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First Half Of 2019 In Review

This past year had a lot of important developments, so I wanted to do a year end summary. It turned out to have more than I expected so this installment will be the first half of the year, and I’ll try to get the second half done in the next few days. My focus was on lending, and there’s plenty to read at any of these links as I don’t want to make this too long.

January 23, 2019 “Aryanna Hering didn’t have pay stubs or tax forms to document her income when she shopped around for a mortgage last year—a problem that made it tough for her to get a loan. But the nursing student who works part time providing home care for children and the elderly eventually hit pay dirt: For a roughly $610,000 home loan, a mortgage company let her verify her earnings with 12 months of bank statements and letters from clients. Ms. Hering’s case highlights how a flavor of mortgage once panned for its role in the housing meltdown a decade ago is making a comeback.”

January 29, 2019 “One of the principal gatekeepers to housing-finance markets is stepping up scrutiny of nonbank mortgage lenders, concerned that some may not have the financial heft needed to overcome stressed conditions. The increased oversight by the Government National Mortgage Association, or Ginnie Mae, comes as nonbank lenders play an ever-bigger role in making mortgages to Americans and as housing markets are cooling. Many of these companies flourished after the financial crisis as banks stepped back from the mortgage market but haven’t yet been tested by an economic downturn.”

“‘This is not a system that has ever been tested in a time of stress,’ said Karen Pence, one of the authors, in presenting her findings at a Brookings Institution conference last year. ‘We question whether it is wise to concentrate so much risk in a sector of the economy that has little capacity to bear it and has a history, at least during the financial crisis, of going out of business.’ There isn’t any single agency responsible for directly overseeing such nonbank entities.”

February 9, 2019 “With the Chinese government restricting investment in the U.S., companies invested in development deals here have been running into cash flow issues. Oceanwide, a developer constructing the largest projects under construction in both downtown San Francisco and downtown Los Angeles recently shut down its $1 billion Oceanwide Plaza L.A. project temporarily because of liquidity issues.”

‘Projects like these have long cycles and are financed with short-term loans,’ Qiu said. ‘It’s a big problem. You have five-year projects and the developers assumed the money would come out of China to support it. Now the money has been cut off. It’s the opposite of four years ago.'”

March 25, 2019 “The federal agency that insures mortgages for first-time home buyers is tightening its standards, concerned it is allowing too many risky loans to be extended. The Federal Housing Administration told lenders this month it would begin flagging more loans as high risk. Those mortgages, many of which are extended to borrowers with low credit scores and high loan payments relative to their incomes, will now go through a more rigorous manual underwriting process, the FHA said.”

“The move is an about-face from a 2016 decision to loosen underwriting standards. Roughly 40,000 to 50,000 loans a year likely would be affected, or about 4% to 5% of the FHA-insured mortgages originated annually in recent years, according to Keith Becker, the agency’s chief risk officer. ‘We have continued to endorse loans with more and more credit risk,’ Mr. Becker said. ‘We felt that it was appropriate to take some steps to mitigate the risks we’re seeing.'”

March 29, 2019 “After declining for years, the share of underwater mortgages started rising again in Colorado in the second half of 2018. There are some first-time buyers who have only put down 3 percent. If they did so last year, and the current drop in home prices continues, they could be at risk if they are forced to sell, said Ralph McLaughlin, deputy chief economist with CoreLogic. ‘The homeowners who are most likely to be underwater are first-time buyers who put 3 percent to 5 percent down and bought during the peak season,’ said McLaughlin.”

April 5, 2019 “Following the news of the Federal Housing Administration subjecting mortgage underwriting to a more intensive manual underwriting process, banks have started to pull back and will continue if yields continue to drop, according to a new study. ‘The reason for the change now is I suspect someone was looking at the FHA portfolio and had an Oh sh** moment when they realized the outsized portion of the portfolio that is at much greater risk of default due to very low down payments and higher debt to income ratios,’ wrote Glen Weinberg, chief operating officer of Fairview Commercial Lending. ‘This led to the abrupt change in underwriting to try to mitigate future risk as the economy enters a new cycle. Unfortunately, the changes now might be too late as the real estate market is already starting to cool.'”

April 11, 2019 “Such a ‘race to the bottom,’ which partly caused the 2008 U.S. economic meltdown, isn’t the only thing that could precipitate the next housing crisis. I’m referring to what’s known in the financial industry as ‘liquidity risk.’ In basic terms, this is the ability for a firm to meet short-term financial obligations such as compensating employees. Liquidity risk is particularly acute within the housing sector because non-bank lenders originate more than 50% of home loans, up from just 9% in 2009. Some 40% of non-banks didn’t turn a profit in 2018, according to Richey May & Co, and these institutions are likely to be in a tough situation if liquidity dries up.”

April 22, 2019 “Home foreclosures in Orlando grew by 60 percent in the first quarter compared with the year before, even as foreclosures nationwide are falling. Foreclosures had been falling sharply since the peak of the housing crisis in 2009 and 2010. But that changed at the end of 2018, when there was a sudden spike. Attom’s Todd Jones said rising house prices combined with the region’s low wages might be a factor in the rising number of foreclosures. Jones said home affordability in Orlando has dropped below its historical average. ‘So homebuyers are more financially stretched,’ said Jones, Attom’s chief product officer.”

April 27, 2019 “Wharton real estate professor Benjamin Keys discusses a new analysis tool he an colleagues have created that could be an early-warning signal when lenders relax mortgage requirements beyond a safe level. ‘We saw this at the tail end of 2018. As interest rates started to go up, we started to see some lenders — even very traditional lenders — starting to make these loans that have some shadows of the types of loans that were so popular during the boom. And now these are not being called subprime or non-prime or ‘alt-A.’ The new name for them is non-qualified mortgage or non-QM. I think people are going to start to hear more about these types of loans… — now it’s growing quickly.’”

April 28, 2019 “A Kuwaiti realtor and his multiple companies bought or brokered at least 160 houses in struggling Buffalo neighborhoods as part of an international Ponzi scheme. The realtor and his associates are serving prison time in the $140 million to $240 million scam that extended to Rochester, Detroit, Cleveland, Florida and North Carolina.”

May 1, 2019 “The Morgan family of western New York built one of the country’s largest rental apartment empires, amassing more than 140 properties and more than 34,000 units across 14 states. Now the family business, Morgan Management, is beginning to shrink as it faces one of the largest mortgage fraud investigations since the financial crisis. Prosecutors allege that Morgan executives and their mortgage brokers obtained about $500 million of loans fraudulently.”

May 5, 2019 “According to the Urban Institute Housing Finance Policy Center’s latest quarterly credit availability report, mortgage lenders are reaching out to borrowers who might have been marginal — or rejectees — in the past. The institute’s study suggests that Fannie Mae and Freddie Mac, the dominant players in the market, both have been taking on more risk ‘steadily since the financial crisis.’”

“John Meussner, executive loan officer with Mason-McDuffie Mortgage Corp. in San Ramon, California, sees hints of trouble ahead. ‘I have definitely noticed a fast uptick in ‘creative’ (loan) products coming out,’ he told me. ‘Recently we saw one investor roll out a product offering up to $2 million in financing for FICO scores down to 600.’ The loan allows borrowers to have made a late payment on a mortgage within the past 12 months and have multiple credit incidents (such as a bankruptcy or foreclosure). The loan also requires the borrower to have just three months of reserves for loan amounts to $1 million. ‘This is something we haven’t seen since before the crash,’ Meussner said. He said some lenders are dumbing down on FICO scores, as well, soliciting applications with scores in the mid-500s in combination with relatively skimpy down payments and ‘varying degrees of risk layering.’”

“Within the past 18 months, Meussner said he has seen a sizable jump in loan offerings that contain layers of risk piled on top of one another, plus ‘increasingly ‘creative’ documentation standards.’ He emailed me one example of how documentation rules — the bedrock of sound underwriting practices in the post-crash era — can be compromised. In an online lenders’ chatroom, a sales representative of a wholesale mortgage company said his firm would approve a loan to borrowers who can’t or won’t document their earnings — essentially a ‘stated income’ loan. ‘Typically,’ Meussner said, ‘this is how the trouble begins.'”

May 8, 2019 “Federal investigators have issued subpoenas to several mortgage lenders that make loans to military veterans, seeking information on delinquencies and payments. At least eight lenders, and likely more, have been asked to turn over hundreds of files on VA home loans made between 2013 and 2017, according to two people with knowledge of the request. The requests include questions about quality control and loan audits. One VA program in particular — the Interest Rate Reduction Refinance Loan, or IRRRL — allows lenders to put existing VA borrowers into new loans without an appraisal or underwriting and was ripe for abuse. On Friday, Ginnie Mae said it was weighing whether to exclude some of those VA loans from its pooled securities in an effort to tackle a wave of rapid-fire mortgage refinancings that have left some military service members deeper in debt.”

May 9, 2019 “Sean Pan wanted to be rich, and his day job as an aeronautical engineer wasn’t cutting it. So at 27 he started a side gig flipping houses in the booming San Francisco Bay Area. He was hooked after making $300,000 on his first deal. That was two years ago. Now home sales are plunging. One property in Sunnyvale, near Apple Inc.’s headquarters, left Pan and his partners with a $400,000 loss. ‘I ate it so hard,’ he says.”

May 13, 2019 “Almost 30% of loans that mortgage giants Fannie Mae and Freddie Mac packaged into bonds last year went to home buyers whose total debt payments amounted to more than 43% of their incomes, according to an analysis by industry research group Inside Mortgage Finance. The share has nearly doubled since 2015. ‘We have a huge shortage of housing,’ said Ed Pinto, co-director of the American Enterprise Institute’s Housing Center. ‘You can’t address that shortage by driving house prices up through leverage, which is what we’ve been doing.'”

May 13, 2019 “As a result of this investor interest and temporary enrollment uptick, ‘there have definitely been assets in certain markets that shouldn’t have been built,’ said David Adelman, chief executive of Philadelphia-based Campus Apartments LLC, which owns or manages properties serving about 50 schools in 18 states. ‘You’ve had developers who haven’t looked at data at all and it was all determined by their ability to find a piece of land and obtain bank financing.'”

May 18, 2019 “According to ATTOM Data Solutions, Pasco County foreclosures in April more than doubled (up 112 percent) from the same time last year. Manatee County foreclosures were up 41 percent, Sarasota saw a 19-percent jump. Realtor Greg Armstrong says he is seeing a trend. The foreclosures involve more and more seniors who are losing their homes. ‘I’m seeing more and more where they were just mortgaged to the hilt. They might be deceased. Or one spouse might have passed away. And they just walk away from it. And that’s concerning. I hate to see that,’ Armstrong said.”

May 20, 2019 “Southern California builders, stuck with the largest supply of unsold homes in seven years, have slashed construction to the slowest pace since 2016. First-quarter data from MetroStudy shows 3,750 new homes went unsold in the four counties covered by the Southern California News Group — an increase of 688 units in a year or 22% and up 37% vs. the five-year average. It was builders’ largest inventory of unsold units since 2012’s first quarter. Builders bet too heavily on the upscale market, which has been hurt by a pullback of foreign, mainly Chinese, buyers. Plus, there’s been a surge of existing homes listed for sale.”

June 19, 2019 “Florida is seeing more foreclosures than all but two other states. Last month was up 23-percent over May of 2018. Loan officer David McLaughlin says one of the contributing factors to foreclosures is that wages in Florida have remained the same over the years. Insurance and taxes continue to go up, so when people budgeted for a home 3-5 years ago, all of a sudden when things get higher, they may have a second mortgage, people are taking equity lines out,’ said McLaughlin. But McLaughlin says one of the biggest reasons for the increase in foreclosures is home affordability. ‘So many home borrowers are being stretched into homes or neighborhoods that are a little higher than they usually can afford.'”

June 24, 2019 “Cerberus Capital Management LP is bringing back a type of mortgage bond that went extinct during the financial crisis. A unit of the private-equity firm issued bonds Friday backed entirely by home-equity lines of credit. The $174 million issuance received a triple-A rating from four agencies including Fitch Ratings. Mortgage bonds pooling esoteric pieces of the home-loan market have been mostly out of style in the decade since the housing market collapsed, a period when government-backed entities ended up standing behind much of the mortgage market.”

“But some structures have slowly returned, including bonds that hold unconventional mortgages resembling the Alt-A home loans of yesteryear for borrowers with hard-to-document income. There have also been a handful of deals involving fix-and-flip loans, and a market for single-family rental bonds emerged after the financial crisis. We are starting to have a lot more creative issuance around mortgage credit,’ said Neil Aggarwal, deputy chief investment officer at Semper Capital Management. ‘I wouldn’t be surprised if there’s more to follow after this transaction.'”

June 27, 2019 “Miami real estate attorney Josh Migdal said rising housing prices is making it harder for average Americans to buy homes and properties are staying on the market longer than anticipated. In some cases, home flippers can’t make mortgage payments and banks initiate the foreclosure process, which is when instances of fraud come to light, Migdal adds. ‘Home flippers are in a tough spot,’ Migdal said. ‘We are left with home flippers stuck with their inventory,’ Migdal said. ‘The mortgage fraud comes into play when some of these individuals don’t tell banks that they are actually home flippers.'”

June 28, 2019 “Wu Xiaohui was shopping in New York. For buildings. ‘He didn’t really care — he’d point out the window and say, ’That one!’ recalls a real estate executive. These days Wu is in jail in China. Anbang, meanwhile, is under the control of the Chinese government and looking to unload U.S. properties worth billions of dollars. ‘It’s like a tsunami that came rushing in and then the waters went back out to the sea,’ one developer says.”

“It is being felt by the developers of several luxury towers sitting empty on the fringe of New York’s Central Park. A New York real estate lawyer recently disclosed that he was unwinding a multibillion-dollar U.S. property fund bankrolled by a Chinese fund. ‘We’re in the process of giving the keys back,’ the lawyer says. ‘There’s no money coming out of China.'”

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  1. From the April 22nd link:

    The Weatherford Democrat in Texas. “Willow Park officials are looking to partner with local, reputable companies after the builders on 18 homes in Meadow Place Estates, Serene Country Homes, LLC, abandoned the lots. The issue was brought up by Willow Park resident Shivaun Palmer after she read an article published last week about Serene Country Homes, which has a Fort Worth address.”

    “‘I’m so excited about living in this community and my husband and I drove by [Meadow Place], and it’s just heartbreaking to see those houses unfinished,’ Palmer said. ‘It’s a lovely neighborhood and I just felt devastated for the people that have built their homes there.’”

    “According to WP Communications and Marketing Specialist Rosealee Kertok, Serene Country Homes started building in 2017, but never finished the homes. The city was told Serene Country Homes ran out of money.”

    “‘The houses were owned by two different sets of investors — nine of them are owned by Global Forest [LLC] and nine of them are owned by another investment company,’ Kertok said. ‘Serene is the builder on all 18 of those lots and they were doing the building for Global [Forest] and the other company. None of them are completely finished and they are in various stages of construction — some of them are closer to being done than others.’”

    “According to the Serene Country Homes website, homes in the Meadow Place Willow Park development are listed at a starting price of $285,950, going up to $369,950. But as far as the city knows, no one had purchased any of the unfinished Serene homes.”

    “WP City Manager Bryan Grimes said they became aware of the situation sometime in October 2018. ‘We reached out to them and at that point they still had an employee. We got the standard, ‘It’s going to be OK, we have a cash-flow problem.’ Every time I hear a contractor say they have a cash-flow problem, it’s going to get bad,’ Grimes said.”

    “The city was unable to get any further communication from Serene. ‘You’re not going to get anything out of them,’ Grimes said. ‘They weren’t even really a company, it was a ponzi scheme. They had [foreign] investors and it was set up so if you invested in the property, you got an unexpired green card — you got citizenship for it. If you noticed in January, you saw a bunch of Asian people driving around the neighborhood and stopping, getting out and taking pictures. That’s what that was, the individual investors.’”

    “Grimes said the lots are a public safety hazard and are full of debris. He added that two months ago, when temperatures hit below freezing, the shower heads in the unfinished homes burst, causing water to flow out. According to an article that was published by CBS DFW on Nov. 13, 2018, homeowners in the Trails of Fossil Creek and The Hills of Windridge said Serene had yet to finish the houses or complete warranty work on their homes.”

    “Sherry Huckaby closed on her home in The Trails of Fossil Creek back in April 2018, but her home wasn’t finished until a month later. She said the experience has been anything but ‘serene.’”

    “‘We have about the same number of houses that were abandoned in our neighborhood too. I don’t know how many are in the White Settlement neighborhood, but I drove out there one time and saw about 10 to 15 at that point. It’s a mess,’ Huckaby said. ‘I closed on my house at the end of April, but it wasn’t finished. They still hadn’t gotten the air conditioning working and they had all sorts of problems. I found out later on that they did that to a lot of people, so they were just pushing to get the money for the sales.’”

    http://housingbubble.blog/?p=1525

    1. HA!

      Back in the late 80’s I lived in Willow Park – back before they built the race track. Population then couldn’t have been over 1500.

      And wouldn’t you know it? There were a built a bunch of recently spec home on 2-4 acre lots and that sat empty for a long, long time when the Savings and Loan scandal went ka-boom.

  2. In some cases, home flippers can’t make mortgage payments and banks initiate the foreclosure process, which is when instances of fraud come to light, Migdal adds. ‘Home flippers are in a tough spot,’ Migdal said. ‘We are left with home flippers stuck with their inventory,’ Migdal said. ‘The mortgage fraud comes into play when some of these individuals don’t tell banks that they are actually home flippers.’

    But there’s no fraud!

    1. There are three flips within two blocks of me in San Diego. Prices still pushing historic highs in my hood. This is one tenacious bubble.

      On another note, does anyone else follow the boating market? I’ve noticed a very significant increase in 40ft+ used yachts hitting the market in So Cal. Just an anomaly or a legit sign of a squeeze on luxury items?

      1. Don’t know re: yachts but I recently saw an ad for a very expensive car fsbo priced way under comps. The reason given? “Real estate investment.” IMO, I think some upper income readers of the WSJ, etc., have seen the snippets of RE price cut stories and think -5% off is some kind of secret RE crash and are liquidating some of their toys to jump in/catch a falling knife.

      2. The more things change, the more they stay the same.

        The Wall Street Journal
        Flip That Yacht
        Rich Buyers Sell Unfinished Boats, Reaping Millions in Profits
        By Robert Frank
        Updated May 25, 2007 12:01 am ET

        Terry Taylor, a Florida car dealer, has purchased five yachts since 2001. But don’t expect to see him anchoring off the coast of Cannes this week. Mr. Taylor is boatless, having sold all of his yachts to other buyers for huge profits.

        “I wouldn’t feel too bad for Terry,” jokes Felix Sabates, a partner in Trinity Yachts of Gulfport, Miss., which built Mr. Taylor’s boats. “He’s probably made more money off those boats than we did.”

        Mr. Taylor is part of a new breed of wealthy boat buyers: yacht flippers, who sell their costly purchases often without taking them on a single cruise.

        With demand for large yachts far outstripping supply, the market for half-finished or recently completed boats is soaring. Some buyers are selling their boats months before they’re ready, for millions more than they agreed to pay. Others are auctioning off their slots on yacht-builder waiting lines.
        …

  3. Quote of the Day:

    “Gentlemen! I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country.

    When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin!

    Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I have determined to rout you out, and by the Eternal, (bringing his fist down on the table) I will rout you out.”

    Andrew Jackson, From the original minutes of his meeting with the Philadelphia bankers, February 1834, from Andrew Jackson and the Bank of the United States (1928) by Stan V. Henkels

    1. “When you won, you divided the profits amongst you, and when you lost, you charged it to the bank.”

      Who knew bailouts were already in play back in Andrew Jackson’s day and age?

    1. Awesome year-end digest, thanks Ben. It’s easy to lose perspective with the drip drip of daily news, but this one post is a devastating bubble-smasher of a summary.

      Also, forgot to say earlier: happy 15th anniversary! Not sure if “happy” is exactly the right word. But what you’ve done here over all these years is certainly something to be proud of.

      1. I appreciate that. And this is just the first half of the year. The FHFA has gotten more vocal about clamping down this fall, plus we saw the “new wave” of foreclosures from non-qualifying borrowers recently. Six month defaults! What I see at the auctions in AZ is they are also getting rid of the dead-wood shadow inventory. So check back cuz the second half is gonna be interesting.

        1. “getting rid of the dead-wood shadow inventory”
          I noticed that too in the Atlantic City article this week, and have seen something similar this year in my hood. Decade-long foreclosures finally starting to get auctioned off. Making room for the new foreclosures, I guess? And looking for top-dollar knife catchers before credit dries up even more, probably.

          2. REIC operatives are heavily reliant on clueless greater fools at this point in the cycle to keep the party rolling.

      2. This also happens to be the 15th anniversary of our move into our first San Diego rental home, punctuated by a just-completed move into a second one. Hopefully we have finally reached the ultimate downslope of the Housing Bubble by this point in time, and it’s all downhill from here to housing affordability.

  5. To summarize.

    Cheap and easy money, fraud and money laundering is now not able to keep the can “kicking down the road” anymore…

        1. Commented on this before but this is just a reminder that legislative oversight of the central banking system was officially abdicated in the last crisis. There will be no votes in Congress in this crisis. Everything will be done behind closed doors in secret proceedings that only the elite of the elite will be aware of. And they will handsomely enrich themselves in the process.

          1. Bloomberg is only polling about 6 percent. However, the Democrat minions he bankrolled in Virginia managed to turn the state blue, and have set about doing their masters’ bidding by attempting to disarm the population.

          2. It’s not just Bloomberg. Virginia has been trending purple-blue for the past decade, largely due to the explosion of younger workers in NoVa near the DC line. Lots of young cybersecurity folks and defense contractors. Who like their illegal housecleaners and lawnmowers. I must be the only person left in the DC area who cleans her own house.

          3. The looming insolvency of Uncle Sam should take care of a lot of the bureaucracy in the DC metro area. As a famous economist once said, “Nothing is better for the economy than the federal government in bankruptcy.”

          4. and have set about doing their masters’ bidding by attempting to disarm the population

            It will be interesting to see if the Governor makes good on a threat to send in the National Guard to confiscate guns in the 2nd Amendment Sanctuary counties. He might be unpleasantly surprised.

          5. Bloomberg is only polling about 6 percent.

            And he is spending a huge wad on ads.

            I would be very surprised if Trump isn’t reelected. What I don’t take for granted is the GOP recovering the House or even holding onto the Senate.

          6. Virginia Democrats also want to outlaw single-family zoning.

            “Virginia House Del. Ibraheem Samirah introduced a bill that would override local zoning officials to permit multi-family housing in every neighborhood, changing the character of quiet suburbs.”

            “Proponents of “upzoning” say the changes are necessary because suburbs are bastions of segregation and elitism, as well as bad for the environment.”

            https://dailycaller.com/2019/12/23/virginia-house-zoning-environment/

          7. “Proponents of “upzoning” say the changes are necessary because suburbs are bastions of segregation and elitism, as well as bad for the environment.”

            Haha…even the Democrats will be voting for Trump.

          8. It will be interesting to see if the Governor makes good on a threat to send in the National Guard to confiscate guns in the 2nd Amendment Sanctuary counties.

            There have probably already been discussion between the governor and the ARNG generals regarding the exact meaning of “lawful orders” and “all enemies, foreign and domestic”.

  6. “After declining for years, the share of underwater mortgages started rising again in Colorado in the second half of 2018. There are some first-time buyers who have only put down 3 percent. If they did so last year, and the current drop in home prices continues, they could be at risk if they are forced to sell, said Ralph McLaughlin, deputy chief economist with CoreLogic. ‘The homeowners who are most likely to be underwater are first-time buyers who put 3 percent to 5 percent down and bought during the peak season,’ said McLaughlin.”

    First half of 2019: I renewed my lease in May.

    I have zero sympathy for the used house loanowners described above. These are people who just suck at life, they take financial advice from radio ads (cough, American Financing dot net).

    1. “I have zero sympathy for the used house loanowners described above.”

      These are the 12 “non-recourse” states: Alaska, Arizona, California, Connecticut, Idaho, Minnesota, North Carolina, North Dakota, Oregon, Texas, Utah, and Washington. Hehe…notice that Colorado is [not] among them?

      “Bad boys, bad boys
      Whatcha gonna do, whatcha gonna do
      When they come for you” —Inner Circle

  7. There are some first-time buyers who have only put down 3 percent. If they did so last year, and the current drop in home prices continues, they could be at risk if they are forced to sell, said Ralph McLaughlin, deputy chief economist with CoreLogic.

    With no skin in the game, FBs can simply stop making mortgage payments and either walk away from their underwater shacks, or live rent-free for months or years while the bank works its way through the foreclosure process. Either way, they make their problem the lender’s problem.

  8. Liquidity risk is particularly acute within the housing sector because non-bank lenders originate more than 50% of home loans, up from just 9% in 2009.

    Hmm…think there’s a connection between the Fed’s frantic, open-ended liquidity-pumping via its repo operations, and the liquidity risk arising from non-performing loans and a rapid deterioration in the underlying collateral?

    1. From Brandon Smith at Alt-Market:

      “To put the current repo purchases in perspective, the audit of the initial TARP bailout in 2008 indicates that the Fed pumped out over $16 trillion in liquidity, much of it in repo purchases. The repo purchases going on the past couple of months are nothing by comparison, and are nowhere near enough to stop the dollar liquidity crisis. The claim that the Fed is “ignorant” of this situation is absurd; the Fed knows, it just doesn’t care.

      The Everything Bubble is imploding in the background … If the central banks really intend to kick the can on the crash, then they will have to inject tens of trillions of dollars into the global system in the next few months. If they do not, then we should expect crash effects to hit the wider public even more than they already are, and this will occur in 2020.”

    2. The more I hear the word “liquidity,” the more disgusted I get. IIUC, “liquidity” is just some short-term loan to make the minimum payments on your debt, like a $50 minimum on $5000 of CC debt. So, if banks are printing trillions of dollars just to make minimum payments, just how much is the actual principle for all this debt??!? None of this will ever be paid off.

  9. First half of 2019:

    “In May, Denver residents voted to reject Initiative 300, which would have overturned the camping ban. The vote against the initiative was 145,649 to 33,685.”

    Second half of 2019:

    “A Denver County Court judge ruled Friday that Denver’s urban camping ban is unconstitutional, citing the eighth amendment.”

    https://www.thedenverchannel.com/news/local-news/judge-rules-that-denvers-urban-camping-ban-is-unconstitutional

    This why I live in Arapahoe County, not in the City / County of Denver.

    2. That’s a pretty generous interpretation of the Eighth (cruel and unusual punishment). What’s next? Free green fees because it would be cruel and unusual to deprive someone of a good back nine?

  10. Maybe that will be the line of 2020. – ‘I ate it so hard,’

    “So at 27 he started a side gig flipping houses in the booming San Francisco Bay Area. He was hooked after making $300,000 on his first deal. That was two years ago. Now home sales are plunging. One property in Sunnyvale, near Apple Inc.’s headquarters, left Pan and his partners with a $400,000 loss. ‘I ate it so hard,’ he says.”

  12. “Mortgage bonds pooling esoteric pieces of the home-loan market have been mostly out of style in the decade since the housing market collapsed, a period when government-backed entities ended up standing behind much of the mortgage market.”

    Aren’t most mortgage bonds federally guaranteed these days?

      1. And California rates are tiered, which means you can pay a lot more than the 20 cents per kwh shown in the chart if you run the A/C.

  14. Here’s some more I didn’t include:

    May 22, 2019

    “Four years and well over $70 million later, Kanodia is feeling the weight of their advice. The modern glass palace he built in Los Angeles’ Bel Air neighborhood has been sitting on the market for more than a year. Rather than rolling in profits, Kanodia is now performing as many plastic surgeries as possible to fund millions of dollars in loans and the high costs of maintaining the empty house and grounds.”

    “After failing to find a buyer, he’s now offering it for rent at $1.5 million a month and says he would consider offers of more than $120 million — marking a $60 million price cut. ‘In Las Vegas, terms it’s called ‘all in,’ he said. ‘I’m all in times a million.’”

    “Kanodia has plenty of company. The high-end real estate market is suffering, with a glut of overbuilt and overpriced mansions in many of the country’s most affluent ZIP codes. After the boom years of 2014 and 2015, developers and investors went on a massive building spree to create ever-larger and ever-more expensive homes.”

    “But now, with foreign buyers fading and tax changes making it more expensive to live in high-tax states, the legions of modern white spec-mansions are becoming the white elephants of the housing market.”

    “‘A lot of developers got caught up in the groundswell, the gold-rush mentality,’ said Ernie Carswell, a leading real estate broker in LA with Douglas Elliman. ‘They thought: Build the biggest, sell the biggest. Unfortunately they’re going to sell at a sacrifice.’”

    http://housingbubble.blog/?p=1737

    1. May 23, 2019

      “Over the course of 13 years, Robert Morgan built a real estate empire that stretches across 14 states and includes 36,000 apartments. But federal prosecutors said he did so with the help of nearly $500 million in fraudulent bank loans. Morgan is also named in a new Securities and Exchange Commission lawsuit that likens the conspiracy to a Ponzi scheme.”

      “‘It’s obviously significant,’ U.S. Attorney James P. Kennedy Jr. said of the size and scope of the criminal wrongdoing. ‘This type of fraud strikes at the very heart of the banking industry.’”

      “In what is believed to be one of the biggest mortgage fraud cases since the Great Recession, Morgan was charged Wednesday with overseeing a criminal conspiracy from 2007 to 2019 that cheated lenders and insurers. The 114-count indictment – which builds on an earlier case against four other individuals – accuses Morgan of working with others to deceive financial institutions, as well as Fannie Mae and Freddie Mac, into providing larger mortgages on apartment properties than would otherwise have been issued.”

      http://housingbubble.blog/?p=1743

      1. May 24, 2019

        “Florida is getting hit with waves of foreclosures, and we had better pay attention to this disturbing trend. Foreclosure rates have been increasing in Florida for eight straight months, according to ATTOM Data Solutions. Some Florida metros are seeing double-digit increases in foreclosure activity. Last month, for example, foreclosure activity was dramatically up in Volusia (97 percent), Orlando (90 percent) and Miami (45 percent).”

        “And all of this is happening in a relatively strong economy with unemployment low and wages rising. In Florida, however, wages aren’t increasing at the same rate as ever-rising housing costs — and that makes us particularly vulnerable to a foreclosure crisis.”

        http://housingbubble.blog/?p=1749

        1. May 28, 2019

          “A federal crackdown on certain no-money-down home loan programs may hurt thousands of cash-strapped home buyers. Concerned about risky mortgages reminiscent of the housing bust, the U.S. Department of Housing and Urban Development recently called for national groups to stop lending down payments to home buyers seeking Federal Housing Administration loans.”

          “Buyers who don’t pony up a down payment are more likely to default on their loans, and FHA loans require qualified buyers to put down as little as 3.5% of the purchase price. In April, home list prices reached a record median $310,000 nationally, according to realtor.com® data. That’s led about 30% of buyers today to tap into some sort of down-payment assistance program, according to the Urban Institute policy research group.”

          “Former FHA head Ed Golding, now an adviser to the Urban Institute, says HUD is correct to rein in national down-payment groups. He and the feds aren’t as concerned with community-based housing programs that provide assistance to much smaller numbers of local buyers. After all, the housing crisis a decade ago was set off when buyers who weren’t able to afford their loans began defaulting on them.”

          “‘You don’t want the allow the riskier part of the market to hurt what is important,’” says Golding.”

          http://housingbubble.blog/?p=1769

          1. June 3, 2019

            Usually, There’s At Least One Lender Willing To Lend You More Than You Can Afford To Pay Back

            “Fortunately, the real estate game in Denver has moderated in recent months, giving first-timers their best chance in years to find the abode of their dreams. But how do novices get started? And what are the key things they need to know? We reached out to managing broker and owner of RE/MAX Urban Properties Lori Abbey.”

            “‘Depending on your income levels and whether it’s a one- or two-person household, there are grants available where sometimes you can come to closing with nothing,’ she reveals. For example, ‘one recent client actually got $1,000 back at closing.’”

            “How? The client was a teacher who qualified for two grants — one through the Colorado Housing and Finance Authority and a second via a separate, national program that specifically targets home buyers from her profession. ‘She had to bring less to the table because she was a teacher and ended up being able to close and get $1,000 back,’ Abbey reports. ‘All of a sudden, she owned a home for the first time in her life — and it’s probably worth $40,000 more now than it was when she bought it.’”

            “Abbey points out that ‘there’s an additional benefit if a home with a government-backed loan has been foreclosed on. Teachers and officers can buy some of those properties at 50 percent off, and that includes the down payment. There are a multitude of qualifications, but if you meet all of them, it’s a pretty fabulous deal.’”

            “According to her, ‘The best way to get $100,000 over three years in Denver is to purchase a home. It’s much easier than trying to save $100,000. You win with tax benefits and you win by gaining equity, which is the same as net worth.’”

            “She continues, ‘I recently put in three offers over five days where I was one of five to seven offers — and we won all three of them. These were all three houses listed at $395,000, and we got them for between $403,000 and $408,000. So they were over list, but not by very much. If they’d been up for sale this time last year, there would have been ten to fifteen offers, so that means your chances of winning have gone up by 50 percent. And they would have sold for more over list — $410,000 to $415,000, for sure. The prices are going over by a little less, and there’s a little less competition.’”

            http://housingbubble.blog/?p=1802

          2. Could someone explain this part: “U.S. Department of Housing and Urban Development recently called for national groups to stop lending down payments.”

            What does it mean, “called for?” Did HUD somehow fund these national groups with fed money and now they are pulling the money? Or are they simply not offering HUD loans to these borrowers?

          3. “What does it mean, “called for?” Did HUD somehow fund these national groups with fed money and now they are pulling the money? Or are they simply not offering HUD loans to these borrowers?”

            I do not think so. It appear that HUD just understands that if people have no skin in the game then walking away is very easy. Left unsaid is if a buying cannot even save 3.5% to buy a house, they really do not have the financial discipline to own a house. This is why the proposal by many of the Democrats during the debates to promote no down payment loan programs is so dangerous. Quite frankly if the Democrats ever managed to get that into law, I would wait for the bubble to expand even more and then sell my house, because the crash would be epic.

          4. “Left unsaid is if a buying cannot even save 3.5% to buy a house, they really do not have the financial discipline to own a house. This is why the proposal by many of the Democrats during the debates to promote no down payment loan programs is so dangerous.”

            The Democrats seem highly determined to destroy whatever still works in our financial house of order.

        1. “Morgan has been well hated in Western NY for a long time.”

          I guess the trial won’t be held around there. 🙂

  16. Fake news, anyone? (I realize this is not real estate related but I am going to post it anyway.)

    https://en.m.wikipedia.org/wiki/Great_Moon_Hoax

    The “Great Moon Hoax” refers to a series of six articles that were published in The Sun, a New York newspaper, beginning on August 25, 1835, about the supposed discovery of life and even civilization on the Moon. The discoveries were falsely attributed to Sir John Herschel, one of the best-known astronomers of that time.

    The story was advertised on August 21, 1835, as an upcoming feature allegedly reprinted from The Edinburgh Courant.[1] The first in a series of six was published four days later on August 24.

    The articles described animals on the Moon, including bison, goats, unicorns, bipedal tail-less beavers and bat-like winged humanoids (“Vespertilio-homo”) who built temples. There were trees, oceans and beaches. These discoveries were supposedly made with “an immense telescope of an entirely new principle.”

    The author of the narrative was ostensibly Dr. Andrew Grant, the travelling companion and amanuensis of Sir John Herschel, but Grant was fictitious.

    Eventually, the authors announced that the observations had been terminated by the destruction of the telescope, by means of the Sun causing the lens to act as a “burning glass,” setting fire to the observatory.[2]

    1. So how are we going to spend the 11 years we have left, per AOC? I think I’ll run about in a state of Beaker-like agitation telling everyone they need to “invest” in carbon credits. Algore and Greta, and of course their puppet master Soros, will be so proud of me.

      2. I think the desperation of the globalist shrills is real. It just isn’t what they claim it to be. It is not that they are worried about uncontrolled warming, They are worried that their crime is about to be exposed. Imagine if you are a globalist and several decades ago you learn due to high solar activity and natural cycles such as the AMO, the world would be subject to a period of warming. You then decide to use that to justify global government and a global carbon tax to fund the creation of the global government infrastructure. If you are able to get the policies into place you have the perfect scam. The policies to fight global warming will enrich your cronies with subsidies for wind and solar and the carbon taxes will fund the creation of global government. When the natural cycles turn, you will be able to claim that it was your government policies which reversed the warming.
        However, if you fail to get your policies in place and the world begins to cool without any significant intervention people will understand you have perpetuated a fraud. Hence the hysteria by the globalists. They know that the natural cycles are turning against them and the fraud will soon be exposed. Thus, they must get the anti-carbon policies in place within the next decade to have any chance to avoid being exposed as liars and frauds.

        1. I don’t know. A lot of people (as in too many) are buying into the warming scare. That Scowling Greta was even allowed to speak at the UN shows how much buy in there is.

          1. The UN is a globalist organization. Greta is a globalist puppet. It’s unsurprising that she was given the platform.

      3. “So how are we going to spend the 11 years we have left”

        “Earth is 4.54 billion years old, with an error range of 50 million years.”

        And these twigs have it pinned down to 11 years remaining?

        How Old Is Earth?

        By Nola Taylor Redd
        February 07, 2019

        Planet Earth doesn’t have a birth certificate to record its formation, which means scientists spent hundreds of years struggling to determine the age of the planet. So, just how old is Earth?

        By dating the rocks in Earth’s ever-changing crust, as well as the rocks in Earth’s neighbors, such as the moon and visiting meteorites, scientists have calculated that Earth is 4.54 billion years old, with an error range of 50 million years.

        https://www.space.com/24854-how-old-is-earth.html

  23. Here’s one of those American debt slaves that can’t scrape together $400 for an emergency. A snippet from the seller comments:

    “Just bought it and then found one of our cats has cancer. Treatment costs are unreal besides his previous unpaid medical costs and I have to sell despite having wanted one for years- this was the last Accord coupe and last V6 and has no mechanical problems.”

    “2017 Honda Accord EX-L V6 Coupe”
    https://www.autotrader.com/cars-for-sale/vehicledetails.xhtml?listingId=538346870

    1. Somehow, I don’t think that getting rid of the monthly nut for a car will be enough to pay for cat chemo.

    2. According to Kelly Blue Book he is also upside-down…owning more than its resale value. And 72-months for a Honda Coupe? This guy is likely the tip of the American debt iceberg.

  28. People are stupid …

    Casino Sued By Compulsive Gambler For Letting Him Lose $260,000
    https://www.newsweek.com/casino-sued-compulsive-gambler-letting-him-lose-260000-1479307

    (snip)

    “Shortly before the Caesars binge, Shokar was said to have attempted suicide by throwing himself in front of a bus after losing all his money at a different casino. Although he was seriously injured, he survived the collision and received a large insurance payout as a result of his injuries.”

    Having learned from this experience he diligently watched over this large insurance payout because he realized the money received offered him a second chance to change his destructive ways.

    Oh, wait! That’s not what happened; This is what happened …

    “He then used the insurance money to finance his massive losing streak.”

    Bahahahahahahahahahahahahahahaha … what a dummy.

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