14 Jan

COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary


EDITOR’S NOTE: The Great Depression showed us that housing prices could drop 25.9%. The Great “recession” has now passed that drop and so far, has fallen 26%. There IS a difference however. In the run up to the Great Depression loose capital combined with other factors sent asset prices upward, but if you look at Schiller and Case Schiller Analysis you see four differences graphically.

The first difference is that in the time leading up to the Great Depression real banks were lending real money and therefore they had the constraint of risk on their own capital. Liars loans didn’t exist. It always was up to the bank’s underwriters to confirm every fact or representation made by or on behalf of the borrower, who incidentally didn’t use mortgage brokers because mortgage brokers, for the most part, didn’t exist. In the time leading up to the Great Recession, there were no real banks taking real risks. Whoever was named as payee on the note never handled the money much less funded it. Whoever was named as lender on the mortgage or deed of trust suffered the same impairment.  Mortgage brokers were sent out in virtual armies with minimal training other than scripted sales pitches.

  • Thus without any risk of loss on the loans and the business model being that the “loan originator” would merely present itself as the lender in exchange for a fee, and there being no underwriting process for which anyone could point their finger at and make a claim the object changed from making good loans that would enhance the income and balance sheet of the party representing itself at closing as the lender, to a different business model: get all the people you can regardless of qualifications to sign loan papers.
  • In Florida these armies of “Loan counselors” or mortgage brokers included 10,000 convicted felons — so it was obvious that Wall Street wanted. The lender identified by the mortgage broker was usually not the lender identified on the closing papers and the lender on the closing papers was not the lender who advanced the money to fund the loan.

The second difference is that the run up didn’t get much out of standard territory in relation to median income adjusted for inflation. It peaked for sure and back then it was considered an extraordinary peak, but it didn’t come close to the run-up in prices preceding the Great Recession.

The third difference is that there was no specific correlation between housing prices and target markets for Wall Street backed mortgages. In fact, there were no Wall Street backed mortgages. So the decline was felt throughout the country, some parts more than others. The types of mortgages available were limited to what you could count on one hand in the time preceding the Great Depression. The number of mortgage “flavors” preceding he Great recession burgeoned to over 400 different kinds of mortgages — a number that baffled Alan Greenspan along with mortgage brokers, borrowers and those who assisted borrowers at closing. The same stack of papers were thrown at the borrower at closing — but only in size and form — the content of those papers was very different from borrower to borrower.

And the fourth difference is that rampant falsely inflated appraisals were absent in the Great Depression but the cornerstone of the Great Recession.

So the takeaway idea in this article is that the whole securitization scheme was a scam that artificially raised the APPARENT housing prices in entire geographical areas that had been targeted by Wall Street. Thus the “decline” in prices is merely a correction to come back in line with median income which has been stagnating for 30+ years. And THAT is why I say that principal reduction is unnecessary. It is a PRINCIPAL CORRECTION back to reality and away from the fraudulent claims at closing and all the way up the securitization chain.


Housing Market Slips Into Depression Territory

By: Cindy Perman
CNBC.com Staff Writer

As the economy revs back to life, with signs of hiring on the horizon, the housing market is being left behind like Macaulay Culkin in “Home Alone.”

Macaulay Culkin
Macaulay Culkin

In the past few years, we’ve all been careful to choose our words carefully, not calling it a recession until it fit the technical definition and avoiding any inappropriate use of the “D” word — Depression.

Things were bad but the broader economy never reached Depression territory. The housing market, on the other hand, just crossed that threshold.

Home values have fallen 26 percent since their peak in June 2006, worse than the 25.9-percent decline seen during the Depression years between 1928 and 1933, Zillow reported.

November marked the 53rd consecutive month (4 ½ years) that home values have fallen.

What’s worse, it’s not over yet: Home values are expected to continue to slide as inventories pile up, and likely won’t recover until the job market improves.

And while the president is physically protected in an emergency, whisked to a bunker at an undisclosed location, the actual White House is not: The value of 1600 Pennsylvania Avenue has dropped by $80 million, or nearly 25 percent since the peak of the housing boom. It’s current value is $251.6 million, according to Zillow, down from $331.5 million.

Oh-h say can you see … by the dawn’s ear-ly light …

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