That was quick

From HousingWire:

Rancho Financial brings back stated-income mortgages

Preparing for the return of the jumbo lending market and the days when Fannie Mae and Freddie Mac are no longer mortgage finance behemoths, Rancho Financial is wading back into offering stated-income mortgages.

A division of Calabasas, Calif.-based Skyline Financial, Rancho only six weeks ago began originating stated-income loans—where a borrower’s personal income is not verified. Rancho is currently processing about 100 applications with an average request of $500,000, the company said, and is receiving 10 calls a day for a program that has a $1.5 million loan limit and requires loans above $1 million to have a second appraisal.

Borrowers’ bank statements are examined, but not their tax returns or pay stubs. And while stated-income loans have borne their share of blame for the destruction of the nation’s housing economy, unlike earlier lending programs that offered stated-income mortgages to high-risk borrowers, the Rancho product is only for the affluent homeowner.

“In the late 1990s and 2000s, no one was regulating anything and you had these loans that were made and sold on Wall Street, and they became known as ‘liar loans,'” says Rancho mortgage banker Craig Brock. “We’re staying clear of that. If someone has several hundred thousand in assets, chances are they do have the money. We’re trying to target smart people who have financial advisers, who have certified public accountants.”

But the concern that this product could again be abused permeates the mortgage-lending arena. “Yes, they can be abused, but that doesn’t mean the potential for abuse means [stated-income mortgages] should be taken out of the market place for everyone. That doesn’t seem to be an appropriate response,” says Rich Andreano, a partner at the Washington, D.C., law firm Ballard Spahr.

Rancho won’t hold the stated income loans on its books. Instead, it sells them to a single portfolio investor (a confidentiality agreement prevents Brock from identifying the investor) who apparently is more comfortable buying these types of loans than the rest of the market.

“They found an investor. Well, they’re lucky,” says Ballard Spahr’s Andreano, remarking on the loan program. “For the right investor there is a marketplace for it. If you find the lender to do this correctly, these are good products to have. They won’t be large in number, it’s just they won’t be standard. The typical investor’s only going want the mainstream vanilla-type loans.”

And Fannie Mae and Freddie Mac aren’t taking them. A spokesperson at Freddie said products with alternative stated income provisions were eliminated from the agency’s guide years ago.

“There’s only one source (taking the loans). Until (PIMCO founder) Bill Gross, until Goldman Sachs start purchasing these loans again, it’s going to be slim pickings. Until they start buying these things, we won’t see any huge volume,” says Brock, who projects originating $50 to $75 million in stated income loans in the program’s first 12 months.

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76 Responses to That was quick

  1. grim says:

    From Bloomberg:

    Buffett Extends Real-Estate Bet With ResCap Pursuit: Mortgages

    Warren Buffett, whose prediction last year of a housing recovery was premature, is raising his bet on a rebound with his $3.85 billion bid for a mortgage business and loan portfolio from bankrupt Residential Capital LLC.

    The offer “certainly indicates that he thinks the worst is behind us,” Jeff Matthews, author of “Secrets in Plain Sight: Business & Investing Secrets of Warren Buffett,” said in a phone interview. “Yes, he’s been wrong about housing before. But if you look at any credit metric, if you look at any of the banks and what’s happening in their loan portfolios, it’s getting better.”

    Buffett’s Berkshire Hathaway Inc. (BRK/A) has prepared for a turnaround by buying a brickmaker, expanding its real estate brokerage and wagering on commercial property through a company jointly owned with Leucadia National Corp. (LUK) The venture, called Berkadia Commercial Mortgage LLC, was formed from a loan- servicing and mortgage business purchased out of bankruptcy in 2009 and once owned by ResCap’s parent.

  2. grim says:

    From the WSJ:

    What Home Builders Need: Locations, Locations, Locations

    The recent rise in home building could be thwarted by an unlikely factor, a shortage of land in desirable locations.

    During the housing boom, developers—the companies that pave roads and sidewalks, dig ditches for sewage pipes and power lines and bring in bulldozers to clear space for construction—prepared hundreds of thousands of lots and sold them to home builders, which in turn built subdivisions.

    Today many of these lots remain empty. They often are in distant suburbs of cities and still owned by banks, builders or developers. The problem is that they are in places where few home buyers want to live. In fact, builders are running low on land in suburbs that have well-regarded school districts and reasonable commutes to city and job centers.

    That is weighing on the recovery of the new-home market that in recent months has showed signs of life. Many economists are optimistic that housing starts—the number of houses and apartments on which construction has begun each year—will rise 15% to 25% in 2012, a prediction that could be bolstered by the May housing starts report due out this week.

    “A lot of the demand during the boom was speculative demand, not real user demand, and speculative demand was blind to location,” said Brad Hunter, Metrostudy’s chief economist. “Real demand is now concentrated in those core counties.”

    Two recent surveys from housing-research firms John Burns Real Estate Consultants and Zelman & Associates suggest that until these land inventories rise, new-home sales and construction will be constrained. As builders run out of “finished lots”—land that has been developed and is ready to be built on—in good locations, land prices in these areas are rising.

    “Any kind of pop in sales volume this spring is going to deplete the builders’ land positions in their current communities, the really desirable locations…and I can really see how difficult it’s going to be to replenish these locations,” said Jody Kahn, who specializes in land issues for the Burns group. “We’re coming off of the bottom, and it’s a little bit like trying to run in a swimming pool. You can run all you want, but it’s hard to get any kind of speed or momentum.”

    The builders’ response to the shortage likely will be to pay more for the most desirable, and most scarce land, or to begin developing raw land themselves. Both courses require big upfront capital commitments and both will likely require builders to pass on the additional costs to consumers in the form of new-home prices. That could make it harder for builders to compete on price with existing homes, whose values have been suppressed by foreclosures and short sales.

  3. grim says:

    From UT San Diego:

    ‘PINBALL’ LISTINGS ARE BAIT FOR BUYERS

    In the real estate brokerage field they’re known as “setups” or “pinball” homes, and this spring’s improving conditions in some markets could be stimulating more of them.

    A setup or pinball property is a house listed with an unrealistically high asking price that pulls in lots of visits by agents and shoppers, but no offers. The problem is this: Real estate agents, including even the listing agent, are using the overpriced house as a negative example to sell other, similar homes nearby that carry lower asking prices.

    “It’s like a pinball machine,” says Debbie Cook, an agent with Long & Foster Real Estate in Silver Spring, Md. The “setup” is the foil — the house that agents show clients in order to make other more realistically priced listings look better. Maybe the sellers — encouraged by reports of rising sales and low mortgage rates — insisted on the aggressive asking price and wouldn’t list for anything less. Or maybe the sellers’ agent didn’t fully brief them about what the house could command in today’s conditions rather than lose the listing.

    Whatever the specifics, pinball houses tend to see heavy “traffic” but go nowhere until the sellers drop the asking price, usually by significant amounts. Before then, however, they may be used without the sellers’ knowledge to market other houses. Since no one seriously expects them to sell at their original asking price, agents are happy to exploit the overpricing to facilitate other sales.

    “We’re definitely seeing it,” said Sandy Nichols Acevedo, an agent at Prudential California Realty in Oxnard. “Some people think they can go higher now because the market seems to be doing better.”

  4. Brian says:

    7 shrinking state economies

    http://money.cnn.com/galleries/2012/news/economy/1206/gallery.shrinking-state-economies/?iid=HP_River

    NJ made number 5 on the list.

    “5. New Jersey 5 of 7
    2011 growth rate: -0.5%
    Economy size: $487 billion*

    The real estate market in New Jersey bumped along the bottom with very low levels of activity in 2011.

    Power outages from hurricanes last summer and mild temperatures into winter dragged down the utilities sector, also contributing to New Jersey’s slowdown.

    But not all news was bad: the state’s professional and technical services industry, made up of professionals from accountants to lawyers to researchers, finally started to rebound from losses in the 2008 recession.

  5. Fiddy Cents on the Dollar says:

    grim :2

    Let’s put those bulldozers to work !! There are plenty of vacant, moldy homes “in suburbs that have well-regarded school districts and reasonable commutes to city and job centers.” Builders could put their crews to work on these litter-boxes and revive the whole industry.

    Buyers better hurry…….don’t want to miss the pre-construction pricing. Pick your colors now !!

  6. Mike says:

    Good Morning New Jersey

  7. Mike says:

    Brian 4 Great, Just what NJ needs, more lawyers & accountants

  8. Brian says:

    I know you say it sarcastically but I can think of at least 4 houses where something similar happened. The house will usally be in a nice location, but it might be a neglected piece of crap. The new owner knocks the old house down to the foundation, makes repairs to the old foundation, then builds an entirely new house on top. In one case it was wierd, they left up like one wall and the fireplace, as if they were exploiting some loophole in the building code or something.

    5.Fiddy Cents on the Dollar says:
    June 18, 2012 at 7:43 am
    grim :2

    Let’s put those bulldozers to work !! There are plenty of vacant, moldy homes “in suburbs that have well-regarded school districts and reasonable commutes to city and job centers.” Builders could put their crews to work on these litter-boxes and revive the whole industry.

    Buyers better hurry…….don’t want to miss the pre-construction pricing. Pick your colors now !!

  9. Mikeinwaiting says:

    Mike 7, my thoughts exactly upon reading.

  10. 1987 Condo buyer says:

    #8, I think by leaving up 1 wall it is considered a renovation versus new build and has significantly less permiting issues, etc.

  11. Anon E. Moose says:

    Grim [3];

    So the overpriced listing is NOT just a lottery ticket after all?

  12. Grim says:

    8 & 10 – that is correct, renovation vs new construction.

    Fee structure is typically lower, many times this approach doesn’t require zoning or variance approvals (time, money, no guarantees) as long as the building envelope doesn’t change.

    And it saves money on the foundation work.

  13. Mikeinwaiting says:

    Brain “as if they were exploiting some loophole in the building code or something.”

    I have heard about that do not know the specifics but yes it is done to exploit some loophole in the system or other. Anyone know more? Now we need a lawyer or an accountant for the answer Mike! LOL

  14. Mikeinwaiting says:

    Well, you guys answered while I was writing.

  15. grim says:

    It isn’t a loophole, it’s in defining new construction and remodeling/rehabilitation.

    A common case for this is changes in minimum zoning.

    Let’s say you have a house in Haughtyville, and 3 years ago they changed the minimum zoning to 1 acre. Your house in a .75 acres. (This is a simplified example by the way)

    You walk into the building department and want to add a second floor to your cape, imagine if they told you no, unless you could somehow come up with another quarter acre of land. You’d be pretty pissed, no?

    This is essentially the same case, if you took the whole house down, you wouldn’t be able to build a new one without a variance (although you could always plead hardship).

    The line is basically that, existing foundation/footprint, and a wall or two left standing.

  16. grim says:

    In other towns, often times it’s used because the setbacks/sideyards have changed enough to make the lot unusable in a new construction situation.

  17. borat the dictator says:

    First

  18. freedy says:

    http://online.wsj.com/article/SB10001424052702303410404577468680797660956.html?mod=ITP_moneyandinvesting_0

    This is wonderful news. The small banks being forced to sell out. As the big get bigger .

  19. The Original NJ ExPat says:

    [16] reno vs. new construction – also affects your financing options, obviously.

  20. Mikeinwaiting says:

    Grim 15 I was under the impression it was two walls.

  21. Fast Eddie says:

    Rick Santelli is still G0d! Let me sum his words up: Lipstick on a pig (Greece, Euro Zone) is still a pig; the globe needs a financial enema so just get it over with; let those who need to default, do so. In other words, there’s going to be winners and losers; too bad, get over it.

  22. The Original NJ ExPat says:

    [18] small banks – I heard tell a while back that the medium sized regional banks in certain areas (mostly away from the very big cities) are growing very well by maintaining high capital levels and not lending. Confusing? How does a regional bank grow by *not* lending? Simple. My polishing up your balance sheet you are first to get tapped by the FDIC to pick the bones of the most recent closures in your area. These “lepers with the most fingers” take over all the deposits and the good loans and then enter into a sweetheart “loss sharing” agreement with the FDIC on the remaining crap loans, or as they’re referred to in the FDIC press releases on Friday nights, “assets”.

  23. Fast Eddie says:

    “With respect to the notion that I can just suspend deportations through executive order — that’s just not the case. Because there are laws on the books, that Congress has passed — and I know that everybody here at Bell is studying hard so you know we’ve got three branches of government. Congress passes the laws. The Executive branch’s job is to enforce and implement the laws, and then the Judiciary has to interpret the laws. There are enough laws on the books by Congress that are very clear in terms of how we have to enforce our immigration system, that for me to simply through executive order ignore those congressional mandates would not conform with my appropriate role as president.” – Barack Obama (2011)

    You don’t think that Executive Order to grant 800,000 worker permits was political, do you?

  24. freedy says:

    I had a discussion with a family member yesterday. I was told “it was the right thing to do” its for the children. I just continued to eat my hot dog.

    This person also thinks it a great ideas to pay 25k in taxes if you can get a two car garage.

  25. 3B says:

    Toured Midland Park yesterday. Nice quiet town, older housing stock, well maintained. It is wedged between Ridgewood and Wyckoff, which I guess means the haughtyville types have no use for it; which is fine by me. The HS had only 79 graduates this year, and they would like to eventually just send their students to northern Highland’s. I am told the town has a reputation for being frugal, and not waisting money, apparently comes from the towns Dutch heritage. I like it.

  26. JJ says:

    Funny stuff , some snooty kid who bought a house in my neighborhood comes over all upset over usual stuff that gets neighbors upset. Anyhow property shark I peaked who owned house recently and the kid bought it and mom co-signed loan and went on the title of the house. No big thing guy is in his 20s may not qualify. Anyhow he has one of those hosemonster BBQ Tunnel crowd girls with him. Why dont know. Anyhow his “finance: as she identified her self is going all gettho on me. Of course wimpy guy brings his little girl with him to fight her battles. So finally, I say look you aint married to him, you aint on title and you aint on mortgage, you go nothing to do with this so get off my property. Going all clint eastwood, oddly she goes to her little man you deal with this I am leaving. So the wimpy guy now is all alone. Dont know what he was trying to accomplish, he was mad abut something on property line, so after having beers all day he then decides to deal with it at 9pm. Really, email or phone or letter would do. Or even knock on door in daylight. I swear I think a good rule is no one under 30 should be allowed to own property. Anyway in ten minutes he scamped back home and then I hear yada yada yada as he is hen pecked. Me and Chuck Norris have law and order on our side. Funny stuff

  27. Brian says:

    26 – You should move to NJ. We have much more class over here.

  28. Juice Box says:

    re: # 26 “usual stuff that gets neighbors upset.”

    Let me guess they did not like your thong?

  29. Brian says:

    WTF happened. I thought we were supposed to have a Greek inspired rally today.

  30. zieba says:

    brass balls,
    Sounds like a job for clot.

    JJ, are you sure you’re not RE101?

  31. Mikeinwaiting says:

    Brain 29 Spain on the front burner now, yield on debt hitting 7% I believe.

  32. Shadow of John says:

    “Lipstick on a pig (Greece, Euro Zone) is still a pig”

    Lipstick? Right now they are attaching garters and sliding on the fishnets.

  33. 3B says:

    #29 Brian: In addition to Spain, Fed meeting tomorrow and Wednesday, cannot have a rally, when market is demanding more stimulus from the Bernank.

  34. Fast Eddie says:

    Nokia said Thursday it would slash 10,000 jobs, or 19 percent of its work force, by the end of 2013 as part of an emergency overhaul that includes closing research centers and factories.

    Thank goodness it has no effect on us. You know, being that we’re insulated and prestigious and all. Meh.

  35. JJ says:

    No I have ADD, OCD and I am hyperactive, I enjoy short term battles greatly. Once I even tied up a traffic cop as he failed to record wind speed and cited evidence with fall tree leaves and what wind speed was that day to prove his radar gun was faulty. I always have like five courses of defense each one kinda kooky. Looking forward to it. Long term I fail to stick to things but short term I am really good at a good fight.
    Izieba says:
    June 18, 2012 at 9:52 am
    brass balls,
    Sounds like a job for clot.

    JJ, are you sure you’re not RE101?

  36. contact sex says:

    Wie wil het nou niet? Lekker sexcontact met honderden of zelfs duizenden vrouwen, mannen en stellen. Iedereen toch? Voor de lekkerste dates zit je dan ook goed bij ons. Daten is natuurlijk helemaal gratis en anoniem!

  37. scottie says:

    What’s the consensus on “low-end” properties in Hoboken (sub-250k range)? First-time buyer here. Can put down 20%. I’m thinking more long-term (living in for a few years and then renting out).

  38. keystone says:

    Can anyone provide the public access web site for the Hudson County MLS, specifically Hoboken? Thanks!

  39. Shore Guy says:

    “closing research centers and factories.”

    Now if they just try to sell off all their intellectual property, they will be like Stu’s Kodak friends.

  40. Juice Box says:

    Gasparino has a secret JP Morgan report on Gov unfunded pension liabilities
    and he singles out NJ


    New Jersey faces an even bigger hole. Even after Christie’s reforms, it would still have to cut spending 30.8 percent or raise taxes another 17.2 percent, keeping them in place for two decades, to solve the problem.”

    Morgan’s big secret

    By CHARLES GASPARINO

    Last Updated: 12:25 AM, June 18, 2012

    Posted: 10:32 PM, June 17, 2012

    While the Senate Banking Committee last week spun its wheels trying to get JP Morgan chief Jamie Dimon to admit to something nefarious during testimony about his “London Whale” trading loss, executives at the big bank were concealing a far bigger scandal.

    OK, it’s no secret that nation’s public pension funds are in big trouble, holding large “unfunded” liabilities owed to public workers once they retire. But most politicians (New Jersey Gov. Chris Christie is an exception) will tell you the problem is fairly containable, that there are simple fixes — such as raising taxes on the rich or pruning benefits.

    Not so, warns a “strictly confidential” report JP Morgan issued last year. It describes in straightforward, frightening detail how underfunded pensions are huge ticking timebombs for many of the nation’s big cities and states.

    The scandal isn’t simply that most public officials are misleading the public about the enormity of the problem and what steps must be taken to address the matter. As the Morgan report notes, many of the real liabilities are located “off balance sheet,” hidden from the public’s eye, and lax accounting standards let cities and states minimize their enormity.

    It’s also that JP Morgan itself kept the report’s findings a secret except for a few big clients, mostly hedge funds and large institutional investors, who got the inside tip on which states and cities are most likely to default on their debt as their pension liabilities fester.

    Yes: Default is a very real possibility, because the solutions are far from easy.

    Nationwide, the actual size of unfunded public pension liabilities is four times larger than the $900-plus billion that officials are ’fessing up to. That’s right, the bank sees a $3.9 trillion hole; to plug that, states and cities will need large tax hikes, massive budget cuts or both. Plus, public-sector unions will have to accept smaller retirement packages, and later retirement ages, to keep the pension systems going.

    Without these steps, states and cities with the biggest holes face possible insolvency and default, though the bank believes the risk of default “is greater for municipalities than for states.”

    Many of the places facing the biggest pension liabilities are right here in the Northeast, where big government rules and public unions are such a potent political force that officeholders dish out gold-plated benefits.

    But the classic big-government answer, taxing the rich, won’t solve this problem. Nor can these municipalites simply count on high returns on investments bailing them out, the report warned, since markets don’t always go up.

    In New York, for example, JP Morgan said state officials would have to immediately cut spending by 12.3 percent or raise taxes on everyone by 7.4 percent. And they’d need to make these tax hikes and budget cuts permanent for the next two decades to fully fund public-employee pensions.

    New Jersey faces an even bigger hole. Even after Christie’s reforms, it would still have to cut spending 30.8 percent or raise taxes another 17.2 percent, keeping them in place for two decades, to solve the problem.

    I got my hands on the report not from an disgruntled employee looking to even up the score with his old firm, but from someone who believed the reason JP Morgan kept it a secret stinks to high heaven: Bankers there are afraid of upsetting state and city officials who hand them large fees to underwrite municipal bonds.

    Keep in mind, JP Morgan is Wall Street’s leading underwriter of municipal debt. A public release of the report might anger big Morgan muni clients such as Massachusetts, which has a large pension liability.

    And why draw attention to an issue that might spook investors, cut off funding for municipal governments and for the fees the bank collects on that funding? A muni-market panic could land the bank in far hotter water than its current London Whale travails.

    But Morgan’s discretion may have broken the law: The report’s dire predictions didn’t make it into investor-disclosure documents on at least some bond deals that Morgan underwrote for states with the biggest liabilities. Legal experts say that could violate federal anti-fraud statutes.

    All of which sounds like far more onerous than anything the Senate Banking Committee could come up with last week: It grilled Dimon over $2 billion trading loss at his London office, while his firm was hiding evidence of a $4 trillion pension disaster.

    Read more: http://www.nypost.com/p/news/opinion/opedcolumnists/morgan_big_secret_DSB0O9VFZwDih1ZrjkeaAN#ixzz1yARiZqZw

    http://www.nypost.com/p/news/opinion/opedcolumnists/morgan_big_secret_DSB0O9VFZwDih1ZrjkeaAN

  41. JJ - Red Room of Pain says:

    I feel like updating my user name

  42. Mike says:

    Juice 40 Gasparino says “underfunded pensions are huge ticking timebombs” and seems Gary is the only one who can hear the tick tick tick

  43. Anon E. Moose says:

    Re: [42];

    It’s true! JJ is a housewife! Kudos to whoever called it.

  44. JJ says:

    long beach long island this week is issuing long term bonds to pay short term funding needs, that is what will happen to underfunded pensions while they kick the can down the road

  45. freedy (24)-

    I say when life hands you children, just make children sausage.

    “I had a discussion with a family member yesterday. I was told “it was the right thing to do” its for the children.”

  46. reinvestor101 says:

    Damn Ruskies are getting frisky:

    http://news.yahoo.com/report-russia-send-marines-syria-144713980.html

    I’ve been spoiling to kick their commie asses so bad that I may just join up with the damn marines so I can personally put some damn whoop ass on them. There ain’t no damn Russian civilians to protect and they shouldn’t be in Syria any damn way. I suspect these jerks will try to pull the same damn stunt in Iran. This is total bullspit and they need to start minding their own damn business. This world ain’t big enough for America and a interfering damn Russia. They need to be taken down and taken down hard. Perhaps a color revolution is just what the damn doctor ordered for this damn punk Pukin and to send those commies in China a lesson too. I say we need to threaten to revoke China’s privilege to buy our Treasuries. Bet that will wipe the damn smirck off their faces. There’s nothing worst than a pinko commie islamic terrorist alliance.

  47. JJ says:

    was your family member named mrs. sandusky
    There Went Meat says:
    June 18, 2012 at 2:56 pm

    freedy (24)-

    I say when life hands you children, just make children sausage.

    “I had a discussion with a family member yesterday. I was told “it was the right thing to do” its for the children.”

  48. zieba (30)-

    An irate neighbor at my door at 9 PM would earn a Louisville Slugger to the forehead.

  49. shore (39)-

    Nokia and intellectual property are mutually exclusive terms.

  50. Libtard in the City says:

    Let me guess they did not like your thong?

    Awesome, JB!

  51. juice (40)-

    Wasn’t that douchenozzle Gasparino slagging Meredith Whitney when she basically came to the same conclusion a while back?

  52. JJ says:

    when i told the fiance you aint married, you aint on the title you aint on the mortgage so get off my front lawn and let me deal with the actual owner for some reason was not happy, nothing like getting an italians irish up.

    There Went Meat says:
    June 18, 2012 at 3:06 pm

    zieba (30)-

    An irate neighbor at my door at 9 PM would earn a Louisville Slugger to the forehead.

  53. chicagofinance says:

    What does this mean?
    “Anyhow he has one of those hosemonster BBQ Tunnel crowd girls with him”

  54. JJ says:

    A Hose Monster is a term to describe a guido girl with big hair from late 80s or early 90s. BBQ is Bronx Brooklyn Queens and Tunnel crowd could be Jersey, Queens or Brooklyn girls heading to clubs in the city.

    Always avoid the Bridge and Tunnel Hose Monsters when clubbing in NYC.

    chicagofinance says:
    June 18, 2012 at 3:46 pm

    What does this mean?
    “Anyhow he has one of those hosemonster BBQ Tunnel crowd girls with him”

  55. chicagofinance says:

    B&T is a better descriptive word….it covers NJ/LI/Westchester

  56. JJ - Red Room of Pain says:

    Yes and no. Girls from Harrison NY and Cove Neck are not Hose Monsters.

  57. chicagofinance says:

    Very Nice….

    Millionaire Parents Say Their Kids Are Unfit to Inherit

    A new study from U.S. Trust says that only half of millionaire baby boomers think it’s important to leave money to their kids. A third of them said they would rather leave the money to charity rather than their kids.

    There are two explanations for their stinginess.

    The kind explanation is that today’s boomers want their kids to grow up with the same middle-class values they had. They want their offspring to learn struggle and hard work and failure and the joys of earned success and all the other lessons that helped the boomers become successful (those, along with 30 years of bull markets and strong economic growth).

    As Warren Buffett said, he wants leave his kids enough to do anything they want, but not so much that they can do nothing.

    Aligned with this benevolent explanation is their commitment to charity and the broader world.

    The second and perhaps more realistic explanation is that boomers don’t think their kids can handle all that money. Only 32 percent of baby boomers are confident their children will be prepared emotionally and financially to receive a financial legacy.

    Granted, not all generations feel this way. Gen-Xers and Gen-Yers, along with the generation older than the baby boomers, are more disposed to leave money to their kids. More than two thirds of those aged 18 to 46 and those over 67 say it’s important to leave a financial inheritance to their children.

    “Our survey points to a shift in generational behavior and outlook, most likely shaped by personal experience and societal responses to economic realities,” said Keith Banks, president of U.S. Trust. “The next generation has not experienced the consistently strong economic growth or investment returns that baby boomers experienced during the longest bull market in history.”

    And there may be a third explanation: the baby boomers plan to spend most of their money. Given the low investment returns in today’s markets, their long lifespan and their famously non-apologetic lifestyles, the boomers are probably burning through their fortunes at a rate that won’t leave much for the next generation.

    In the end, however, the phenomenon outlined in the survey boils down to a simple problem: The baby boomers have raised kids who are unequipped to inherit large amounts unearned wealth. The kids have been given most of what they want since childhood and have followed their parents model of generous spending. And the job market isn’t exactly conducive to college grads making it on their own.

    In the same survey last year, U.S. Trust found that half of multi-millionaire respondents said their children wouldn’t reach a level of financial maturity to handle the family money until they are at least 35 years old.

    Whose fault is all this? The parents, in part. Only half of the respondents had told their children about their family wealth. When asked why, they said the children would become lazy, make poor decisions, squander money or fall prey to golddiggers.

    We can call it the Rinehart Paradox. Wealthy parents aren’t raising kids to be good with wealth, so they refuse to leave them wealth.

    In the end, the biggest losers here are the kids.

  58. Meh. All fiat is about to become worthless, anyway.

  59. Doom is imminent in Urrp.

    “The euro experiment was merely a commingling of 17 different national fiat experiments… albeit a remarkably stupid one.

    Under the normal fiat game, a country would at least have to stand on its own two feet and con(vince) the market that its particular brand of monopoly money was sound.

    http://www.sovereignman.com/expat/the-experiment-has-failed-are-you-ready/

    With the euro, even the trashiest economies in Europe were able to pass off Germany’s credibility as their own. And now, finally, after more than a decade, the market is calling that ridiculous bluff.

    Spanish bond yields have risen to a euro-era record, well north of 7%. Italian bond yields are 6%. The talking heads on financial news are going bonkers… nobody can fathom these countries staying afloat with interest rates being so ‘high’. And they’re right.

    What’s funny is that the 20-year average of Italian 10-year bond yields since 1993 is 5.9%. They’re currently priced at 6.06%. Italian bond yields aren’t spiking, they’re just reverting to the mean. The real spike hasn’t happened yet.

    Italy is in such dismal shape that having to borrow funds at ‘average’ rates is going to push it into insolvency… the government can only limp along if it can borrow at absurdly low rates that don’t even keep pace with inflation.

    Perhaps more than anything, this shows how truly broken the system has become… and what a colossal failure the experiment has been.”

  60. I’m impressed!!! Really informative blog post on njrereport.com my friend. I just wanted to comment & say keep up the quality work.

  61. JJ says:

    My rich aunt is giving it all mainly directly to grandkids in trusts they cant touch till they are 30. I like that idea. I would actually like to die with 100 year z coupon bonds and give them to my great great grandchildren by they it would be like a trillion or so dollars.

  62. Drachma says:

    Are there any cases yet where an estate is loaded up with debt via mortgages and home equity loans to the point where the estate has negative value AND the heirs get stuck with the bill?

  63. JJ says:

    That is illegal. Upon death it is win win. An underwater house can be given back to bank by exectutor via deed in lieu no obligation to pay off. If it is above water estate can sell and keep profits.

    Funny when Jets was selling PSLs contact stated upon death Jets would not pursue outstanding balance. Smart people put PSLs in 99 year old grandparent name on 15 year plan with zero down. Win win, if PSLs tank, grandparent dies and debt obligation is gone, if PSLs rises in value you inherit and can sell for profit. I saw a summer home old folks bought zero down near peak, kids inherited and gave back to bank. Fishy to me as it was a family home, why was old guy buying with nothing down at peak, why hedging themselves.

    Drachma says:
    June 18, 2012 at 5:08 pm

    Are there any cases yet where an estate is loaded up with debt via mortgages and home equity loans to the point where the estate has negative value AND the heirs get stuck with the bill?

  64. My definition of death is being a Jets fan.

  65. The Original NJ ExPat says:

    Hose Monster has been around a long time, but I never heard the term until my best friend went to Syracuse for college, the term wasn’t used at Rutgers. Danceteria, Limelight, fading days of Studio 54, in the mid 80’s was an ideal place to study the mating habits of BBQ & Tunnel chicks. I may have launched a few investigative probes of my own back then;-)

  66. Mike says:

    Big Surprise Millionaire parents say their kids are unfit to inherit http://www.cnbc.com/id/47859258?__source=yahoo|headline|other|text|&par=yahoo

  67. Shore Guy says:

    “heirs get stuck with the bill?”

    One can simply disclaim the bequest.

  68. Former MP says:

    #29 3b

    I sold my place in Midland Park (and took my lumps). Overall it is a nice town, lots in the plus column, some in the negative. Town finances are good as they have a lot of shared services and there is not a lot they can spend money on. They share the nuilding inspectors with Allendale. They share the judge and I think the attorney. Wykoff does all the dispatch for Fire and Police. They have issues with Ridgewood water who supply the town and some issues with the Telecoms over tower access. One big concern is the state of the resevoir up the hill in Wykoff. It is a Wykoff problem but if the resevoir fails, it will be a MP problem in a hurry.

    Taxes are overall low as most of the town is blown out capes. You could walk to Ridgewood train from parts of the town, but it is a BIG hill. If you are taking the train, people drive to Allendale as the parking list is shorter. Most people going intro NYC take the bus or drive. The town park and ride is good and its a one shot into Port Authority. The town has very little green space. It has one small park and some land off the side of the school run by the Rec depatment. The Rec department has good facilities due to a benefactor that paid a boat load of cash to update the Barn (community center). Rec was in turmoil a few years back with some serious problems. There were issues with coaches that had lawsuits flying and one member passed away (long story).

    Board of Ed was in shambles when I left and it is one of the main reasons I cut my losses. I think at some point the high school (with their falling scores) will merge with Waldwick. It has been talked about for years. I think North Haeldon would like to send their kids, but they can’t seem to get it sorted out. Northern Highlands don’t want them.

    The library is good and was being refurbished. It is not like Wykoff with their million dollar addition.

    If you don’t have kids it is a good bet. If you do, pass, bite the bullet and pay for Ridgewood.

  69. Fabius Maximus says:

    Love it!

    Of all the petards that Mitt could hang himself on, Immigration is one he can’t walk back from.

    http://www.borowitzreport.com/

  70. Former MP says:

    Catching up on the weekend posts.

    AG, your theme tune is ready.
    http://www.youtube.com/watch?v=lX4hN2KAaww

  71. Former MP says:

    Shore

    “Obama’s Drift Toward War With Iran”
    Drift is an interesting word to use here. I just finished Rachel Maddow’s book with the same name. This article is a kick off from the book (without the acknowledgment). Regardless of your views on her politics, it is worth a read.
    P.S. I recommend the audio version, very entertaining and give a nuance that is lost in print.

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