Whoa, This Paints a Picture

Granted, the site is using old census data, but have a look at the Village of Pittsford’s website and the statistics it cites. There are 157,916 owner-occupied properties in Monroe County and 94,239 rental units (actual homes as opposed to buildings). Of the occupants therein, 19% of home owners are living with expenses for mortgage and utilities over 30% of their income, but 44.4% of renters are in a similar situation.

Granted, you would expect that one sign of a lower income would be not owning a house.  It stands to reason that you would be living closer to the edge, balancing rent and food, if that’s the case.  I certainly did at one time.  But given the fact that many properties have been purchased with subprime mortgages and landlords across the country have been known to raise rent to compensate for their now-increased payments, I wonder how many people in M.C. are getting evicted or booted due to foreclosure?

If you have any information, leave it in the comments or else contact me.  I’m still digging around at this angle and would be interested to hear from you!


The Loss of Real Housing Wealth

Dean Baker over at the American Prospect discusses the media’s inability to spot the big-picture problem in our American economy: the loss of value in our nation’s real estate. Real estate is losing it’s value to the tune of 11.3% annually, costing about 2.2 trillion dollars in lost wealth. Why is that important? Well, because banks decided to sell mortgages like they were bonds on the market. That easy-money concept of profit making led to riskier and riskier mortgage lending to feed the beast more profit, hence the Subprime disaster. Now, not only are the home owners affected as home owners, but the entire stock market is affected by the sudden dropping of real estate value. But is it that real estate is losing value, or that it was over-valued by the market looking to cash in?


My Top 5 New Year’s Resolutions

Of course, how trite of me to have a New Year’s Resolutions list, eh? But then, the start of a new year, like any mathematically or biologically significant milestone in the wheel of life, is a good time to reflect on what has been and what you hope should be. I’ve never ascribed to the concept of “resolutions,” in the sense of those silly promises you know you can’t keep. Rather, I prefer to take the opportunity to look out on the new cycle and set some long-term goals which have at least the appearance of achievability, and those whose aim it is to make me just a little bit better off than I was before.

And so, for the sake of both reflection and anticipation, I commit my most relevant political resolutions for the coming year:

1. I resolve to remind myself that “sovereignty” is not a word important only to the United States.

All too often in the discussion of the War on Terror, our entire dialogue happens in the absence of this very basic fact. I thought about this again while watching Pumpkin Head in the last Sunday morning of the Old Year, questioning politicians about the situation in Pakistan. I regret to say that Mike Huckabee did better with his answer than did Barack Obama. But both politicians and Tim Russert all seemed to forget that Pakistan, for all the aid we might have provided them, is still a sovereign nation. When Barack Obama says we need to “be sure” that elections in Pakistan are fair, well, the fact is that we don’t have the right to make that call. We tend to forget that while we get all wrapped up in our own problems.


Sub-Prime: Investment Properties and the Tenants that Live in Them

As the Bush Administration insists that it won’t bail out “speculators” for making lousy purchases, we see that it is not always just the speculator that gets screwed. I’m not a fan of coming to the rescue of rich idiots who’ve taken nasty gambles on investment property, but as we see, the mortgage crisis has a very long tail, indeed:

Mortgage crisis inflicts collateral damage – Mortgage mess-

Especially hard hit are families that rent their homes from landlords facing foreclosure. RealtyTrac, a national real estate network that specializes in foreclosed properties, estimates that more than 20 percent of foreclosures involve investment properties; when landlords lose those properties, their tenants lose a roof over their heads with little warning.


Subprime: This is Why Liberals Hate the WSJ

A group calling themselves the National Center for Policy Analysis reprints the findings of a study that “undoes” the “assumptions” that led to the government-led bailout situation. If you’ve any reason to doubt why Liberals hate the financial conservative types extra-extra, especially the Wall Street Journal, check out this douchebag statement:


Falling home prices in many areas provide a powerful incentive to default on the loan, live rent-free for many months, and then hand the keys to the bank.


So that’s what everybody’s doing then, is it? People bought homes they couldn’t afford, waited for the prices to drop, and are now living the good life, rent-free, until the ride is over?

Conservatives see “welfare mamas” everywhere the eye can see. But I don’t want to hear about what you think is happening, I want you to bring me the chicken-wing eatin’, crack smokin’, fat ass welfare mama that’s living in a $150,000 home rent free and loving it. Prove she exists. Bring her by the house, could ya?

What is particularly vexing about the outrage that seems to be moving though certain quarters of the Conservative financial community is that there really isn’t any reason they need be concerned: the government is not handing out loans or bailing out the banks. The president’s Treasury Dept. actually did what an executive branch department is supposed to do: it got the principle players together to work out a solution to their own problems.


Try calling 1-800-995-NOPE

Whoopsies.  Looks like there’s been a little mix-up with the subprime refi number the President Bush gave out the other day.  The number is supposed to be 1.888.995.HOPE, not 1.800.995.HOPE.  Oh, shizzle.


“The Freeze” in a Nutshell/”Superfund” Explained

And indeed, a nutshell is a roomy place for all the people affected by said freeze. Felix Salmon discusses how the mortgage freeze is a good deal for investors and therefore a dealable compromise for the subprime crisis. Somewhere in there, he lays out who’s going to get the freeze, and it’s a remarkably small subset of people:

Finance Blog – Market Movers by Felix Salmon: Why Lenders Love the Mortgage-Freeze Plan –

If you have good credit and are current on your mortgage, you’re not eligible for the freeze. If you have bad credit and you are behind on your mortgage, you’re not eligible for the freeze. The only way that you can be eligible for the freeze is if you have bad credit and you’re current on your mortgage, and it will reset to a higher rate after January 1, and your mortgage servicer determines that you won’t be able to make your mortgage payments after they reset.

And again, this doesn’t affect those whose mortgages have already reset. Meanwhile, Felix tells me in email that the “superfund” I referred to earlier is what’s known as a super-SIV, which as I read it, means that they’re using the same fuzzy math to bail out the fuzzy math that got us into this mess. Phrases like “asset-backed securities” and “collateralized debt obligation” sound like using money owed to lenders like cash, which is precisely the original problem.

So, chances are, if you’re Joe Six-Pack with a mortgage problem, you’re going to need to find a way to get an FHA mortgage right-quick. If you’re a lender who’s continually made money by selling debt – and taking on risky debts willy-nilly, without regard to whether they’re worth the paper they’re printed on – you get to do more of the same and pretend nothing happened.

Pretend nothing happened, that is, for five years. Based on what I’m reading here, I think there might be cause to suspect that the lending institutions chose to abide by this freeze in part because they’re betting that most high-risk borrowers will have either sold off their properties, defaulted on their existing mortgages or otherwise left the lender/borrower scene in that time.


The Subprime Solution: 100 Bn Superfund

Forbes has the skinny on the new Bush proposal to alleviate the subprime crunch. I’m not an economist, so anyone who can correct me on this please, please contact me. But as I read this article, it seems as though it’s just another Federal bailout of banks, like always. The banks don’t appear to be taking a loss on those frozen rates, they’re just substituting:

A Subprime Solution –

Paulson got the biggest three U.S. banks together earlier this fall to hammer out some way of alleviating the crisis, and what they came up with was also met with harsh criticism. It was a $100 billion superfund to buy up the short-term debt of off-balance-sheet entities the banks had set up to invest in some of the mortgage securities that had come under distress.

OK, so “Superfund” in this case appears to be a play on words, comparing the subprime mess to an environmental disaster. Hmm. . Seems apt enough.

But considering the fact that the industry has made billions off investing in predatory loan scams like the subprime mess, and considering the fact that those who’ve already seen their mortgage rates adjusted are left out in the cold, it does seem prudent to expect the industry to pay a little into the solution, as well.

Bah!  That’s just crazy talk.


Conde Nast: Subprime Freeze Agreement “Non-Binding”

I hope you weren’t drinking your coffee when you read that headline. If so, let me suggest one of those monitor privacy filter things. They’re cheaper than the monitor an easier to wipe the coffee off of:

Finance Blog – Market Movers by Felix Salmon: The Subprime Plan: Now, It’s Political –

According to the WSJ, the plan “includes” a non-binding agreement by servicers and investors to freeze the teaser rate on some loans for five years. That’s the main plank of the policy, and is the part that most of the media, including the NYT, concentrates on.

So, they enter into an agreement that they’re not even bound to keep? Never let it be said that the banks don’t rule this country. And it turns out that the White House plans not only to kick the can down the road to the next administration with a five-year rate freeze, but they plan on putting the burden of refinancing homes on the backs of. . . you guessed it. . . states and local governments:

Finance Blog – Market Movers by Felix Salmon: The Subprime Plan: Now, It’s Political –

This is not being reported by most news outlets covering the plan, so it counts as something of a WSJ scoop, although details are obviously very hazy. The idea that the White House would want to dragoon state and local governments into funding refis seems – well, let’s just say that it seems like a complicated solution to an ill-defined problem.

Dean Baker, another blogger I’ve not seen prior to following the subprime situation, takes an even dimmer view of the freeze. He points out that, for those who’ve already had their mortgages reset, this plan does nothing.


The Bush Subprime “Rescue”: 5 Years and a Prayer

The D&C reports on Bush’s mortgage freeze plan today. Details are still clouded in mystery, since Bush has not actually formally released the plan, but this AP report does a good job of laying out the outlines. I’ve asked yesterday what comes after the 5-year freeze plan. Well, chalk this one up to more Administration punting, because there’s really nothing:

Mortgage rescue will freeze rates || Democrat & Chronicle: Local News

The administration plan would let subprime borrowers who are living in their homes and are current on their payments avoid a costly reset for five years. The hope is that by then the housing downturn will have stabilized, clearing the glut of unsold homes and halting the steep slide in prices that has hit many parts of the country. . .. . . When sales and prices are rising again, the expectation is that homeowners will be able to renegotiate and change their adjustable-rate mortgages into more affordable fixed-rate loans with payments that don’t change.

The report is also a tad rosy in it’s assessment of the damaging hikes of interest rates. It reports that the “average” $1200 monthly mortgage payment could increase by $350 a month. That’s bad, but I do know of at least one case where the payments came close to doubling in a single pay period.

The troubling thing – though predictable – about all this is that the administration does nothing to try to avoid a similar crisis in the future. The underlying problem here is that mortgages have been getting sold on the stock exchange as commodities. That has the double-negative impact of both encouraging deceptive or at least risky lending practices on the one hand, and removing a major source of bank income from the umbrella of FDIC, thus making any losses incurred by banks entirely uninsurable. If there is any reason that the markets are panicking, it is largely due to this second effect.

Hillary Clinton and John Edwards have both proposed their own solutions to the problem. No word yet from Obama or any of the other candidates, that I know of. Of the two proposed solutions, Hillary’s just throws money at the crisis without addressing the underlying issue, whereas John Edwards’ goes hard and heavy at the banks while offering creative ways to minimize the impact to home owners and allowing them their own ways out of trouble.


5 Years and Then What?

Color me amazed that Bush wants anything to do with the subprime mortgage fall out, but he looks like he might actually be paying attention:

UPDATE 2-Bush to outline 5-year rate freeze plan-sources | Bonds News |

President George W. Bush is expected to outline on Thursday a plan to freeze mortgage rates for five years for many U.S. homeowners facing sharp increases in their monthly payments, industry sources said on Wednesday.

We’ll have to see what the final proposal looks like. I am glad for any relief the president would deign to provide working class people. But a five-year moratorium on rate increases? Doesn’t that just mean those people have a ticking clock over their heads?

Of course, the banks are saying they’re going to get soaked. Oh, well. Live like a predator, die like a predator, bub. Besides which, 500,000 home owners paying their mortgages at lower rates than you’d like is a hell of a lot better than 500,000 empty homes turned opium dens for lack of tenants.


Municipalities Feel the Credit Crunch

More interesting fallout from the Subprime credit crunch. Cities that once relied on the low-interest bond market for loans to complete projects are now beginning to see those interest rates go up, and projects are being put on hold as a consequence:

Municipal Bond Deals Squeezed By Credit Crisis –

The municipal bond market has been squeezed by steep losses among bond insurance firms. Towns and cities with poorer credit ratings often rely on these insurers to back their bonds, enabling them to pay lower interest rates. But now bond insurers are facing massive write-downs because they promised to cover losses in the mortgage industry, leading some to stop insuring new projects.