States Fast Approaching Financial Abyss

“…but the day of reckoning is at hand. The debt crisis is already making Wall Street nervous, and some believe that it could derail the recovery, cost a million public employees their jobs, and require another big bailout package that no one in Washington wants to talk about.” – 60 Minutes

60 Minutes has done a thirteen minute report on the approaching day of reckoning for the states who are drowning in the deep end of the fiscal pool. According to Gov. Chris Christie, it’s not a income problem, it is a government employee benefit problem, and according to Meredith Whitney (highly respected Wall St. financial analyst) who has done research on the financial health of states and cities, this spring will see an influx of municipalities defaulting on their bonds because $160 Billion of federal stimulus cash will run out (just about the time the next round of residential and commercial mortgage resets occurs). She was calling out the big banks about the problems ahead for them long before they wanted to admit their liability, and those very same municipal bonds that will be defaulted on are owned, in the majority, by those very same big banks. Let’s all get ready for T.A.R.P. 2.0.

Welcome to a ‘Round Robin’ of fiscal insanity; who will default first?

(H/T TheRightScoop)

Rep. Devin Nunes (R-CA) is trying to set up a pre-emptive strike against bailouts for public pension funds (from 12.7.2010).

Obama Times Mortgage Forgiveness Perfectly…

Obama Times Mortgage Forgiveness Perfectly…

Get ready for the snake-oil salesman to go all in as he prepares to make the voters swoon, cry, and wave their arms in the air yet again.

On the heels of another $1.5 Billion requested bailout from Fannie, (who has suffered 12 straight months of losses), we have the Obama political machine maneuvering to ‘buy’ votes in the upcoming midterms by offering mortgage forgiveness to Americans.  How does that money-changing-hands-thang work again?  Why don’t we just keep our money in the first place?  I’m sorry, I forgot; I’m just some brain-dead, fluoridated, prescription-drugged and debt-strapped moo whose only reason for an IRS and Social Security tracked existence is to be out working to produce a revenue stream for the aristocrats and the rest of the world.

Then again, did I or DID I NOT say in Fall 2007 that somebody was going to have to put a freakin’ floor under the housing market to stop the slide, and how does this affect the coming rounds of mortgage resets coming down the line in the next three years?

An August Surprise from Obama?

Main Street may be about to get its own gigantic bailout. Rumors are running wild from Washington to Wall Street that the Obama administration is about to order government-controlled lenders Fannie Mae and Freddie Mac to forgive a portion of the mortgage debt of millions of Americans who owe more than what their homes are worth. An estimated 15 million U.S. mortgages – one in five – are underwater with negative equity of some $800 billion. Recall that on Christmas Eve 2009, the Treasury Department waived a $400 billion limit on financial assistance to Fannie and Freddie, pledging unlimited help. The actual vehicle for the bailout could be the Bush-era Home Affordable Refinance Program, or HARP, a sister program to Obama’s loan modification effort. HARP was just extended through June 30, 2011.

The move, if it happens, would be a stunning political and economic bombshell less than 100 days before a midterm election in which Democrats are currently expected to suffer massive, if not historic losses. The key date to watch is August 17 when the Treasury Department holds a much-hyped meeting on the future of Fannie and Freddie. A few key points:

1) Republican leaders believe this is going to happen since GOPers and Democratic moderates in the Senate are unwilling to spend more taxpayer money on more stimulus. But such a housing plan would allow the White House to sidestep congressional objections and show voters it is doing something tangible about an economy that seems to be weakening.

2) Wall Street banks are alerting their clients privately to this possibility. Here is what some are cautiously saying publicly. This from Goldman Sachs:

GSE policies are one of a dwindling number of policy levers the administration has left to pull, so it is conceivable that changes could be made, though there is no sign that a policy change is imminent. The Treasury’s essentially unlimited ability to provide financial support to the GSEs creates an interesting situation over the next twelve months: the GSEs could potentially be used to provide additional support for the housing market and, to a lesser extent, the broader economy in 2H 2001.

And this from Mizuho Securities:

As policy makers ponder their next move the data suggests that they face not only a stalling recovery but a growing risk of deflation taking root in the economy. As a result, the Administration has turned back to industrial policies by approving the purchase of a sub-prime auto lender by GM as a means for pumping  up domestic sales, especially since the latest auto sales data indicates that consumers are still responsive to incentives. This precedent increases the risk that the government will use its control of Fannie and Freddie to increase consumer cash flow and juice the economy again.

Moreover, Morgan Stanley is pushing a mortgage relief plan directly to Congress. On August 3, a top Morgan Stanley economist recommended to the Senate Budget Committee that Fannie and Freddie ease their lending standards to allow millions of Americans to refinance their mortgages.

3) Keep in mind the political and economic context. The nascent recovery is already running out of steam. Wall Street economists just downgraded the government’s second-quarter GDP estimate of 2.4 percent to around 1.7 percent. And as even Treasury Secretary Timothy Geithner is warning, the unemployment rate may well begin to rise back toward the politically toxic 10 percent level given such sluggish growth. Many in the White House thought the unemployment rate would be dropping sharply by this point in the recovery.

But that is not happening. What is happening is that the president’s approval ratings are continuing to erode, as are Democratic election polls. Democrats are in real danger of losing the House and almost losing the Senate. The mortgage Hail Mary would be a last-gasp effort to prevent this from happening and to save the Obama agenda. The political calculation is that the number of grateful Americans would be greater than those offended that they — and their children and their grandchildren — would be paying for someone else’s mortgage woes.

4) And don’t think the White House is worried about financial market reaction. If they thought it would pass Congress, they would be submitting a $200 billion Stimulus  2.0  (3.0?, 4.0?) right now.

August is supposed to be a slow month for Washington politics. But maybe not this one.

A few questions though.

  1. Who will be making up the difference of the forgiveness loans?
  2. Who will still be able to pay their mortgages without jobs, or with a dollar whose value is almost non-existent?
  3. Who will still be able to pay their mortgages when their taxes increase in a few short months?
  4. Who will still be able to pay their mortgages when hyper-inflation hits and food becomes more important than a roof over their childrens’ heads?
  5. If this was such a viable option, why did Washington wait so long to do this?

Another short term heroin hit to make the Usurper Freeloader look like The Messiah and attempt to save his precious majority from the guillotine.

The chess game continues…


(UPDATE:  I want to congratulate Left Coast Rebel and their crew of amazing bloggers for being picked up by The Daily Caller as they cover a number of these issues including Sam Foster’s GM and Chrysler bleed jobs while Obama claims victory.  Make sure to put LCR on your daily flyby of blogs of note.)

(H/T BB)

A Little Matter Of Commercial Real Estate

A Little Matter Of Commercial Real Estate

We’ve been waiting for the second of many shoes to drop which will include the next round of residential mortgage resets AND the bottom falling out of the commercial real estate market. It appears some guys way more fluent in the aspects of the monetary problem (because they created it) are a bit edgy themselves. At what point can we abolish The Fed and get the entire concept of central banks (and the government credit card) out of our wallets? (Did you know that the FBI considers Americans that call themselves ‘sovereigns’ to be terrorists? I’ll save that for another post.)

European Central Bank’s Report Issues Warning

FRANKFURT — Despite recent improvements in the health of European banks, they remain vulnerable to a daunting array of hazards that are expected to produce another round of sizable write-offs during the next couple of years, the European Central Bank said Monday, in a report that cataloged in alarming detail the problems facing the region’s financial institutions.

The challenges for banks in the 16-nation euro zone include exposure to a weakening commercial real estate market, hundreds of billions of euros in bad debts, economic problems in East European countries, and a potential collision between the banks’ own substantial refinancing needs and government demand for additional loans, the central bank said. (emphasis mine)

In its twice-yearly review of risks facing the nations that use the euro currency, the central bank expressed particular concern about banks’ need to refinance long-term debt of an estimated 800 billion euros, or $984 billion, by the end of 2012.

Borrowing costs could rise as the banks compete with governments in the bond market, “making it challenging to roll over a sizable amount of maturing bonds by the end of 2012,” the report said.

It’s coming kids.  You know it in your gut.  I’m expecting the dominoes to start falling sometime this month.

ROUND TWO Of The Mortgage Reset Game = Foreclosure

ROUND TWO Of The Mortgage Reset Game = Foreclosure

The Next Two Years Are Really Frightening!

DingDingDingDingDingDing!!!! ROUND TWO!!

Still think that the government is not trying to suck every last penny out of your pocket, leave you without property under your feet, and place you in a position of serfdom?  Then why did they do everything in their power to prop up the veneer of solvency for the banks and NOT put a floor under the housing market? There is still a trillion dollars in unreported losses floating around out there. It’s been how long since they knew the subprime mortgages were resetting, and that the housing market was imploding? Still think that Obama, his henchmen, the progressive republicans AND THE FEDERAL RESERVE give a hoot about the average American?

WAKE UP!

Homebuyers scramble as mortgage rates jump

The average rate on a 30-year loan has jumped from about 5 percent to more than 5.3 percent in just the past week. As mortgages get more expensive, more would-be homeowners are priced out of the market—a threat to the fragile recovery in the housing market.

How about those millions of foreclosures flooding the market and threatening the fragile recovery? Or those millions of people that are priced out of the market because, well, they DON’T HAVE A JOB ANYMORE?

And if you wanted to refinance at a super-low rate, you may have missed your chance. Mortgages under 4 percent are still available, but only for loans that reset in five or seven years, probably to higher rates.

Yet another round of let us take your house, your money, your life….in five to seven years. Whoever thought that a significant portion of the population would be stupid enough to get an adjustable rate mortgage?  Whoever thought people would still be so gullible.

Rates are going up because of the improving economy and the end of a government push to make mortgages cheaper.

BULLSHIT!!

For people putting their homes on the market this spring, rising rates may actually be a good thing. Buyers are racing to complete their purchases and lock in something decent before rates go even higher.

“We are seeing some panic among potential buyers who have not found houses yet,” said Craig Strent, co-founder of Apex Home Loans in Bethesda, Md. “They’re saying: Man, I should have found a house three weeks ago or last month when rates are lower.”

If a potential buyer was not able to find a house three weeks ago, that person is a total moron or this story is a total whitewash considering the amount of homes on the market right now. What say you? You aren’t that stupid are you?

Quarter 1 - JANUARY 2009

Just you wait until the commercial real estate market really starts to reset. Woo Hoo!  Gonna have some fine times then!

Go here now to continue your education.

And You Were Lead To Believe The Mortgage Bubble Had Popped

And You Were Lead To Believe The Mortgage Bubble Had Popped

(Editor’s Note: While you watch these videos from 2008, think about what the Obama administration did or did not do to circumvent the coming waves of residential resets and commercial mortgage resets during his first year in office.)

Very few people, and none that I know, would be happy to be the bearer of bad news, but this might explain why Tea Party Patriots have been screaming “stop spending money“.

The second tsunami of the residential mortgage meltdown disaster is about to roll right over us and what is left of our wallets. Amazingly enough, it was covered by ’60 Minutes’ in December, 2008.

Whitney Tilson of T2 Partners explains the Alt A and Option ARMS that are going to reset starting this year and continuing through the entirety of 2011 into 2012.  This is one of many indicators I have been watching, and it is probably one of the reasons why the central bankers put one of their very secretive meetings on the calendar for this week in Sydney.

According to Mr. Tilson, the ALT A mortgages are valued at close to $1 Trillion, and the Option ARMS come in somewhere around $500-600 Billion.  Mr. Tilson expects that about 70% of these mortgages are going to default.  The continued credit freeze for average Americans will, more than likely, contribute to the defaults.

Part 2, Florida Foreclosure Row

What do we have to combat this? Obama, Bernanke, Geithner, Frank, and Dodd. Have you stocked your pantry and/or root cellar yet?

The Fed Is Worried About The Housing Market?

The Fed Is Worried About The Housing Market?

The Federal Reserve

How many more pots is The Fed going to dip their fingers into?  Are you as worried as I am about all the mortgages that are going to reset in the next three years?  Recovery?  What Recovery?  We are sliding farther into the abyss while Barry, Harry, and Nancy congratulate themselves on Obamacare.  And what about Fannie and Freddie? How are they going to be affected in the next 3 years?

Some at Fed See a Need to Do More for Housing

Despite extensive government intervention in the housing market, some policy makers at the Federal Reserve are worried that even more might need to be done.

The minutes of the Federal Open Market Committee’s mid-December meeting, released on Wednesday, reflected a lingering wariness about the strength of the recovery in light of high unemployment and substantial slack in the economy.

At the same time, unease is growing that a tentative comeback in the housing market could fall apart as a tax credit for home buyers expires and the Fed’s program to hold down mortgage rates comes to a close.

Concern over housing deepened Wednesday with the release of new data showing that long-term interest rates were rising rapidly from their historic lows, while mortgage applications to purchase houses were falling. Applications are now at their lowest level in 12 years.

Lowest level in 12 years…because no one is willing to take the risk and/or they cannot qualify because they have no money and/no job.

Meanwhile, this is what you should be paying attention to because it is the forecast of the future.  From 3.30.2009.

Mortgage Crisis Over? Please, It’s Just Beginning

Now that all those sub-prime loans have defaulted and folks who couldn’t afford their houses have been evicted, the foreclosure crisis is over, right?

Wrong.

Why?

Because subprime loans aren’t the only loans that began with a couple of years of fantastic teaser rates that made houses seem affordable.  And over the next few years, all of those other loans will reset.

Now that interest rates are low, the folks who still have jobs and equity in their houses will refinance. Others, however, will be stuck paying higher rates–or they’ll walk away from their houses.

This reset profile is of great concern, because the majority of resets are still ahead. Moreover, the mortgages to which these resets will apply are primarily those originated late in the housing bubble, at the highest prices, and therefore having the largest probable loss. Though many of these mortgages are tied to LIBOR, and therefore benefit from low LIBOR rates, the interest rates on the mortgages are typically reset to a significant spread above LIBOR, and this spread remains constant as interest rates change. Undoubtedly, some Alt-A and option-ARM foreclosures have already occurred, but the likelihood is that major additional foreclosures and mortgage losses lie ahead. If we fail to address foreclosure abatement during the current window of opportunity (early to mid-2009), there may not be time for legislative efforts to contain the resulting fallout.

Is the picture clearer now?  Maybe Glenn can help…

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