make the case disappear. The Registrar will be bound to notify any agency which has charged the CQV trust.
Sending an EDP, on the certified copy of the birth certificate, to Vital Statistics, prior to the court date, ought to make the case disappear. The Registrar will be bound to notify any agency which has charged the CQV trust. After finding our Divine Trust ID # http://globe-union.org/home.asp , if, in court, we are asked for our name, remember that this reveals the built-in presumption that we are a slave. If we answer to the Name, then we have admitted to being a slave. We are to answer, “I am Trust Recipient #……-……-……, also known as the form, [Name]. I’ve advised the Registrar of Vital Statistics to remove the name from the slave-roll.” In response to a demand for a plea, we can ask,
“How can I enter a plea before you have established jurisdiction?” If court proceeds, we can say, “Objection! Since jurisdiction remains unresolved, then, as a matter of law, I’ll appeal this. If you cannot prove jurisdiction, then dismiss this case.”
How to Succeed at Court: http://one-heaven.org/court_success/court_process_examples.htm
COMPLIANCE VS. CONSENT
So, to have their trick backfire on them, let them know, “With respect: of necessity and under duress, I shall comply with your order, however, I do not consent. Any oath or vow I utter, any action I take, any document I sign will be of no value to you without my consent. Without my consent to any bond which might be created on my word, by the honour of canon law, it will be deemed worthless.” (See: Key Concepts: http://one-heaven.org/ecclesiastical_deed_poll/edp_concepts.htm ) ‘Court’, from the word, ‘cautio’ means, ‘bond, security, bailment’. Court is not about justice; it is about money.
TRAFFIC “LAWS”
We know they do not really want us to “slow down”. If we all did the “speed limit”, they wouldn’t be able to collect revenue. They designed thousands of statutes which, if we don’t obey, and how could we even know them, never mind obey them, they will charge the CQV trust. I think my favourite might be the one about being fined for having more than one “proof of insurance” paper, in the car. If you have put this year’s insurance slip in front of last year’s, be prepared. Ask a cop why he cares. You can see not only how insane that is but also how desperate they are.
MORTGAGE
We know that they do not really want us to “pay the mortgage” because if we all paid the mortgage, we would remain in honour, we would not become “delinquent” and, ergo, we would not be what they want us to be, contend we are, and treat us as: “incompetent”. It is the dishonour, delinquency, and incompetence which allows them to control us by charging the CQV trust and making us ‘pay’.
SLAVERY
Only slaves, aka “property”, are required to be enumerated. A woman was stopped at the border and asked for her passport. She said she didn’t have one. When asked, “Why not?”, she replied, “I don’t qualify for one.” I presume this means that she didn’t have a birth certificate because that is what is required in order to get a passport. But, now we know that it is the birth certificate which evidences our enslavement.
Non-registration is our freedom. My son has no birth certificate. I have vacillated, over the years, about getting him one and a few years ago, I tried and failed, three times. Since it was so difficult, I figured it must not be the right thing to do, so I let it go.
For the rest of us whose names are “registered”, meaning: on the slave roll, which means “bind”, and “titled to the corporation”, we must contest the ownership of that title. The way to alter the status of the name of the CQV trust is to send, to Vital Statistics Registrar, an Ecclesiastical Deed Poll. This will allow us to go after the Equity Redemption which ought to get us $10 million for “injuries”, i.e.: what they have stolen from us over our lifetime of slavery.
I’ll have what he’s having. Bartender, make it a double!
@chipotle
I am still dealing with collection agents and credit card banks but I have way more fun with them now. I ask the credit card companies to send me a bill, not a statement, to include a copy of the contract, evidence their consideration (what they gave me, which was nothing, in exchange for the $$$ they want), and have it signed under the full, commercial liability of one who can bind their corporation in contract. Since they can’t do this and it would be fraud if they did, they pass it along to collection agents who are even more fun because, who are they? I never had any contract with them either. They are all third party debt collectors / interlopers. I just tell them to get out of my commercial affairs. I like best the ones who have the attorneys write the letters because …. the bigger they are, the harder they fall. My latest ploy is I just pay them with a transfer instrument – makes them crazy.
…the economics of banking is counterfeiting.
Pay them with a transfer instrument? How does that work?
What is meant by “pay them with a transfer instrument”?
@ chipotle – If having a double would bring critical thinking and the necessary questioning of fundamental beliefs you have been programmed with since birth….then yea, have a whole bottle.
Most people will lack the fortitude to even question how our nation works, or if what it does is good or right. Most people assume that is the case, and obviously, they are wrong as american free society is crumbling under the rottenness of government intrusion, manipulation, and control.
The good ol’ US of A is so fascist nowadays, to even question our government can be considered a “terrorist” act. Sad, hope you all enjoy the debt servitude. BTW, I read the Global. Union link and it sounds good, but so did the Constitution at one point, now it’s just that much more paper to wipe our asses with.
Swiller, there is critical thinking and then there is foaming at the mouth moonbattery. Just because you can string a dozen legal sounding words in a row, doesn’t make you a critical thinker. But Wesley Snipes looks forward to sharing a jail cell with you and ol’ Maddox for your (shall we just say novel?) reinterpretation of 250 years of commercial law and secured finance.
My humble prediction…OC home sales will likely do well this Spring. QE2 reinflated stock market (check out that chart), Boomers retirement portfolios resurrected beautifully. OC Boomers flush with cash call Realtors, eager to fund down payments (or even buy outright) houses for adult kids who would struggle to buy any OC real estate with their savings/income/credit scores. OC house is bought, kids/grandkids stay nearby, prices stay irrationally high relative to income. Entire family heads to local soccer field to cheer little Connor as he kicks the winning goal. Day concludes at South Coast Plaza shopping for furniture/housewares.
We just need QE3, QE4… to keep the party going. I heard the Fed has a 1,000 year supply of ink, so we should be good for as far as the eye can see.
Can’t fight the Fed. 401K’s and housing will be bailed out no matter what the cost. Gotta get everybody back power shopping.
It’s a rare day the red market closes red, usually down thirty points or less…followed by a rally the following day quickly wiping out any loss, no matter what bad news develops. Let’s see if today they perform that final hour magic, the Turnaround.
“We just need QE3, QE4… to keep the party going. I heard the Fed has a 1,000 year supply of ink, so we should be good for as far as the eye can see.”
Did you read about the TARP report by the Inspector General. It’s very interesting, given that the report actually admits that interfering creates more of the same hazards…
http://www.wtffinance.com/2011/01/special-inspector-general-to-testify-before-congress-tarp/
And you are right, it’s just a matter until the next QE, the only problem is that the Chinese are now dumping their USD holdings. Not all at once but they sure try to get something tangible in return.
WTF?
I wonder if every IRS and CRA employee ought to be apprised of this. You might want to pass it along; it IS the loving thing to do.
*
It just crossed my mind that you might be unfamiliar with the banking system. Allow me to use the “Lottery” as an example. People generally use cash to buy lottery tickets. The lottery pot is about $20M at any given time – CASH! If you won $8,000 in the lottery, you would take the ticket for verification. Would someone go to the cash drawer and count out your $8,000? No; he would write you a cheque. If you accepted the cheque and never did anything with it, nothing would occur. Nothing would change. No accounts would be debited; no accounts would be credited. That cheque is valueless until you endorse it. When you do, suddenly, it is worth $8,000. What’s different? Your signature is what gave it value. This can be verified in §57.1 of the Bills of Exchange Act of Canada which states that the signature IS the money.
Now, if you were to deposit that cheque, your account would be credited. If you were to cash the cheque, the bank would give you $8,000 cash. Then, what happens to the cheque? Its value to the bank is quite incredible because that credit can off-set the liability of your cash receipt or account credit and, now, their ledger is balanced at no cost to the bank.
What banks are permitted, by law (the Bank Act), to do is hypothecate the value and lend it out numerous times for dramatic profit. (For details on how a bank makes a fortune from your signature, Google: Money As Debt). Suffice it to say that the cheque became a huge asset – vastly more than its face value. So far, you have benefited a bit and the bank has benefited a lot, by your signature, but the real winner, by far, is the Lottery itself because the bank returned the cheque to them. Although it is worth only $8,000 on its face, the signature upon it grants it interminable value. That cheque gets sold on the securities market and it literally travels the world creating a profit each time it is sold. So, your signature has created another fortune, this time for the Lottery. Did they EVER have to dig into their pot of $20M in order to give you your win of $8,000? No. You might think $8,000 was a windfall, but the truth is, bankers profited by far more than you did and it was all funded by you. YOU created your lottery win.
Can you see that the Lottery is simply a cash-confiscatory game for the ones who run it – the World Bank? Can you see that IRS/CRA operates the same way? Can you see that IRS/CRA is just an agency of the International Monetary Fund and the World Bank? If you grasp this concept, you’ll see that not only do I not “owe” IRS/CRA anything but also I was the source of value which will create egregious revenue for IRS/CRA which has nothing to do with the government of U.S.A. or Canada, or the States or the Provinces, or the people of either. Its sole purpose is CASH-CONFISCATION. I am certain that you, also, have felt the effects of the IMF on your personal finances. Whatever your loss, it is important for you to know that it was all by design and intention.
Please realize the truth of this, before you consider confiscating, from me, the meagre amount that I have, compared to what IRS/CRA will receive, forever, from my signature. I created the value and IRS/CRA is the beneficiary. Then, please, consider a job more suited to your ethics. Thank you.
Click on my name for more info.
I must add the third responsible party – the Real Estate Cartel. Many an Agent referred a borrower to me during the 2004-2007 boom only to find the conversation went something like this:
Agent – I’ve got a buyer. They want to put an offer in on a $500,000 1br / 1ba Condo.
SGIP – Thanks. I spoke to them earlier today. I don’t know how this will work. They have no cash down and make $1,500 a month gross.
Agent – Hmmm. That’s not what my other lenders at Countrywide and WAMU said. They could qualify them up to $1,000,000. I guess the only thing I can say is THANKS FOR SCREWING UP THE SALE. YOU SUCK.
Off the buyer would go, only to be set up for failure. Many of these buyers then would Ponzi their home, trying to fit that $1,500 per month income into a $4,000 per month payment the only way they knew how – leverage in an appreciating market.
The majority of the failed home owners who purchased before 2002 when Underwriting standards vanished were felled by their own self inflicted wounds. Those who purchased after were aided by the Real Estate Sales Cartel promising prices that will reach to the sky. Who didn’t hear “oh, you can always refi later” or “You’ll likely sell in 5 years so buy what you can now”?
If I had to put percentages on it, it was certainly lenders in the lead, followed by the Real Estate Sales Cartel, then borrowers who grew intoxicated on cheap money and rising faux status amongst their cul-de-sac bretheren.
My .02c
Soylent Green Is People.
Have all America’s real estate markets really been laid waste to? Some have fared terribly, but they also had borrowers that were willing, for the most part, to do two things: pay double what someone else paid just a few years earlier, and/or devote a far higher percentage of their income to housing. Throw in the specu-vestors and a lot of blame goes to borrowers.
In 1996, I received one of those, “Here’s $3,500 (USD) for a Happy Christmas …. just sign the back of this check”, where it outlined how much I would pay over whatever period of time I took to repay this alleged loan if indeed I cashed the cheque. I loved it. I mozied over to my bank, endorsed the cheque and was handed $3,500 FRNs. They were right; I did have a happy Christmas that year.
When they sent me a statement about a month later, trying to collect something from me which not only didn’t exist but also didn’t cost them anything other than postage and printing, I requested proof of their loss. They were flummoxed. They didn’t lend me anything. Understand that banks do not ‘qualify’ you in order not to lose $$$, they ‘qualify’ you in order to gain $$$; they don’t want to lend to educated customers. They can’t lose anything
they never lent. I hear where your ego just took you … ‘well, you got something for nothing’. No, I didn’t; I sold my signature for $3,500 – a good price back in 1996. All I got was $3,500 in debt notes. Since then, I’ve done the math. My signature is now worth 15 billion dollars (CAD).
Then they got really jumpy and sent me threatening letters. I asked that they show me their loss. What loss could they possibly have sustained? Is my bank out any $$$? No, its books are balanced since they were electronically credited by the ‘other’ bank (there’s only one bank). Is the other bank out any $$$? No,
the returned cheque with my signature was their credit. So their books were balanced. Were my books balanced? Of course! My debit was my signature and my credit was the cash. It is all just bookkeeping entries.
Who owes what to anyone? The transactions are complete. It was simply an exchange of debit/
credit. Why would I give them anything more than what I already gave them – my signature, which is by the way, by far more valuable than $3,500 because they will lend funds against my signature many times, earning them, depending upon the rate of interest, an unlimited number of times that amount. This is called ‘fractional banking’ and their not apprising me of this is called ‘bank fraud’. So in fact I did them a huge favour by selling them my signature. They informed me that I had not ‘repaid my loan’. This is called
‘double billing’. ‘Double billing’ is fraudulent.
This is the best piece I’ve read here for a long time.
My only gripe is how flippant IrvineRenter remains regarding the chain of title. Yes, on the blame issue for the mortgage mess as a whole, this paperwork issue is irrelevant. But, it becomes very relevant when you purchase a bank owned home. The last thing a new homeowner needs is the hassle of dealing with title issues after they purchase a home. So, the paperwork issue isn’t meaningless. Even if the title holds (which will almost always be the case), it is no fun dealing with the legal drama that ensues when one of these deadbeats challenges the title on your property
“The emotional pandering is part of the left-wing political meme on this issue. The other political pandering to loan owners concerns robo-signer.”
I couldn’t agree more on this and I’m a friggin liberal. Crooks and Liars is one of the more mainstream sites I see this garbage on. During the Bush years these sites were very reasonable. I guess when you have a razor-sharp focus on a clearly illegal war based on doctored intelligence it’s pretty easy to have a reasonable position. Impeach the guy.
But, now that we got a centrist in office that has very reasonable policies regarding bailing out homeowners, these sites are awash with emotional diatribes about how these poor debt laden luxury car driving “homeowners” deserve a free ride for one reason or another.
“But, but… the banks got away with it!”
Hey friends, maybe your focus should be on prosecuting bank executives rather than promoting more theft.
In accordance with 15 USC sec. 1641(f)(2) (which is part of the Truth in Lending Act(TILA)) requesting the chain of title information to the note and Deed of Trust which, by Federal law, the lender or servicer must give you. BTW, about 80% of the time, the servicer DOESN’T have one or both of these present and is betting on you NOT asking for it. But this isn’t the half of it.
Think of the game of musical chairs. There simply are not enough chairs ($$$ to pay interest) to go
around. Those who are forced to leave the game, as there is not enough money in the economy to pay back all the debt the banks have created by their expansion of credit, and profited from creating it, will lose all they have worked to accrue. It is the banks which will receive the hard asset, representing the fruits of your labour, and you have to start all over, with nothing. Who sets the interest rates in this country? The interest rate, e.g.:6% is always commensurate with the percentage of those who will go bankrupt.
The bankster’s crime of pre-meditated expansion of the debt beyond the amount of money in circulation will create a predetermined number of innocent victims, commensurate to the percentage of interest that the banks charge each year. Yet, banks cannot commit this crime without our giving them our signed promissory note so we can hypothecate a certain number of years of our future labour in order to use the bank’s
equivalent of money, right now, in the present. Until interest, which is being applied to the credit extended by banks, is eliminated the people will remain slaves to the ‘credit system’ which is the banking and monetary system of the world.
Man, what’s with the chain mail? The world has gone to hell.
Generation Y wants housing Las Vegas has in short supply
This means two things:
downward pressure on the types of housing that are less desired
much less downward pressure on desired housing types.
Different types of housing in different locations are not perfect substitutes.
Our financial system is screwed, and the only way to rebuild it is with consumer confidence. Who has confidence in the dollar or our economy currently..No one. That to me is worrisome, and to top it off where are we seeing the most “economic stimulus”.. foreign investors?? Soon we’ll have to answer to another BIG bank,,, China. And they’ll have our @**
“Our financial system is screwed, and the only way to rebuild it is with consumer confidence.”
I very much disagree with that assessment. No doubt, the US monetary system is screwed but it isn’t for a lack of confidence. The Federal Reserve and Government’s policies do everything they can to increase confidence, all policies are there to increase spending, increase credit, etc. That results in misguided confidence and the result is the dire state that the US monetary system is in.
Policies that add “confidence” only delay the inheritable. Look were the artificial low interest rate got us…
http://www.wtffinance.com/2011/01/fcic-report-financial-crisis-could-have-been-avoided/