November foreclosures up 68% YOY

From the Associated Press:

US Foreclosure Filings Rose in November

S. homeowners increasingly failed to keep up with their home loan payments in November, as the number of foreclosure filings surged 68 percent nationwide compared with the same month a year ago, according to a mortgage research company.

In all, 201,950 foreclosure filings were reported last month, compared with 120,334 in November 2006, Irvine-based RealtyTrac Inc. said Wednesday.

Last month’s filings fell 10 percent from October’s 224,451.

The last time there was a sequential drop in foreclosure filings was between August and September, when they fell 8 percent.

“It’s a little bit of good news in the otherwise murky real estate market right now,” said Rick Sharga, RealtyTrac’s vice president of marketing. “The fact that we’re seeing a 10 percent decrease is significant. It’s a good thing.”

The U.S. had one foreclosure filing for every 617 households in November, RealtyTrac said.

The filings include default notices, auction sale notices and bank repossessions. Some properties might have received more than one notice if the owners have multiple mortgages.

Forty-three states saw an increase in foreclosure filings over last year.

The decline in filings from October to November likely corresponds with a lull in adjustable-rate mortgage resets, Sharga said.

We’ll see another fairly big spike in (foreclosure) filings in early ’08,” Sharga said. “Then there’s another group of loans that’s due to reset in May and June, so we’ll see another wave of defaults probably in the fall.”

Experts estimate some 2 million adjustable-rate mortgages are due to reset at higher rates in the next seven months.

This entry was posted in Housing Bubble, National Real Estate, Risky Lending. Bookmark the permalink.

236 Responses to November foreclosures up 68% YOY

  1. grim says:

    From the WSJ:

    Foreclosure Activity
    May Have Peaked for Year
    December 19, 2007 5:03 a.m.

    Foreclosure filings for November surged 68% from a year ago but dropped 10% from October, another sign that foreclosure activity overall may have peaked for the year, a foreclosure-listing service said.

    RealtyTrac Inc. Chief Executive James J. Saccacio said that November’s 10% drop from October was the first double-digit monthly decrease observed since April 2006.

    The sequential decline “could indicate that foreclosure activity has topped out for the year, but the true test of whether this ceiling will hold will come at the beginning of next year — when we anticipate that a seasonal surge in foreclosure filings and another possible wave of resetting mortgages could place further pressure on the housing market,” Mr. Saccacio said.

    According to RealtyTrac, based in Irvine, Calif., a total of 201,950 foreclosure filings — default notices, auction sale notices and bank repossessions — were reported during November. The national foreclosure rate for the month was one foreclosure filing for every 617 households.

  2. grim says:

    From the Philly Inquirer:

    Foreclosures down in PA, NJ

    Foreclosures in Pennsylvania and New Jersey declined in November from the previous month and from October 2006, RealtyTrac, of Irvine, Calif., reported today.
    The number of foreclosure filings – default notices, auction sale notices and bank repossessions – dropped 18.7 percent in Pennsylvania from October and almost 20 percent from November 2006, the firm, which tracks bankruptcies nationwide, said. New Jersey foreclosures fell 12.6 percent from October, and 17.1 percent from November 2006.

    While foreclosures dropped 10 percent nationwide from October, they were up nearly 68 percent from November 2006, according to RealtyTrac.

    “While it’s too early to tell if the worst is over in Pennsylvania and New Jersey, the November numbers certainly indicate that the two states’ housing markets are faring much better than housing markets in many other areas of the country,” said RealtyTrac marketing manager Daren Blomquist.

  3. Rich In NNJ says:

    Less closed sales in November than October, less foreclosures 1-3 years later in that month.

  4. grim says:

    From the Daily Record:

    N.J. among 10 states facing budget crunch

    New Jersey is one of 10 states that anticipate budget shortfalls in the next fiscal year, which begins July 1, according to a report out today.

    Those 10 states could be forced to cut services and programs or raise taxes to plug the anticipated budget holes, or dip into reserve funds to avoid fiscal pain, according to the report by the Center on Budget and Policy Priorities.

    New Jersey anticipates a shortfall ranging from $2.5 billion to $3.5 billion, the group said, adding that the state is finding past tax cuts too costly.

    Arizona, California, Maine, Massachusetts, Minnesota, Nevada, New York, Rhode Island and Virginia are the other nine states facing similar situations as New Jersey.

    The report said all those states have “structural” problems with their finances that prevent revenues from keeping pace with the rising cost of government programs and services.

  5. grim says:

    From MarketWatch:

    Weekly mortgage applications off 19.5%, data show

    Applications filed for mortgages decreased a seasonally adjusted 19.5% last week, reflecting a sharp drop in refinancing activity, the Mortgage Bankers Association said Wednesday.

    Mortgage interest rates rose across the board during the week ended Dec. 14 compared to the prior week, according to the Washington-based MBA’s latest survey.

    Applications were up an unadjusted 1.7% compared with the same week in 2006.

    Refinance applications decreased 27.3%, according to the survey. Applications for loans to purchase a home fell 10.6% on a seasonally adjusted basis.

    The four-week moving average for all loans was down a seasonally adjusted 1.0%.

    Rates on 30-year fixed-rate mortgages averaged 6.18% last week, up from 6.07% the previous week. As for 15-year fixed-rate mortgages, average rates moved up to 5.78% from 5.72%.

    Rates on one-year ARMs averaged 6.48%, up from 6.31% the previous week

  6. grim says:

    From the WSJ:

    Now, Even Borrowers With Good Credit Pose Risks
    December 19, 2007

    So what is Mr. Lewis worrying about today? In an interview last week with Wall Street Journal editors, he expressed concern that even borrowers with strong credit scores might turn out to be default risks if housing prices keep tumbling. In other words, what is being portrayed as a credit-quality problem with the riskiest 20% of the mortgage market could spread to a much wider cross-section of home loans.

    Such jitters mean that cleaning up the subprime mess may be just a prelude to resolving deeper problems with mortgages in general. Investors can’t be sure yet how any financial institution — even a stalwart such as BofA — will sort out its home-loan portfolios. Lending norms have eroded, making it hard to know who is really a “good” borrower.

    “There’s been a change in social attitudes toward default,” Mr. Lewis says. Bankers typically have believed that cash-strapped borrowers would fall behind on their credit cards, car payments and other debts — but would regard mortgage defaults as calamities to be avoided at all costs. That isn’t always so anymore, he says.

    “We’re seeing people who are current on their credit cards but are defaulting on their mortgages,” Mr. Lewis says. “I’m astonished that people would walk away from their homes.” The clear implication: At least a few cash-strapped borrowers now believe bailing out on a house is one of the easier ways to get their finances back under control.

    Because of lax lending standards in the past few years, many homeowners never amassed much equity in their homes. Sizable down payments became a rarity, as many buyers borrowed close to 100% of the purchase price through a blend of first mortgages and home-equity lines of credit. Others kept refinancing their mortgages as property prices climbed, taking on bigger loans and draining the equity value of their homes.

    As a result, there is a new class of homeowners in name only. Because these people never put up much of their own money, they don’t act like owners, committed to their property for the long haul. They behave more like renters, ducking out of an onerous lease in the midst of a housing slump.

  7. grim says:

    From MarketWatch:

    Morgan Stanley books additional $5.7 bln mortgage write-down

    Morgan Stanley before Wednesday’s opening bell said its fourth-quarter results reflect an additional $5.7 billion of mortgage-related write-downs in November. Including the $3.7 billion write-down as of Oct. 31, which was announced on Nov. 7, the total fourth-quarter mark-down on mortgage exposure was about $9.4 billion. The company reported a fourth-quarter loss from continuing operations of $3.59 billion, or $3.61 a share.

  8. grim says:

    From Bloomberg:

    U.S. MBA’s Mortgage Applications Index Fell 20% Last Week

    Mortgage applications in the U.S. fell last week by the most since 2004 as a jump in interest rates caused purchases and refinancing to decline, a private survey showed.

    The Mortgage Bankers Association’s index decreased 20 percent to 653.8 from 881.8 the prior week. The group’s purchase index fell 11 percent and its refinancing gauge plunged 27 percent.

    Loan restrictions and a glut of unsold homes on the market are prompting buyers to wait for even bigger price discounts, economists said. Higher borrowing costs and more foreclosures suggest the real-estate slump will continue to hurt economic growth well into 2008.

    “The housing recession continues to grind away,” Brian Bethune, an economist at Global Insight Inc. in Lexington, Massachusetts, said before the report. A tougher lending environment “has disqualified a large number of borrowers and continues to restrain demand.”

  9. ithink_ithink says:

    Any data junkies out there know the YOY for PA & NJ?

    “Foreclosures in Pennsylvania and New Jersey declined in November from the previous month and from October 2006, RealtyTrac, of Irvine, Calif., reported today.”

  10. grim says:

    From Bloomberg:

    Morgan Stanley Reports Worse-Than-Estimated Loss

    Morgan Stanley, the second-biggest U.S. securities firm, reported a fourth-quarter loss of $3.56 billion, the first in the company’s history, after $9.4 billion of writedowns on mortgage-related investments.

    Chief Executive Officer John Mack is forgoing a bonus for the year and called the results “deeply disappointing.” Morgan Stanley obtained a $5 billion investment from China Investment Corp., the nation’s sovereign wealth fund, the New York-based company said today in a statement.

  11. grim says:


    Posted above.

    New Jersey foreclosures fell 12.6 percent from October, and 17.1 percent from November 2006.

  12. Frank says:

    The numbers reported by RealtyTrac do not mean anything in NJ, because RealtyTrac reports a number of fillings not the property count, so if you go to their website, you’ll see that there are multiple filling for each property, so the foreclosures are much lower than reported by RealtyTrac in NJ.

  13. Frank says:

    Credit Crisis: Worthless Billions Won’t Solve A Problem Worth Trillions

    “So no matter how many more billions Trichet will create, it ain’t gonna earn him a paper-jumpsuit from Superman as these new Euros that have grown the ECB balance sheet in less than a year by almost 20% will only worsen the current crisis which was brought on by too much money in the first place.The whole world nowadays knows that the mess was created by too much cheap credit. Only central bankers keep denying this. Extending credit further is not a solution but only a whimpish action to delay the outcome until 2008.

    No matter how much new money is created, the day of reckoning will be December 31 when all “assets” have to be priced for year-end results. I think is is fair to advise some cash/gold on hand in January. Just in case the ATM won’t work.”

  14. BC Bob says:

    “We’re seeing people who are current on their credit cards but are defaulting on their mortgages,” Mr. Lewis says. “I’m astonished that people would walk away from their homes.”

    Why is this so astonishing? Many of these had no right “buying” a home. Their cc is their crutch, their lifeline. They don’t value a house, they didn’t have to struggle to save for the right, there is no self satisfaction/accomplishment. If you worked hard to save, you will tend to your property, keep up its value, improve it. Those that received a free option have no sense of pride. Why throw money into a pit that is depreciating? They didn’t put a dime into it, what value is there? Now they have a choice, a strapped homeowner,in a period of declining prices, or a drunken consumer renter? It’s a Tim Wakefield fastball, right down the middle.

  15. BC Bob says:

    “Chief Executive Officer John Mack is forgoing a bonus for the year and called the results “deeply disappointing.”


    Lat year Mack was in London personally handing out bonuses, that’s right Pret, he blew off NY and went to Canary Wharf. I heard that traders were spraying $1,000 bottles of champagne over each other, like World Series champions. What a difference a year makes.

  16. t c m says:

    actually, if you reallly want to help strapped borrowers, who never should have borrowed the amount they did for a house, then i would think it would be more compassionate to just allow them to walk away from this obligation, rather than think up a scheme that helps them to pay P+I. even if they get relief on rate, what happens when taxes go up, or the roof leaks, or any number of the very normal expenses that these people can’t afford.

    i know that being forced to move can be really stressful, but once situated in a rental for about 50% of the cost of the house, i think it would be a enormous relief to the person.

    perhaps to make up for the lax oversight of our regulators, their credit should be wiped clean a few years earlier than what the norm is now.

  17. Rich In NNJ says:

    New Jersey is one of 10 states that anticipate budget shortfalls…
    …forced to cut services and programs or raise taxes…

    The state will probably NEED to cut services and programs (but will do it on a limited basis) and will probably raise taxes (I’m guessing gasoline).

  18. grim says:


    The same methodology is utilized for the entire country. They don’t handle NJ data any differently than any other area.

    I don’t think your criticism is a valid one.

    Secondly, it’s not the overall foreclosure count that is important, it’s the trend.

    The trend remains the same whether or not a property is counted one or multiple times.

    Lastly, Realtytrac puts out the absolute (unduplicated) counts on a quarterly and midyear basis. If you are concerned about the multiple counting problem, simply deal with the quarterly numbers.

    The numbers you are looking for are under the “properties with filings” heading.

    Lastly lastly, the Real Estate Owned (REO) numbers are not counted multiple times. If we’re concerned with the last stage of the foreclosure process (who cares if someone is late?), we can trust that the counts are of unique properties.

  19. grim says:


    I agree, I’ve got a gut feel that a gas tax hike is in the works. I’m going to go out on a limb here and say if they do go ahead with a gas tax hike, it will be paired with an elimination of the full-service restrictions. Pump your own to offset the cost of the gas tax hike.

  20. scribe says:

    From Page One of the WSJ:

    Fed’s New Rules
    On Mortgages
    Draw Hostility

    December 19, 2007; Page A1

    Concerns about the U.S. mortgage crisis and turmoil in global credit markets intensified, with U.S. policy makers seeking to clamp down on the practices that created the crisis and Europe’s central bank pouring an unprecedented half-trillion dollars into an effort to soothe markets.

    The Federal Reserve proposed new rules that would sharply curtail the kinds of high-risk mortgages largely responsible for the global credit crunch. But the proposal drew a lukewarm, and occasionally hostile, reaction from lawmakers and other critics, who called for more-aggressive action.

    The Fed’s proposal came as European officials tested a new approach to the fears of default that have reduced the availability of credit world-wide. The European Central Bank, hoping to avert a year-end meltdown in Europe’s money markets, swamped the markets with €348.6 billion ($501.7 billion) in two-week loans to banks, one of the largest sums a central bank has ever lent in a single shot.

    The ECB’s heavy lending pushed down Europe’s short-term interest rates, as intended, but wasn’t applauded by everyone. “They’ve confused the market and created a lot of volatility,” said Erik Nielsen, European economist with Goldman Sachs in London.

    In Washington, the Fed’s proposal was greeted with jeers from influential Democrats in Congress. And in a signal of the fast-changing nature of the political debate, former Clinton Treasury Secretary Lawrence Summers called for a $50 billion to $75 billion stimulus package, including universal tax rebates, if the nation’s economy shows no sign of improvement by early next year.

    Democratic lawmakers pounced on the central bank for having failed to act before the current wave of home foreclosures and for not seeking bigger changes in mortgage-industry practices. They noted the Fed’s proposal comes too late to help many homeowners, and that it addresses a market for risky mortgages, or subprime home loans, that has largely dried up.

    One big test of the Fed’s overall response will come today when the central bank announces the results of an auction of as much as $20 billion in low-rate 28-day loans to banks. The auction was designed to encourage banks to lend to each other, greasing the engine of the nation’s financial system. A successful auction would be a sign that the Fed’s efforts are gaining traction.

    At least until then, the harsh reaction to the Fed’s proposal represents a setback for Chairman Ben Bernanke, who is trying to maintain credibility on Capitol Hill at a time when Congress is scrutinizing the central bank’s monetary and banking policy decisions.

    Until now, Mr. Bernanke has won plaudits for his flexible approach to regulatory matters since becoming chairman in February 2006. At the same time, lawmakers including Rep. Barney Frank, a Massachusetts Democrat and chairman of the House Financial Services Committee, have threatened the central bank with legislation that would make other regulators equal to the Fed in consumer-protection authority over banks.

    The threat of more than a million foreclosures in a presidential-election year has supercharged the policy debate. Rather than forestalling more-aggressive congressional action, as some banking executives and central-bank staffers had hoped, the Fed’s move may have incited it.

    It could also affect Treasury Secretary Henry Paulson’s effort to revamp the way the U.S. handles mortgage regulation, which is currently shared by the Fed and several other agencies. Mr. Paulson described that system Monday as a “patchwork quilt.” If the Treasury makes headway — it is expected to unveil a plan early next year — Democrats, who have questioned the Fed’s commitment to protecting consumers, may see an opening to reallocate some of its authority.

    “We now have confirmation of two facts we have known for some time: One, the Federal Reserve System is not a strong advocate for consumers, and two, there is no Santa Claus,” Rep. Frank said yesterday. “People who are surprised by the one are presumably surprised by the other.”

    Years of lax lending by banks and other institutions have led to a surge in mortgage defaults over the past year as home prices have fallen from their peaks at the top of the recent housing boom. Unless lenders greatly step up efforts to restructure loans, Moody’s forecasts that three million home loans will go into default in the 30 months ending in mid-2009, and about two-thirds of those will result in foreclosures.


    The public will have 90 days to comment before the Fed finalizes the rules.

    The proposal falls short of the more sweeping changes sought by consumer groups and senior Democrats. Democratic leaders including Rep. Frank and Senate Banking Committee Chairman Christopher Dodd made clear they plan to push ahead with their legislative plans to tighten regulation of the mortgage industry.


    Sen. Dodd said he plans to “re-examine” legislation he introduced last week on mortgage-lending practices because he is now considering taking more power away from the central bank. His displeasure with the Fed could also derail the hopes of Fed governor Randall Kroszner, who was renominated for a 14-year term at the Fed in May; his current term ends Jan. 31. Mr. Kroszner and two other nominees need Dodd’s approval before facing a Senate confirmation vote.

    “It is unfortunate that so many consumers have had to go over the cliffs of foreclosure to get attention,” said Jim Carr, chief operating officer at the National Community Reinvestment Coalition, which represents local groups that promote affordable housing.

    The Fed’s proposal wouldn’t assign any liability to Wall Street firms that market securities based on loans that turn out to be unfair or deceptive. There are bills currently being considered in Congress, however, that would do just that. A Fed official said the central bank lacks legal authority to do so.

    The Fed’s overall response to the housing bubble is becoming a sensitive topic now that the repercussions are clear. The late Edward Gramlich, a Fed governor from 1997 to 2005, recalled earlier this year that he proposed in or around 2000 that the Fed use its authority to send examiners into the offices of certain consumer-finance lenders to tackle the growing problem of predatory lending.

    Alan Greenspan, then Fed chairman, opposed the move, Mr. Gramlich said. Mr. Greenspan has confirmed his opposition. More recently, Mr. Greenspan told National Public Radio there was little the Fed could have done short of a sudden increase in interest rates that would have popped the housing bubble and also “broken the back of the economy.”

    Yesterday, the Fed was clearly aware of the intense scrutiny it was under. For the first time in the central bank’s history it allowed television cameras to record audio and video from the entire meeting.

    The banking industry generally supported the Fed’s approach. The American Financial Services Association called the proposal “measured,” while the Independent Community Bankers of America said it was an “important step.” The American Bankers Association, however, said that some parts of the proposal were too rigid and “could make it harder for bankers to tailor products for their customers.”

    Though the Fed’s proposal would apply to all subprime lenders, the central bank wouldn’t be alone in enforcing it. A final rule would make it much easier for state attorneys general, the Federal Trade Commission and private lawsuits to go after those who violated the new policies.

    The subprime market addressed by the proposals is now a fraction of its former size. It mushroomed in the first half of this decade as lenders rushed to grab the higher profit margins available on such loans. At the peak of the housing market in 2005, lenders granted about $625 billion of subprime loans. They accounted for a fifth of all home mortgages that year, according to trade publication Inside Mortgage Finance.


    Now, lenders are making only a trickle of subprime loans. Guy Cecala, publisher of Inside Mortgage Finance, says subprime lending is running at an annual rate of about $50 billion, or around 2% of the mortgage market.

    The subprime market “is never going to be the size it was,” said Thomas Kelly, a spokesman for J.P. Morgan Chase & Co.’s mortgage operations. Mr. Kelly said Chase continues to offer subprime loans but borrowers need to show better credit scores and verifiable income and make a down payment, generally at least 10%. Like most lenders, Chase has stopped making subprime loans that “reset” to a much higher rate after two to three years at a lower introductory rate.

  21. Shore Guy says:

    What a great time to be looking for investment properties. There will be opportunities here and there for a well-capitalized buyer to help out a struggling family (or a bank) and get extra properties at a significant discount.

  22. grim says:



  23. scribe says:

    Also from the WSJ:

    Greenspan Says Forcing Lenders
    To Alter Terms Would ‘Tax’ Economy

    By GREG IP
    December 19, 2007; Page A14

    WASHINGTON — Former Federal Reserve Chairman Alan Greenspan said that compelling lenders to alter mortgage contracts would be a damaging tax on the economy and it would be less harmful to simply give the homeowners money.

    Mr. Greenspan, clarifying remarks he made on television Sunday, said in an interview with The Wall Street Journal yesterday, “I’m saying instead of in effect ‘taxing’ financial institutions and giving the funds to the homeowners, we’d be far better off, as far as the future structure of our financial markets are concerned, to do it strictly with cash. Do it out in the open. Do it cleanly and with transparency, not by hidden processes.”

    Mr. Greenspan said on ABC News’s “This Week” that “cash is available and we should use that in larger amounts, as is necessary, to solve the problems.” But he wasn’t specific about what form that cash would take, and some have interpreted his comments as advocating a massive fiscal bailout, a stance at odds with his longstanding reputation as a fiscal hawk.

    Assuming the government is going to act to help out homeowners, Mr. Greenspan clarified that he would like it to do so in a way that minimizes the distortions to private behavior, which economists say can result in the misallocation of resources, less efficient markets and a lower standard of living.

    He said, “Emergency aid is what I’m talking about, similar to what government does in natural disasters. I would make the criteria for who gets payments exactly the same for who would get rate relief. You still have the problem of drawing a line between those who were irresponsible and those who are innocent victims. That’s a tough political value judgment to make.” But once that judgment is made, “it is far less damaging to the economy and far simpler, without the ongoing consequences for the markets, if you give homeowners cash.”


    Moreover, Mr. Greenspan worries that even voluntary measures could be harmful if they get in the way of a “selling climax” sending home prices down as rapidly as possible to their natural equilibrium level. “Involuntarily altering the forms of a contract or intervening in the market-price-adjustment process will delay the selling climax, which is necessary to end the current crisis,” he said. “At the end of the day, we will experience a far worse outcome.”

  24. chifi - CFAs do it better says:

    BC Bob Says:
    December 19th, 2007 at 8:25 am
    Lat year Mack was in London personally handing out bonuses, that’s right Pret, he blew off NY and went to Canary Wharf. I heard that traders were spraying $1,000 bottles of champagne over each other, like World Series champions. What a difference a year makes.

    bost: as I have said many times though….bankers get paid in cash and work for a “call option”. Forgoing a 2007 bonus is symbolic at best… back a requisite chunk of the inflated 2006 bonus would be a real gesture.

    I know you generally skip late night posts…..did you see this?

    chifi – children are -(NPV) Says:
    December 18th, 2007 at 11:28 pm
    pretorius Says: You are right about one thing though – I’m bearish about the future of NJ at the same time I’m bullish about the future of New York City. NY remains internationally competitive in finance and continues to attract this industry’s best and brightest.

    High powered people need high powered incentives and yada, yada, yada…blah, blah, blah….DOH!

  25. scribe says:

    Also from the WSJ:

    How Hidden Incentives
    Distort Home Prices

    December 19, 2007; Page B1

    PARKER, Colo. — As the housing market slump deepens, disguised discounts are making it harder to tell exactly how much people are paying for homes.

    Buyers, sellers and other market participants typically monitor fluctuating home values through sale records that legally have to be listed with county clerks. But incentives offered to buyers — ranging from free cars or furniture to cash rebates — are making those prices less reliable as a sign of what buyers actually paid, netting out the giveaways. And that may be misleading lenders and people shopping for homes, some real-estate lawyers and appraisers warn.

    KB Home in January sold a new townhome with green siding in the Denver suburb of Parker for $196,000, according to the deed recorded with the Douglas County clerk. But a disclosure form provided to the buyer and seller of a particular property, which isn’t part of the public record, shows that home builder KB paid $27,600 to another company, which made a cash payment to the buyer. Netting out that effective discount, the price was $168,400.

    Incentives of all kinds have mushroomed in recent years as sellers found it harder to unload homes, says Jonathan A. Goodman, a lawyer in Boulder, Colo., who gives seminars to real-estate professionals on how to avoid fraudulent transactions. Fannie Mae, the nation’s largest investor in home loans, sent a memo to lenders this month warning them to watch out for “practices that may distort or artificially inflate” house prices, such as payments from sellers or builders that effectively rebate part of the recorded price.

  26. grim says:

    Why not just give the homedebtors $2,000 debit cards?

  27. chifi - CFAs do it better says:

    With Fed’s Spigots On, Who’s Drinking?
    December 19, 2007; Page C1

    A report today will show whether banks have gulped down the Federal Reserve’s latest credit-market medicine.

    The results of the Fed’s “term auction facility,” its latest salvo against the credit crunch, will be released in the morning. The Fed is essentially auctioning off as much as $20 billion of cash. Monday, bidders offered a broad basket of collateral, including risky mortgage securities, and bid to take the money at interest rates of 4.17% and up. More auctions of this kind are on tap.

    The facility is conceived to be a laser-guided cash injection to help thaw frozen credit markets. Lenders, wary of toxic subprime holdings at other banks, have been reluctant to make short-term loans to one another. They have also been wary of going to the Fed’s discount window for loans directly from the Fed, for fear of being stigmatized.

    The European Central Bank reported yesterday strong demand for its offer of cash yesterday — lending an extraordinary €348.6 billion ($501.65 billion) for two weeks.

    Many analysts think the Fed’s handout will be gobbled up because it allows banks to borrow anonymously, without bellying up to the discount window, where the rate is pegged at 4.75%.

    Heavy interest in the Fed’s loans would show its plan is getting a warm reception and also underscore the stress in the market. A weak bid could mean the Fed is still struggling to get its arms around the problem.

    In the long run, though, it seems unlikely to solve the market’s problems. The facility “doesn’t address the fundamental issues that still have to be resolved,” says Laurence Meyer, vice chairman of Macroeconomic Advisers and a former Fed governor. “This is not a problem of liquidity; it’s a counterparty-risk problem.”

    Until lenders start to feel confident that other banks don’t have hidden time bombs on their balance sheets, the credit turmoil is likely to persist.

  28. chifi - CFAs do it better says:

    scribe Says:
    December 19th, 2007 at 8:46 am
    Also from the WSJ:
    How Hidden Incentives Distort Home Prices
    December 19, 2007; Page B1
    PARKER, Colo. — As the housing market slump deepens, disguised discounts are making it harder to tell exactly how much people are paying for homes.

    except in NYC and the Gold Coast of NJ

  29. scribe says:


    I think Greenspan should knock it off already.

  30. grim says:

    In other news, Morgan Stanley announced early Wednesday morning that it was contemplating a name change. Insiders say that “Morgan Shanghai” is the current front runner.

  31. thatBIGwindow says:

    Grim # 19: What makes you think that the full service stations will be eliminated? I thought that would never happen in NJ

    Hopefully, the days of 1 gas attendant for 10 cars spilling fuel on my paint and slamming the fuel door shut so that it breaks are over.

  32. kettle1 says:

    I want to respond to a comment by MR T from late last night…

    # MrT Says:
    December 18th, 2007 at 11:20 pm

    271 –

    the part i don’t get from the crashing dollar, $90 oil crowd is….

    which is it?..inflation or deflation

    If you expect inflation to continue to get worse and compound going forward..why wouldn’t you want a 30 yr fixed loan at 6%? pay back over time in depreciated dollars…seems like a no brainer.

    if deflation..i.e. houses will drop to 1999 levels etc etc……wouldn’t that mean dollars must be scarce..and foreigners would not be able to buy these assets either (strong dollar again)? and if oil was $20 a barrel in 1999..will oil and other commodities also be dropping to 1999 levels? and if this is all going to happen..why would the Fed and all central banks reduce the money supply so drastically?

    Im sure a collapse and deflationary depression such as that is possible..but if there was such a deflation..I would bet the last thing on your mind would be trying to close on a nice 4 bedroom house in Bergen county..would probably be a full scale world war raging or some other disruptive event.

    John, i would suggest that there is a good chance that we are looking at another bout of STAGFLATION. We are currently entering a period where many natural resources are being limited in supply, i.e oil, copper, water. I am not suggesting that we are out of, or running out of these materials. What i am saying is that they supply of these materials cannot meet the current rate of global growth. This is all tied into exponential growth rates and doubling times (if your not familiar with this look it up). A good example For example, in 2005 global oil usage was 31 BILLION barrels. from 1990 to 2000 the growth rate of global oil usage increased an average of 3% per year. This means that global oil consumption doubles every 23 years. Now add the rate at which countries like india and china are rapidly industrializing and the rapid growth of their consumer/middle class populations and you increase raw material demand even faster.

    So what i am saying is that the majority of our resource supplies are stressed or will be in the near future. Oil may bounce back down into the $70’s for a bit, but the intermediate and long term trends are only going up. Regarding inflation/deflation; we are headed into inflation (actually we are already well into it if you look at M3) but depending on how both the FED and global markets respond we could slip into deflation. Deflation is not very likely though, as the FED considers deflation its #1 enemy because most of the methods it uses to try and control the economy are ineffective in deflationary periods. So this means that the FED is going to inflate the dollar like a helium balloon and employment is poised to slow. if employment drops, we are going to enter stagflation ( once again there are good arguments that we are already entering stagflation, albeit the very early stages).

    Oh and to answer your actual question. I would not buy a house now even though the dollar is being inflated because, housing is poised to drop by 15-30% over the next 4-6 years. The dollar is not likely to decrease as fast and can be hedged against. So instead of going upside down on a mortgage, i place my down payment into something like a mix of gold/swiss francs/general commodities ( this would be a method for a moderate to high risk tolerant individual in my opinion). in 3-4 years as the dollar and housing has sunk and my investments have risen, i pull the money out which is now worth noticeably more in real dollars and o buy a house!

    note i do not know how to add , do not take my investment advise

  33. scribe says:

    From the FT:

    Fitch may set limits for debt product ratings

    By Paul J Davies

    Published: December 19 2007 01:57 | Last updated: December 19 2007 01:57

    Fitch Ratings could set limits for the maximum credit ratings that can be awarded to complex debt products that are sensitive to changes in the market values of their underlying exposures, the agency said on Tuesday.

    The move would affect some of the deals that have been particularly hard hit by the sudden withdrawal of liquidity from debt markets over the second half of this year, such as structured investment vehicles (SIVs) and constant proportion debt obligations (CPDOs).


    Meanwhile, a number of CPDOs, which essentially give investors a leveraged bet on a group of corporate debt exposures, have been forced to unwind, with investors losing up to 90 per cent of their initial stake in one deal from UBS. The CPDOs were hurt by volatility, particularly in the value of financial company debt in recent months.


    Fitch is proposing revised liquidity stresses for most market value structures, which in turn would lead to higher credit enhancement levels, as well as ratings “caps” for certain less liquid assets and for most “knockout” structures.

    Knockout structures include CPDOs and the junior debt issued by SIVs. The name highlights the way in which investors in such structures are the first to lose everything because they provide a protective cushion against losses for senior creditors in these deals.

    CPDOs caused a flurry of excitement when they first emerged last year with many questioning how they could promise high returns and qualify for the safest AAA ratings from Standard & Poor’s and Moody’s. Fitch and rival agency DBRS both published papers saying they did not believe such structures deserved top ratings. ●Separately, Moody’s, a rival ratings agency, on Tuesday said its downgrades to collateralised debt obligations made up of pools of US mortgage-backed bonds and similar securities had totalled about $51bn over the month of November. This means almost 10 per cent of the entire market for such CDOs was downgraded in one month alone. At the end of November, $174.1bn worth of such deals remained on review for downgrade.

  34. twice shy says:

    If NJ does increase the gasoline tax, will the revenue be dedicated to infrastructure maintenance and improvements or be used to offset the projected operating deficit in the state budget?

  35. Shore Guy says:


    New Jersey Vulture……?

  36. Shore Guy says:


    “Upgrading to plasma-screen TVs at Drumthwackett?

  37. Shore Guy says:


    Of all the things that F could stand for, fund works for me, lol.

  38. BC Bob says:

    Chi [24],

    Why do I picture the lame Braves fans and their asinine chop?

  39. SG says:

    Housing pullback still squeezing Hovnanian

    BOSTON (MarketWatch) — Hovnanian Enterprises Inc. late Tuesday reported a widened fourth-quarter loss, as home builders continue in vain to search for a bottom in the residential housing market.

    The Red Bank, N.J.-based company HOV:Hovnanian Enterprises, Inc) said its net loss for the period ended in October increased to $466.6 million, or $7.42 a share, from $115.3 million, or $1.88 a share in the same period a year earlier. Meanwhile revenue fell to $1.39 billion, from $1.75 billion.

    Hovnanian delivered 19% fewer homes during the October quarter compared to the year-earlier period. The cancellation rate rose quarter-over-quarter to 40% of gross contracts, up from 35%.

    Ara Hovnanian, the company’s CEO, at an investment conference last month said U.S. housing won’t likely get back to a “balanced marketplace” until 2010. Meanwhile, 2008 will be “another challenging year” and he was not looking for strong earnings from home builders.

  40. BubbleYum says:

    “Lending norms have eroded, making it hard to know who is really a “good” borrower.”

    I think the real problem is there are no more “good borrowers,” because what made a good borrower for a product like a 30-year mortgage were not only relatively high wages, but even more importantly, stable employment. We will probably have to return to the day when people bought houses for cash or well over 50% down.

  41. SG says:

    Housing pullback still squeezing Hovnanian

    BOSTON (MarketWatch) — Hovnanian Enterprises Inc. late Tuesday reported a widened fourth-quarter loss, as home builders continue in vain to search for a bottom in the residential housing market.

    The Red Bank, N.J.-based company HOV:Hovnanian Enterprises, Inc) said its net loss for the period ended in October increased to $466.6 million, or $7.42 a share, from $115.3 million, or $1.88 a share in the same period a year earlier. Meanwhile revenue fell to $1.39 billion, from $1.75 billion.

  42. kettle1 says:

    On another note,

    Did anyone here the comments by greenspan on Npr last night? greenspan said that even if all of the funny money loans given out over the last 5 years had been 30yr fixed (with real standards) loans that we would have had the same run up in home prices and just as many people would be in trouble!! Why doesnt someone call him out as a liar and a fraud? I’m an engineer not a finance guy and i can see that he is full it. It drives me nuts that no one with any level of recognition will call out the BS FED moves over the last 5 or so years.

    Perhaps they have and the MSM just hasnt touched it. It would still be nice to see someone actually tell the truth.

  43. thatBIGwindow says:

    #41: My grandfather built his house when he was in his 20’s. My grandmother helped him put in walls and insulation! Doubt my generation has the skills to do that!

  44. grim says:

    Unbelievable, am I understanding this correctly? Toms River wants to raise property taxes preemptively, to cover future potential shortfalls due to the 4% property tax hike cap? Way to go, NJ, we’ve basically guaranteed ourselves a yearly 4% hike in property taxes.

    Toms River mayor urges tax increase

    Although Mayor Paul C. Brush presented a budget in October that called for no increase in the municipal tax rate, he and his successor, Thomas F. Kelaher, have asked the Township Council to consider raising the rate by 7.9 cents per $100 of assessed value for the fiscal year 2008 budget.

    In a joint statement, Brush and Mayor-elect Kelaher told the council Tuesday night that the previously presented $87.9 million budget should be amended to $91.5 million to adjust for a state law passed earlier this year that does not allow municipalities to increase municipal tax levies by more than 4 percent each year.

    “Next year, the township is not going to be able to raise enough money in support of the budget because of this 4 percent cap,” Brush said in an interview after the proposal was presented to the council.

    “Not to do this is fiscally irresponsible,” Kelaher said in an interview.

    Both Brush and Kelaher said that the original fiscal year 2008 budget Brush proposed complied with the 4 percent cap, but that if that budget were to be implemented, the fiscal year 2009 budget would have a tax levy shortfall and require extensive cuts to personnel.

  45. John says:

    I could not resist!

    A German research published in New England Journal of Medicine and Weekly World News said that men staring at women’s breasts in fact prolong their lives with years. “Just 10 minutes of staring at the charms of a well-endowed female such as Baywatch actress Pamela Lee is equivalent to a 30-minute aerobics work-out,” said author Dr. Karen Weatherby, a gerontologist. The team led by Weatherby was made up of researchers at three hospitals in Frankfurt, Germany, and found this results after monitoring for 5 years the health of 200 male subjects, half of whom were asked to look at busty females daily, while the other half had to abstain from doing so. For five years, the boob oglers presented a lower blood pressure, slower resting pulse rates and decreased risk of coronary artery disease. “Sexual excitement gets the heart pumping and improves blood circulation. There’s no question: Gazing at large breasts makes men healthier. Our study indicates that engaging in this activity a few minutes daily cuts the risk of stroke and heart attack in half.” said Weatherby, who even recommended that men aged over 40 should spend at least 10 minutes daily admiring breasts sized “D-cup” or larger. She said that this was as healthy as going to the gym for 30 minutes daily and prolonged a man’s life by five years. “We believe that by doing so consistently, the average man can extend his life four to five years.” said Weatherby.

  46. leavingqueens says:

    Off topic, but is there any ethical issues with a realtor (from a reputable agency) representing their own flips? I’ve notices several houses in the town I’m looking in that have to be flips — all bought by the same “person” and then put back on the market weeks later with the same paint and decor inside. They are all represented by the same realtor whose name is remarkably similar to the “person” that bought these houses. The most recent one closed last month and is back on the market for nearly $200K more — and, yes, same color paint, same furniture, etc.

  47. kettle1 says:

    bubble yum

    We will probably have to return to the day when people bought houses for cash or well over 50% down.

    Do you know what that means for real estate??? if prices are inflated now at an average of 7X annual income , then prices would have to drop through the floor for any significant portion of the population to be able to front even 50% much less buy outright.

  48. Shore Guy says:

    With Fed’s Spigots On, Who’s Drinking?
    December 19, 2007; Page C1

    I love the headline, it evokes Jonestown.

  49. thatBIGwindow says:

    #47: It is legal and ethical only if the realtor DISCLOSES that he/she owns the house, or is related to the owner

  50. kettle1 says:

    Greenspans comments from the other day…

    Global forces beyond the Federal Reserve’s control helped fuel the bubble that led to the current housing meltdown, former Fed Chairman Alan Greenspan said Thursday. In an NPR interview, Greenspan also said that the odds of a recession are “clearly rising.”

    This week, Greenspan wrote a commentary in The Wall Street Journal looking at the roots of the current mortgage crisis. In the article, he defended the Fed’s decision to keep rates low — a move that some people say fueled the housing bubble.

    ‘Extraordinary Forces of Globalization’

    “The problem is not explaining myself,” Greenspan told Steve Inskeep in an NPR interview. “The problem is getting a focus on how to look at the world’s economy more appropriately. Certain things are happening in the world which are affecting central banks, have affected central banks, essentially because of the extraordinary forces of globalization that arose subsequent to the end of the Soviet Union.”

    Greenspan rejected the criticism that the Federal Reserve fueled the housing bubble by lowering interest rates.

    That argument “doesn’t coincide with the facts,” he said. “First of all, we’ve had housing bubbles in two dozen or more countries around the world … everybody’s long-term rates have gone down.”

    Fed ‘Lost Control’ of Long-Term Rates

    Greenspan noted that there has been a disconnect in recent years between the Fed’s short-term rate moves and long-term rates, such as those that apply to mortgages.

    When the Fed began to raise rates in 2004, the central bank had expected to get — “as a bonus” — a rise in mortgage rates, Greenspan said. But that didn’t occur, he said.

    “We concluded that the monetary forces that were arising in the world globally had become so overwhelming, relative to the resources of central banks, that we had effectively lost control of long-term interest rates and the forces directing higher prices and homes,” he said.

    Asked if the Fed could have prevented, or eased, the U.S. housing bubble, he said, “There’s only one thing we could have done — cutting off short-term credit. But that would have broken the back of the economy and brought the housing boom down.”

    Short of raising interest rates dramatically, “the evidence is very clear that there was nothing that any central bank could have done, or tried to do.”

    He said the housing meltdown was “inevitable in one sense: When you get a type of euphoria building in an economy, you’re dealing with the innate aspects of human nature. And I’ve watched bubbles inflate and deflate for 60 years. I’m pretty much convinced that we will never be able, by monetary or fiscal policy or government actions, short of disabling the economy, (to undermine) those bubbles.

    “Eventually, this has to defuse itself,” he said.

    Economy Close to Stalling

    Greenspan said it’s too soon to say whether a recession is coming, “but the odds are clearly rising.”

    “We’re getting close to stall speed” in economic growth, he said. “And we are far more vulnerable at levels where growth is so slow than we would be otherwise.

    “Indeed … somebody who has an immune system which is not working very well is subject to all sorts of diseases, and the economy at this level of growth is subject to all sorts of potential shocks.”

  51. Shore Guy says:

    # 45 “Not to do this is fiscally irresponsible,”

    Of course, there is the novel approach of cutting overall spending to meet revenue. Or is that, um, passé?

  52. grim says:


    Ethical Issues? Not if the seller discloses that they hold a license, which they are required to do.

  53. grim says:

    Or is that, um, passé?

    Political suicide. As a politician, if you cut jobs, you’ll likely find yourself unemployed come election time.

    It’s much easier to just add more debt on to the saddle, let the next guy worry about it.

    By the way, where do I pick up my pension check?

  54. kettle1 says:

    #52 shore,

    you cant cut spending!! that means you would have to fire someone, because heaven knows that you cant actually reduce say… the mayors salary or otherwise trim the fat.

    Also regarding Bubbleyums comment… I suspect that your scenario would only be possible in a deflationary environment and the FED will do everything they can to prevent that.

  55. kettle1 says:

    As bad as NJ may look at times, at least we dont live in florida!!!

    Florida school board : “The entire theory of evolution is not scientific fact, Intelligent design balances it out.” (

  56. Shore Guy says:

    #54 and 55

    I have come to the conclusion that the only way to help force change on the “politics as usual” is a Constitutional amendment that would prohibit the payment of pensions to any elected official (I would exempt the president). If people did not feel the need to keeep their position in order to safeguard a pension, there would be less of an incentive to “get along by going along.”

    Term limits wil never fly and, despite people screaming “throw the bums out,” there is a reluctance to throw out “our own bum, who is ok.” Take away the pension and they will thro themselves out.

  57. kettle1 says:

    OT, but i cant help myself

    A majority of Pinellas County School Board members think that if Florida children are taught evolution, they also should learn other theories on the origin of life.

    This is why my children will not being going to public schools. Apparently the board members are to stupid to realize that evolution has NOTHING to say about the origin of life. the study of the origin of life is Abiogenisis. Evolution simply describes the manner in which life changes over time due to environmental influences. Abiogenisis and Evolution are completey independent of each other!!!

    sorry, rant off….

  58. grim says:

    Discontinuing pensions for elected officials at the municipal level would certainly go a long way towards eliminating career politicians.

    It’ll never happen.

  59. Shore Guy says:

    # 59

    “It’ll never happen.”

    It is not likely to, I agree. The other thing that would help NJ is consolidation. There are just too many microscopic boroughs, etc. that have duplicated positions, services, etc. Has anyone ever been to Loch Arbor, for instance?

  60. kettle1 says:

    #57 SHore

    That wouldnt do much to help. The problem is not the pensions, but the attitude of the people that comprise the society, laws do nothing if the people do not support them i.e drug laws. Our society has become an entitlement society. The only way to solve the issue to shift our society back to a more “personal responsibility” society ( at a loss for the right term). When people no longer expect to be taken care of by others then you will not have the sick/broken system that we currently have.

  61. grim says:

    A new angle on subprime, how refreshing.

    Clergy take on subprime mess

    These days, many people also are praying about their mortgages.

    “There are many people in this community who are losing their homes or in danger of losing their homes, and there are some who have just seen their mortgage payments go through the roof,” said the Rev. Marc Maffucci, the church’s pastor.

    While the financial fallout of the mortgage meltdown has been well documented, the moral dimensions have not been widely discussed, religion experts say. They say they are particularly troubled on a moral level by the explosion of subprime mortgages, which allowed lower-income people with weak credit to buy homes based on attractive teaser interest rates that now are resetting to levels they cannot afford.

    Subprime lending is not unethical under Judeo-Christian tradition — and it can serve a good societal purpose by allowing those who have been down on their luck to get access to capital, said David Miller, executive director of the Center for Faith and Culture at Yale Divinity School.

    He and others, though, said that subprime lenders have a duty to charge fair interest and that they also have a moral responsibility not to extend credit to those they know cannot pay it back.

    “One of the interesting questions that should be asked of subprime mortgage lenders, is, ‘would you take this loan out on your own home?” said Gary Moore, a financial adviser in Sarasota, Florida, who writes about religion and investing.

    “That’s the Golden Rule. But I bet there’s not 1 in 100 that did. If more of them just thought about that for a minute, it would have prevented a lot of this.”

    At the same time, religion experts say that many homebuyers may have acted immorally by living beyond their means and that borrowers are required to try to make good on their debts. They cite a verse in the Book of Psalms that says: “The wicked borrows and does not pay back.”

    “If Dante were to rewrite ‘The Inferno,’ I think there would be another ring in his hell for unscrupulous property flippers,” said Surufka, who has discussed the housing crisis frequently in his weekend homilies.
    (Emphasis added)

    I nominate that last quote for “real estate quote of the year”.

  62. Shore Guy says:

    # 61

    No individual can do much to influence a societal shift back to “personal responsibility,” I am saddened to say. Not that we should not do what we can and to live our lives thus. Nevertheless, if there were not so many pols with their hands in the till, and going along with poor policies in order to keep their jobs and protect the retirement, it would help promote the shift you seek.

  63. grim says:


    Eliminate the fiefdoms?

    Surely you jest, my liege.

  64. kettle1 says:

    #63 shore,

    I agree, its a rather vexing chicken/egg problem. I would suggest that the best solution is to start with the children. Adults are useless as they are already stuck in their ways for the most part. By starting with the children and teaching them not to be consumerist entitlement slaves you may actually affect a change. Yes i know, it is easier said then done.

    you know, in the current state of affairs, i think the traditional insult of “capitalist pig” may be very appropriate!

  65. Shore Guy says:

    Back to Loch Arbor. It is a lovely place. Nevertheless, does it make sense to have a town of 280 people in the most densely-populated state?

  66. Shore Guy says:


    Proud capitalist, just not a pig.

  67. S&P is lowering ratings on another 1292 classes of RMBS.

    #65 – kettle1 – I’m afraid that that may be an up hill battle. I’m beginning to think that the only way we may change, culturally, is when we are forced to either via violence (revolution) or severe deprivation (economic collapse). Neither prospect is very appealing.

  68. Shore Guy says:

    Speaking of capitalism. It is time for me to go oppress the masses. Happy blogging everyone.

  69. John says:

    I was born in a log cabin that I built myself. Actually, the house I grew up in we bought in 1973 from a very old lady who was the original owner, her husband bought the 40 by 100 plot in 1909 for $500 bucks then they saved for another 14 years and in 1923 paid close to $3K for a three bedroom colonial house right from the sears catalog and had it assembled on the site. During the 1940s through 1950s she won many prizes for the rose gardens in her backyard and died of old old age after raising a family and burying a husband in 1973 after living in her house for 50 years and buying the plot 63 years earlier. My Mom and Dad bought the house in 1973 after saving for a house for 13 years, my Mom passed away in 2003 after raising a family and burying a husband.

    The third owner of the 1923 house purchased it in 2004 and immeditately started gutting it to flip it, the 81 year old glass front door and original handmade windows all ended up in the curb while home depot windows were quickly jammed in place by illegals. He never go the flip off and it is now a rental.

    thatBIGwindow Says:
    December 19th, 2007 at 9:14 am
    #41: My grandfather built his house when he was in his 20’s. My grandmother helped him put in walls and insulation! Doubt my generation has the skills to do that!

  70. thatBIGwindow says:

    #65: Eliminate MTV

    ( consumerist entitlement TV)

  71. scribe says:

    There’s a small Cape Cod across from my parents’ former house.

    I don’t remember this, but my mother said that when we moved in, in 1957, the guy was building it himself. He had someone make the basement, and then he would come out on the weekends and hammer boards while the wife would sit there in a folding chair, reading magazines.

    It’s a nice-looking Cape Cod. Most recent sale, about $260,000 – in 2003, I think.

  72. thatBIGwindow says:

    #70: How sad…Luckily most of my house is still original from 1925. Real wood kitchen cabinets and butcher block counters are much nicer than Home Depot pressboard and granite.

    “the 81 year old glass front door and original handmade windows all ended up in the curb while home depot windows were quickly jammed in place

  73. scribe says:

    From Marketwatch:

    U.S. banks borrow $20 billion from Fed at 4.65%
    By Rex Nutting
    Last update: 10:01 a.m. EST Dec. 19, 2007

    WASHINGTON (MarketWatch) — U.S. banks have borrowed $20 billion from the Federal Reserve for 28 days at 4.65%, the Fed announced Wednesday. It was the first of several planned auctions of short-term credits to alleviate a liquidity crunch in credit markets. A total of 93 banks bid in the auction on Monday, asking for $61.6 billion. The bid-to-cover ratio was 3.08. At 4.65%, the stop-out interest rate for the auction offered a 10 basis point discount from the Fed’s discount window rate of 4.75% and 28 basis points below the prevailing interbank lending rate of 4.93%. The loans are fully collateralized and will be repaid on Jan. 17. End of Story

  74. Shore Guy says:

    “WASHINGTON (Thomson Financial) – Emergency vehicles raced to the White House as thick black smoke gushed from windows of the office building across from the West Wing that houses US President George W Bush’s office.”

    Burning more Gitmo tapes?

  75. Clotpoll says:

    “Chief Executive Officer John Mack is forgoing a bonus for the year and called the results “deeply disappointing.”

    Spin that one, pret.

    And, this thing is just getting started.

  76. stuw6 says:

    More Don Harrold:

    PS – The next time you hear Larry Kudlow (et al) talk about the “goldilocks” economy, you remember this: America’s economy is in debt at historic levels, the trillions we owe are to China (et al), and now, those countries are exacting payment from our infrastructure. If that’s “goldilocks”, then, “the three bears” have begun to eat her alive. The idea that we have a “free market” economy is a flat-out lie. The US economy is a rigged system that has failed you. The only thing close to “free” about our economy is the “value” of the US dollar, which continues to erode into oblivion. No, Larry, this is not the “goldilocks” economy. This is what happens when you allow your nation to be controlled by private banks who then facilitate the sale of your infrastructure to your creditors and enemies.

  77. grim says:

    Caveat to this comment, I come from a family of Polish tradesman. I’m a first-generation American.

    My father built his house in the early 80s. I fondly remember “growing up” on the site. It wasn’t just him, but uncles, cousins, and friends as well. It really was a family affair, everyone helped. No big deal, this is the way things were done “back home”.

    When my sister built her house in Wayne in the 90’s, it was the same. We were all out there working, from teardown to framing to the wallboard and paint.

    Likewise, when my cousin built his home in Pequannock (posts under the handle Richie), the house was built in a similar fashion. Although I admit, I didn’t help out as much as I probably should have. But I pulled some cabling, did some tiling and spent some time in the crawlspace there too.

    The experience of growing up in this environment wasn’t wasted on me. I don’t need a plumber, electrician, or carpenter. I can easily handle a bath or kitchen remodel on my own. Dare I say I’m probably more qualified than most of the “contractors” you’d find on the street these days.

  78. dreamtheaterr says:

    Dear President Bush,

    I don’t often ask the Federal government to intervene on my behalf, especially with regard to my personal finances, but when I heard you had recently intervened on behalf of mortgage owners to have their interest rates frozen, it occurred to me that you could help me as well.

    Here’s my situation:
    About two years ago, I received a credit card in the mail that offered me what I thought was an unbelievable deal. The company agreed to let me consolidate all of my other credit cards on their card and agreed to give me a low interest rate of 3.99%. Well, it turns out that this rate wasn’t permanent. It was only a teaser rate and is now scheduled to reset in February of next year to a much higher rate. When this card resets at the new higher rate, it will place a tremendous hardship on me and my family and could drive me into bankruptcy. I figured that since you are helping to freeze the rate that mortgage owners are paying, you could also help freeze the rate on this credit card too. If you don’t consider me too forward, I would like to ask for a minimum five-year freeze. Hopefully five years will give the economy time to change in my favor and heighten my chances of being able to pay back my debt. Of course, the economy might get worse, but I’m trying to think positive.

    I feel it is only fair to ask for the same help, as I am in the exact same situation they are, which is to say that I fell victim to predatory lending practices and didn’t fully appreciate what the reset would do to me financially. Also, when the card resets, it will curtail my spending, which in turn could spell trouble for the economy. I can also assure you that I am not the only one who fell victim to teaser rates, so by helping me, you will be helping others and holding off future economic problems.

    Like I said, I don’t usually ask for help, but since you’ve been so kind with others, I thought I might benefit from what you’re doing.

    Renter For Life

  79. Clotpoll says:

    grim (22)-

    NJVF, aka the buzzard boys.

  80. skep-tic says:

    We have been undergoing a massive societal shift in the past 20 yrs or so, similar to the late 19th century (massive shift to industrial economy). Late 19th century saw repeated boom/bust periods. Wealth grew increasingly concentrated at the top. Massive immigration of “undesireable” races who were used as cheap labor (sound familiar?).

    Our government at the time was set up to deal with an agrarian economy. It was quite simply outmoded and unresponsive to contemporary life. Similarly, our government now is designed to deal with an industrial economy and it’s workers have all of the trappings of industrial beurocrats from two generations ago.

    Like then, change will happen in a period of crisis when it becomes all too apparent that government as it currently exists is incapable of dealing with current problems. I personally believe that this crisis will come alongside the retirement of the baby boomers (i.e., in the next 5-10 yrs).

  81. chicagofinance says:

    grim Says:
    December 19th, 2007 at 10:21 am
    I can easily handle a bath or kitchen remodel on my own. Dare I say I’m probably more qualified than most of the “contractors” you’d find on the street these days.

    grim: I guess we can modify the old saying “You can lead a horse to water….”…….”You can have an engineer build a bathroom, but you can’t make him shower…..”

  82. 007 says:

    Is it a good deal to buy foreclosure property?

    I checked on RealtyTrac about foreclosure property, seems to me they also charge for the service. I don’t know how much. Any one has experience on this?



  83. HEHEHE says:

    “But a disclosure form provided to the buyer and seller of a particular property, which isn’t part of the public record, shows that home builder KB paid $27,600 to another company, which made a cash payment to the buyer. Netting out that effective discount, the price was $168,400.”

    That’s just sweet.

  84. grim says:

    Realtytrac is expensive and doesn’t typically contain the “freshest” foreclosures.

    The benefit is that they provide an easy-to-use, all-in-one service. The alternatives are for you to do your own legwork.

    I’d suggest exploring REO offerings if you are interested in foreclosure properties.

    Given the fact that a significant percentage of foreclosures taking place have either no equity, or negative equity, you won’t find a deal at a foreclosure auction. As mortgage balances are higher than market prices (underwater), upset prices are higher than market. Just doesn’t make sense to bid on these.

  85. Clotpoll says:

    Vodka (56)-

    “Florida school board : “The entire theory of evolution is not scientific fact, Intelligent design balances it out.” (”

    Au contraire. The population of the state of Florida is living proof of Darwin’s theory of natural selection.

    The only mystery is how such a giant population of fools managed to end up in the same place (and elect a Bush as their leader).

  86. Clotpoll says:

    Vodka (58)-

    “Apparently the board members are to stupid to realize that evolution has NOTHING to say about the origin of life. the study of the origin of life is Abiogenisis.”

    Those board members must’ve been too busy watching TIVO’d episodes of the 700 Club to research this.

  87. grim says:

    The veteran vultures that make their living feeding on the foreclosure carrion are finding pickings slim as well.

    If there was even a scrap of flesh (equity) left on these properties they would have been snapped up by the vultures.

    The fact that the vast majority of these foreclosures are going back to the first or second lienholders (REO) strongly suggests that outstanding mortgage balances exceed market values.

    Like I said, there are vultures who make a living on foreclosures, if they aren’t bidding, there is good reason for it.

  88. Clotpoll says:


    “If Dante were to rewrite ‘The Inferno,’ I think there would be another ring in his hell for unscrupulous property flippers…”

    “Hell is other people.”- JP Sartre

  89. Jamey says:

    All of which means, of course, that there’s no better time to buy or sell a house than now.

    Clot: Have you actually read (or seen performed) “No Exit”?

    “l’enfer, c’est les autres” is, perhaps, the most widely quoted out of context phrase in the history of literature.

  90. 3b says:

    And now of course the criminal investigations.

    Bear Starns hedge fund Manager Departs amid probes.

  91. Clotpoll says:

    Grim (90)-

    Exactly right, and it’s a real problem. 90% of the foreclosures in my area go straight back to the bank; there’s not a shred of equity left, so investors can’t do anything with these properties.

    A friend who regularly attends the Somerville sheriff sales tells me the crowd has dwindled to the point that the only people in the room are functionaries and bank reps.

    This is bad news for the “ecosystem”, as now properties go straight from owner-occupied to REO. The massive, swift discounts that occur in such an environment are going to have a jarring effect on prices going into ’08. All the investors who traditionally have been able to pick up foreclosures and pre-foreclosures, improve them and resell them at- or close to- market value have been effectively locked out of this game. The only way for an investor to play now is to wait for REOs to hit the market at massively-discounted prices, then gamble that even those prices allow them enough potential margin to justify the investment/improvement risk.

  92. Clotpoll says:

    Jamey (92)-

    “Huis Clos”…in college, in French. A real uplifting experience (the intellectual equivalent of shooting yourself in the thigh with a nail gun).

    Of course, we followed this uplifting gem with L’Etranger. What a yukfest.

  93. bi says:

    For the last company picnic, management decided that, due to liability issues, they could have alcohol, but only one (1) drink per person.

  94. kettle1 says:

    As has been pointed out by others here, The Bank owned properties are the real time bomb. Once the banks decide to really unload these properties they will devastate the surrounding neighborhoods price wise.

    On another note… As this adventure in real estate has progressed,i have gone from planning on leaving the state to planning on staying due to family connections. The question i am wrestling with now is where is the safest location. Nj is in serious financial trouble ( i.e pension liabilities, infrastructure, mass exodus of 20 somethings, out of control taxes) and it looks like NY state may not be far behind from some of the recent articles i have read. So it is starting to look like hoping right across the border into PA may be my best option. The trouble is that i have plans of possibly working in manhatten in the next couple of years. Does it make any financial sense to own a primary residence in PA and rent in NJ. the wife would work in NJ so she would have NJ state tax; i would be in manhatten and would have to pay NY city and state tax. I havent started to run the numbers yet, i am just starting to put togather my “escape pan”. of course i could always consider killadelphia for employment…..

  95. kettle1 says:

    well. a little more OT for the holiday season… from reuters

    Singapore man charged with “fraudulent posession of women’s underwear” after wearing a pink bikini to work. Submitter has new idea for casual Fridays

  96. bi says:

    46#, Here is one more example for this research. A few years back there was a sexual harassment lawsuit against a big I-bank. The claim was as follows: a BSD trader in the firm asked his female assistant trader to take her cloth off and stare her breast for 10 minutes before market open each day.

  97. grim says:

    The Bank owned properties are the real time bomb. Once the banks decide to really unload these properties they will devastate the surrounding neighborhoods price wise.

    Already starting to happen, although on a small scale.

    MLS# 2465336 – 12 Fells Manor
    3br/2.1ba end-unit townhouse
    Asking: $469,900
    (Pre-foreclosure asking price: $599,900)

    MLS# 2445386 – 19 Fells Manor
    2br/2.1ba interior-unit townhouse
    Asking: $535,000

  98. grim says:

    Who would pay a $65,000 premium for a smaller, less desirable interior unit? In addition to having an additional bedroom, the REO is a more desirable end-unit (More windows, fewer neighbors).

    Even if the interior unit has a remodelled kitchen or baths, that $65k difference would go a looong way towards making those units equivalent in terms of finishes.

    Not to mention the benefit of being able to negotiate with a party that has no emotional involvement.

  99. grim says:

    From Bloomberg:

    Ambac, MBIA Debt Outlook Lowered By S&P; ACA Rating Cut to CCC

    MBIA Inc. and Ambac Financial Group Inc., the world’s two largest bond insurers, had their credit outlook lowered to negative from stable by Standard & Poor’s, while ACA Capital Holdings Inc. had its rating cut to CCC from A.

    “The rating actions were prompted by worsening expectations for the performance of insured nonprime residential mortgage backed securities and” collateralized debt obligations of asset backed securities, New York-based S&P said in a statement.

  100. grim says:


    From CIBC:

    CIBC Provides Update to Previous Disclosure on U.S. Subprime Real Estate CDO / RMBS including Likely Large Write-down in First Quarter 2008 Financial Results

    Following Standard and Poor’s announcement today that it had reduced the credit rating of ACA Financial Guaranty Corp. from “A” to “CCC”, CIBC confirmed that ACA is a hedge counterparty to CIBC in respect of approximately U.S. $3.5 billion of its U.S. subprime real estate exposure.

    It is not known whether ACA will continue as a viable counterparty to CIBC. Although CIBC believes it is premature to predict the outcome, CIBC believes there is a reasonably high probability that it will incur a large charge in its financial results for the First Quarter ending January 31, 2008.

  101. BC Bob says:

    “Singapore man charged with “fraudulent posession of women’s underwear” after wearing a pink bikini to work.”


    Trader from SAC?

  102. Clotpoll says:

    grim (103)-

    Ohhh nooo! Same model, same street in prestigious Basking Ridge. The “Active” is owner-occ, the “Under Contract” is Countrywide REO. You can bet the REO went for less than asking, too:

    #2450235 Active: Bernards Twp. 59 GOLTRA DRIVE, asking $599,000

    #2448941 Under Contract: Bernards Twp. 34 GOLTRA DR, asking $539,900

  103. jlx says:

    hello all… newb here… great site and community… is there a way to get a list of just reo properties?

    was thinking of buying soon but from what i’m reading on this site, it looks like the time to buy is 12-18 months from now…

    looking in towns such as fort lee, leonia, paramus, river edge, oradell, englewood…

    can anyone offer any good insight to these towns?

    #1 priority is… easy to commute to nyc
    and must be close to gwb as in-laws come to babysit from queens

    thanks for any advice.

  104. scribe says:


    Some of the banks have REO sites. For instance, Wells Fargo is here:

  105. afe says:


    speaking of B. Ridge, do you have an address/info for mls 2430509


  106. jlx says:

    thank you scribe!

    these links will be instrumental in my potential buy and upgrade myself approach…

  107. Clotpoll says:

    Hey, bi, are you long Sallie Mae?

    “Lord, who assumed the chief executive’s seat on Friday and said he plans to stay in the position for at least two years, called his sale of more than 1.2 million shares of company stock to meet margin calls “embarrassing and troublesome to me personally” but not a reflection of diminished confidence in the company’s long-term future.”

  108. Clotpoll says:

    afe (113)-

    15 Lenape Ct (The Summit). 142 DOM (no previous listings), reduced to 829K from 849K on 9/7/07, then reduced to 812.5K on 11/19/07.

    Listing agent is a bitch on wheels. Beware.

  109. Stan says:

    To what degree to bank sales currently driving down the comps?

    Are Realtors(tm) and sellers seeing enough bank sales to feel like they need to drop prices to compete with them?

  110. spam spam bacon spam says:

    [54] Grim:

    So you’re saying this guy is unethical?

    OBJECTID: 51431
    PIN: 1025-000060000-000070000-00000
    MUNI: 1025
    BLOCK: 6
    LOT: 7
    TAXMAP: 3
    ZIPCODE: 08827
    A_ACRES: 0
    B_ACRES: 0
    TOT_ACRES: 5.4
    CMBD_PROP: 2
    DATE_DWNLD: 6/14/2006

    And it’s for sale by….wait for it….

    Presented By

    John Stolarz
    Mobile: (908) 246-3159
    Office: (908) 735-8080
    Fax: (908) 730-6449
    Broker: (908) 735-8080 Ext. 246

    Nary a peep about it being owned by it’s listing agent on the page…

  111. afe says:


    thanks! funny you should say that, i was about to call her for the address then i thought, look at scowl!! :)


  112. spam spam bacon spam says:

    PS-If you want to make him sweat, ask if that house has ever flooded.

    Oh, yeah. Ask him if there’s anything he wants to mention that might be buried next to the garage.

  113. grim says:

    spam spam,

    Never said it had to be disclosed on

    It is disclosed in the listing details, although I’ve got to admit, he is really pushing it by stating it as part of the showing instructions…

    ?SHOW: Call Listing Office, Call Owner, Owner is Licensed RE Agent, See Showing Instructions

    Has that place really been on the market for 440 days?

  114. Bubble Disciple says:

    That’s amazing! :-)

    John Says:
    December 19th, 2007 at 9:59 am

    I was born in a log cabin that I built myself.

  115. grim says:

    From Bloomberg:

    Citigroup Cuts CDO Bankers After Mortgage Losses, People Say

    Citigroup Inc., the biggest U.S. bank, dismissed about 30 employees in its structured-credit group after record mortgage-related losses, said three people with knowledge of the decision.

    The cuts reduced the division by almost a third, a week after newly appointed Chief Executive Officer Vikram Pandit pledged a “front-to-back” cost review, said the people who declined to be identified because the decision hasn’t been made public. The department helps put together collateralized debt obligations, mortgage-related securities that contributed to at least $9 billion of writedowns at Citigroup.

    “Issuance in structured credit, especially related to mortgages, is anemic at best, with little likelihood of a recovery anytime in the near future,” said Andrew Davidson, president of New York-based Andrew Davidson & Co., which advises fixed-income investors on mortgage-backed securities. “My guess is you’ll see more of these cutbacks across Wall Street.”

  116. pretorius says:

    Chifi #25,

    I was just in London. I always enjoy taking in the print media there. Times, Guardian, Sun in the morning followed by the Evening Standard.

    Sentiment about UK home prices and economy, based on most media reports and UK real estate company stock prices, is extremely bearish in London. The handful of open houses I checked out revealed asking prices that make Manhattan homes seem fairly priced, if not cheap.

    However, some papers were reporting that West End retail sales topped ₤100m on 1st Sunday in December, akin to our Black Friday. The figure mentioned last year was only ₤80m.

    People explained away the figures by attributing the spending surge to Russians. But when I was waiting in line to get inside Louis Vuitton and to get onto escalators in Selfridges on that day, I heard mostly British English accents. In fact, the volume of shoppers was so overwhelming that cops were forced to ban car traffic from several major streets. And we’re not talking window shoppers – people were hauling heaps of shopping bags everywhere.

  117. grim says:


    Did you listen to the call?

    “Steve, lets go, no more questions, lets get the f*ck out of here. [laughing]” – CEO A. Lord


  118. 3b says:

    #127 grim?

  119. #127 – Grim – I heard that too! Minyanville already has a port up about it with the audio.

  120. kettle1 says:


    I havent been to london for about a year now, but from the info i read it looks like the UK could be on a very similar path as the US housing market, just a year or so behind us. people were still buying like mad last Xmas and everyone was poo-pooing anyone who suggested that troubled waters might lie around the bend. I only follow europe casually but from what i have seen they are teetering on the edge, heck their banks have stepped in the same pile of BS that our banks have.

  121. ermm, that should be “post” not “port”. I suck.

  122. kettle1 says:

    Pre i know that i generally sound fairly pessimistic, and at times i can be, however its not all doom and gloom. Turbulent periods whether in finance, housing, or history in general often offer the greatest opportunities for those willing and able to take the risks. Just dont forget the greater the reward the greater the risk ( yes i know you are more then aware of that). i think that over the next couple of years, people who have stayed plugged into the various markets and are financially sound will have very real opportunities even if the majority of markets are down.

  123. kettle1 says:

    With the various wall street cuts going on, can anyone tell me how the quants are faring? are they any better off then some of the other guys?

  124. grim says:

    Don’t know about the quants, but this hedgie seems to be doing OK.

    Bass Shorted `God I Hope You’re Wrong’ Wall Street

    J. Kyle Bass, a hedge fund manager from Dallas, strode into a New York conference room in August 2006 to pitch his theory about a looming housing market meltdown to senior executives of a Wall Street investment bank.

    Home prices had been on a five-year tear, rising more than 10 percent annually. Bass conceived a hedge fund that bet on a crash for residential real estate by trading securities based on subprime mortgages to the least credit-worthy borrowers. The investment bank, which Bass declines to identify, owned billions of dollars in mortgage-backed securities.

    “Interesting presentation,” Bass says the firm’s chief risk officer said into his ear, his arm draped across Bass’s shoulders. “God, I hope you’re wrong.”

    Within six months, Bass was right. Delinquencies of home loans made to people with poor credit reached record levels, and prices for the securities backed by these subprime mortgages plunged. The world’s biggest financial institutions would write off more than $80 billion in subprime losses, while Bass, his allies and a handful of Wall Street proprietary trading desks racked up billions in profits.

    Bass and investors like him saw opportunity in a range of new investment tools that banks created to sell subprime securities worldwide. These included mortgage bond derivatives, contracts whose values are derived from packages of home loans and are used to hedge risk or for speculation. The vehicles allowed hedge funds like Bass’s to bet against particular pools of mortgages.

  125. 3b says:

    #130 kettle London/UK is no differnt than here, housing bubble, loose lending standards, record amount of debt held by British consumers, and record amount of people loosing their homes.

    London just like NY will no longer need al ot of that innovative and creative talent that created thei mess in the first place.

    Ironically some of that so called innovative and creative talent, were the very same clowns who got us into this innovative and creative mess in the first place.

  126. Confused In NJ says:

    U.S. Mortgage Crisis Rivals S&L Meltdown
    by Greg Ip, Mark Whitehouse, and Aaron Lucchetti
    Wednesday, December 19, 2007
    provided by

    Toll of Economic Shocks May Linger for Years; A Global Credit Crunch

    The home has long been the bedrock asset of most American families. Now, its value has become the biggest question mark hanging over the global economy and financial system.

    Over the past decade, Wall Street built a market for more than $2 trillion in securities sold globally and backed by loans to U.S. homeowners on two long-accepted beliefs and one newer one. The prevailing logic: The value of the American home would never fall nationwide, and people would almost always make their mortgage payments. The more recent twist: Packaging mortgage loans and turning them into securities would make the global economy more resilient if anything went wrong.

    In a matter of months, though, much of the promise of the new financial architecture — together with its underlying assumptions — has proven to be a mirage. As house prices fall and homeowners default on mortgages at troubling rates, the pain has spread far and wide. An examination of the resulting crisis shows that it is comparable to some of the biggest financial disasters of the past half-century.

    More from The Wall Street Journal Online:

    • Property-Tax Frustration Builds

    • South of the Border, the Market’s Still Hot

    • Profit From the Pain to Come in Bonds

    So far, the potential losses look manageable compared with the savings-and-loan crisis of the 1980s and the tech-stock crash of 2000-02. But the housing debacle could yet take years to work out, thanks to the sheer complexity of it. Until the mess is cleaned up, investors will remain jittery and banks will likely hold back on all kinds of lending — a credit crunch that is already damping global growth and could tip the U.S. economy into recession.

    The new financial system — shifting risk from banks to securities markets — has worked “pretty well” up until now, says former Federal Reserve Chairman Paul Volcker. “We’re going to find out if it works well for a major-league crisis.”

    To ease the pain, the Federal Reserve has cut short-term interest rates twice and is expected to cut them further tomorrow. The Bush administration has also pressed for private-sector curative measures. First, it urged big banks to create a new entity to buy some mortgage-linked securities that don’t have a ready market now. And a plan finalized last week calls for freezing interest payments on perhaps hundreds of thousands of qualifying homeowners whose mortgage notes are set to rise. (See a primer: Will the Rate Freeze Help You?) Both ideas are controversial. They are hailed by some as well-conceived financial first aid and criticized by others as inadequate — or an impediment to crisis resolution.

    Veteran financiers see in the current episode a pattern consistent with classic financial manias: Investors’ enthusiasm for an asset — in this case U.S. houses — drove up prices, attracted more capital and lifted prices to levels that preordained a fall. Home prices rose sharply elsewhere, too, including in the United Kingdom, parts of continental Europe and Australia. “Old fogies like me expected the bust to come earlier than it did,” says George Soros, the 77-year-old chairman of Soros Fund Management. “A lot of us got tired waiting for it.”

    The Extent of the Crisis

    The ultimate extent of the crisis will depend largely on how steeply the price of the average American home falls. That will play a pivotal role in determining how many people are at risk of foreclosure as payments on adjustable-rate mortgages tick upward and in the size of losses on securities backed by those loans. It will also affect the size of the hit that consumers sustain to their spending power.

    More from Yahoo! Finance:

    Special Report: Financial Outlook 2008

    House prices are down by 0.5% to 10% now, depending on the measure used. If they fell 30% — what it would take to restore their historic relationship to inflation, rents and incomes — $6 trillion worth of housing wealth would be wiped out. Measured against the size of the U.S. economy, that is less than what was lost in the stock market between 2000 and 2002. Initial guesses at total losses on subprime and similar mortgages range from $150 billion to $400 billion.

    The latter figure would equal about 3% of U.S. annual economic output. That is similar to the losses suffered by S&Ls and commercial banks between 1986 and 1995. But it is less than half the scale of Japanese bank losses in the wake of that country’s burst stock and real-estate bubbles.

    The current crisis, though, differs in crucial ways from the recent tech-stock bust and the S&L crisis.

    For one, it centers on assets — houses — that, unlike stocks, most people have bought with borrowed money. On average, mortgage debt amounts to nearly half the value of houses. In recent years easy credit has allowed many to borrow up to the full value of their homes, making them more leveraged than any hedge fund.

    As prices fall, people who find themselves owing more than their homes are worth are much more likely to renege on their mortgages, leaving lenders to sell the foreclosed houses at a loss. To make matters worse, payments on more than $500 billion in mortgages will reset in 2008, mostly to higher rates.

    Banks are far less exposed to serious damage than during the 1980s. Nonetheless, the shift of loans from banks to markets has created a staggering complexity that threatens to prolong the crisis.

    During the Latin American debt crisis, the Fed and U.S. Treasury were able to prod a few hundred banks to renegotiate billions of dollars in debt owed by a few dozen developing countries. “You had uncertainty in valuation, but it was more straightforward: You know how big the debt is, you know who has it, a relatively small group,” says Mr. Volcker. “This is much more complex.”

    Mortgages today are dispersed among banks as well as more than 11,000 investment pools, each of which may have hundreds, if not thousands, of investors. Many of those pools have been further repackaged into specialized funds known as structured investment vehicles and collateralized debt obligations, or SIVs and CDOs — each of which have their own investors. That makes determining who owns the securities, what they are worth and the nature of the underlying collateral a tricky process.

    David Barse of Third Avenue Management LLC, a New York investment firm specializing in distressed companies, is steering clear of CDOs for now. He says he would need to hire new experts just to figure how much they are worth. “We don’t have the analytical systems to break them down,” he says.

    Indeed, coming up with a value for a CDO entails analyzing more than 100 separate securities, each of which contains several thousand individual loans — a feat that, if done on any scale, can require millions of dollars in computing power alone.

    Recent deals, such as a hedge fund’s purchase of the mortgage portfolio of E*Trade Financial Corp., suggest markets are starting to sort things out. But many investors are hanging back, prolonging the uncertainty over markets and the economy.

    Housing fits a pattern Mr. Soros has observed since he entered the investment business in the 1960s. Economic fundamentals, he posits, are supposed to determine asset prices. But often a flood of capital makes an asset’s fundamentals seem sounder than they really are, attracting even more capital. “Eventually, you reach a turning point,” he says, “where the value of the collateral begins to decline, which reduces the willingness to lend, which reinforces the fall in the value of the collateral.”

    “There usually has to be a flaw in people’s perceptions to set a boom-bust sequence into motion,” Mr. Soros says. In the case of housing, he says, it was the assumption that, because home prices fall nationwide only in a severe economic slump, a diversified portfolio of U.S. mortgages made for a very safe investment.

    Robert Shiller, a Yale University economist who has made a career out of studying bubbles, says the last bear market in stocks may have also made houses more appealing. A 2003 survey of home buyers he conducted with a colleague found 10 times as many said the stock market’s collapse encouraged them to buy a home as said it discouraged them. Their thinking, Mr. Shiller says, went like this: “I’m fed up with the stock market, I had so many promises of high returns and my broker and the accountants were deceiving us. But homes have always gone up in value, and it gives me great satisfaction to own a home and I can see it everyday.”

    At first, home prices rose for good reason. With the economy in recession, the Fed slashed interest rates in 2001 and kept them low until mid-2004. That, plus an influx of foreign savings to the U.S., kept mortgage rates low. Former Fed Chairman Alan Greenspan frequently argued there could be no housing bubble. The high cost and inconvenience of moving “are significant impediments to speculative trading and…development of price bubbles,” he said in late 2004.

    But rising home prices may have given both buyers and lenders a false sense of the market’s stability and security.

    Chris Delzio, a securities broker in the pricier New York area, moved to Palm Bay, Fla., in 2003 and bought two town houses, each for $75,000. Within two years, he had sold both for double what he paid and plowed the profits into land to build five new homes. Compared to staring at a securities-trading screen, he says, “It was fun, driving around, looking at the properties. You’re out, talking, negotiating.”

  127. Pat says:

    It must be the overarching theme of redemption on this blog. I ain’t talking Dante, either.

    Maybe 2008 will be the Year of Redemption.

  128. Pat says:

    137 in reference to the attendees.

  129. chicagofinance says:

    Frank Says:
    December 17th, 2007 at 8:03 pm
    #90,Citi CDO group is getting the ax tomorrow.

    Frank: made the call…..prima facie evidence that he is a reliable information source

  130. grim says:

    NJ unemployment ticks up to 4.2 from 4.1

    No worries, the 900 jobs added in “accommodation and food services” easily make up for the 600 jobs lost in “Financial Activities”.

  131. 3b says:

    UK Rtail sales at their weakest level in a year.

  132. 3b says:

    UK to face more financial shocks going forward

  133. HEHEHE says:

    129 stop posting from that Looney Tune website

  134. chifi / children are -(NPV) says:

    Damn it pret! You studied material on placing anecdotal evidence in its proper perspective. The whole point in being a CFA is that you are providing outward signaling that you have the wisdom derived from quantitative training and rigor. The rigor is needed so that as an observer of your environment, you are able to transcend your natural human behavioral tendencies that are hard wired into your brain.

    You studied the stuff….you passed the tests…..did any of this stuff resonate? Can’t you incorporate your book knowledge into your skill set?

    pretorius Says:
    December 17th, 2007 at 8:28 pm
    Chifi, I know all about those heuristics because they’re part of the CFA test. I still think it is useful to illustrate a point with an anecdote though.

    pretorius Says:
    December 19th, 2007 at 1:09 pm
    Chifi #25, People explained away the figures by attributing the spending surge to Russians. But when I was waiting in line to get inside Louis Vuitton and to get onto escalators in Selfridges on that day, I heard mostly British English accents. In fact, the volume of shoppers was so overwhelming that cops were forced to ban car traffic from several major streets. And we’re not talking window shoppers – people were hauling heaps of shopping bags everywhere.

  135. kettle1 says:


    the posting company list to hot handle????

  136. pretorius says:

    Chifi, still need to take and pass final test to be a CFA. Level 3 includes less quant and more psych stuff. Maybe I’ll fail cuz I don’t know heuristics.

    Separately, if I was part of this crowd – and I was – then I wouldn’t be too worried about UK retail sales.

  137. grim says:


    Elimination of “piggybacking” is the key there.

    Lots of first time/just married buyers use this technique when there are large discrepancies in credit scores (especially due to credit history length).

    Simply adding the partner to the longest history length account was good enough to push the low-FICO up significantly.

  138. pretorius says:


    Here’s one that all the stock and real estate wizards here should be interested in:

    3-5 years experience, $200k-$300k comp

  139. grim says:

    Moody’s cuts D.R. Horton ratings to ‘Ba1’ from ‘Baa3’
    Moody’s: Outlook on D.R. Horton is ‘negative’
    Moody’s cuts D.R. Horton’s rating to below investment grade

  140. 3b says:

    #147 pret: You are easily dazzled.

  141. Clotpoll says:

    grim (127)-

    “Steve, lets go, no more questions, lets get the f*ck out of here. [laughing]”

    Where’s “out of here”…Tierra del Fuego?

  142. Bystander says:

    I think it is less a financial decision than a huge life decision. PA is far away from NYC & unless Scotty creates his beam machine, your life will be commuting. My brother lives in Easton. His has huge, new construction mansion that they paid under $400K for it back in 2003. All of their neighbors are Staten Island or north NJ transplants. I love the area…but he commutes 2 hours each way to Woodbridge. His girl commutes the same to Morristown. 78 E or W is insane & getting worse. What you save in taxes and home prices, you will pay slowly over years in gas, commuting costs or time itself. I had a boss who commuted from Nazareth to NYC everyday. He said it only took 1.5 hours to NYC..but he left at 5:30 AM. PA is a viable option if you want to sacrifice time for money. It is a great retirement haven. If you sock the NYC $ away and change to a lower income job then you could have a decent life out there. People who moved there and banked on central/western NJ jobs are absolutely hurting now. Lehigh Valley market is pegged to the big NJ insurance, financial and pharma industries, not NYC. I should mention that PA charges a 1% (?) personal income tax on top of state tax. My bro. was not aware of it when he moved out there.

  143. spam spam bacon spam says:

    [122] Grim

    Never said it had to be disclosed on

    oh… then at least he’s not a total turd :)

    It is disclosed in the listing details, although I’ve got to admit, he is really pushing it by stating it as part of the showing instructions…

    Has that place really been on the market for 440 days?

    I guess so. He probably paid about 300K for it. I know the previous owner well. She couldn’t sell it in good conscience because it has a PROFOUND water problem. The basement doesn’t “leak”…. it actually has a small creek running under the house which floods the “basement” up to about the chest level during normal rain storms. She was elderly and would shut everything down until the water subsided. The furnace was from the 1950’s and was cast iron, I’m sure the new guy replaced it due to the fact that it had rotted out from being submerged all those years.

    She had asked that anyone buying to have the house jacked up, engineering done to move the water away and the house reset on a new foundation. Other, less costly solutions had been tried by her and were not successful… she had laid out almost 60K for some serious work prior to moving.

    I’m sure she thought this guy was going to do just that. He never did. It’s a flip for him.

  144. kettle1 says:

    Clot 153

    I hear brazil is nice this time of year

  145. Bystander says:

    #154 is for kettle (#98)

  146. Clotpoll says:

    grim (140)-

    Want fries with that?

  147. Clotpoll says:

    John (149)-

    “If you can value or model mortgages you got it made…”

    If you can value or model mortgages, you are Jesus.

  148. John says:

    I give Lord a medal for somehow having his SLM bonds still rated as investment grade, now that is a miracle!!

  149. John says:

    NEW YORK, Dec. 19, 2007 (Thomson Financial delivered by Newstex) — Shares of beleaguered student loan giant SLM Corp., better known as Sallie Mae (NYSE:SLM PRB) (NYSE:SLM PRA) (NYSE:SLM) , tumbled to a 6 1/2-year low Wednesday after Al Lord, the company’s chief executive of three days, became irate with analysts on the company’s conference call, which he ended abruptly by saying ‘let’s get the (expletive deleted) out of here.’
    The executive prefaced the call by saying his remarks would be broad because he is new in the CEO role, and that he aimed to get the company out of ‘deal limbo.’ Sallie Mae’s shares fell last week after news that a proposed takeover by private-equity firm J.C. Flowers & Co. for $60 a share fell apart. The scrapped deal led SLM to cut its 2008 outlook.

  150. 1987 Condo Buyer says:

    1% PA tax, yes this is how they help keep real estate taxes lower, each town can tax income.

  151. kettle1 says:


    The PA idea is just an initial concept, i will let it sit for a while and see what i still think of it in a few months. What i actually meant before was that i would consider building (sidebar: i actually want to build my own house, the majority of it anyway. I helped my brother-inlaw do the majority of construction on his house in mendham and really enjoyed it.)in PA while renting nj for several years and then making the move to PA including the job

  152. grim says:

    From MarketWatch:

    Moody’s cuts Ryland debt rating to junk

    Moody’s Investors Service on Wednesday lowered its ratings on home builder Ryland Group Inc. into junk territory, and the outlook is negative. “Ryland’s bottom-line profits will remain under heavy pressure in 2008, given Moody’s expectation that land impairments and option abandonments will continue at a brisk pace,” the ratings agency said in a statement. “Moody’s expects investment-grade companies, even in cyclical industries, eventually to return to profitability, even with charge-offs.” Earlier Wednesday, Moody’s cut D.R. Horton Inc.’s rating below investment grade.

  153. pretorius says:


    If you’re looking for a cheap home (and an honest realtor) in PA, then consider this listing.

    I don’t think there are many job opportunities for quants in Johnstown though.

  154. John says:

    You would never guess SLM is a public company and since SOX is a point in time of 12/31 when they discover a material weakness post 12/31 and pre 302/404 certification it is an automatic failure and with “qualified” financials you start to have loan covents kick and investor confidence wrecked. I have no clue how on 12-19 their ceo has no clue what is going on with everything yet by 12-31 they are going to pull it together, sounds like one big fat short to me.

  155. Pat says:

    Or one big vulture buy.

  156. chifi / children are -(NPV) says:

    Sign of the times….I just e-mailed another banker I know on his personal account, because the work e-mail bounced back…….I received this auto-response…..
    “I am currently volunteering in Africa with limited access to email. I will be returning all emails and voicemails when I return the 2nd week of January. Have a Happy New Year.”

  157. AntiTrump says:

    From Today’s WSJ:

    How Hidden Incentives Distort Home Prices

    PARKER, Colo. — As the housing market slump deepens, disguised discounts are making it harder to tell exactly how much people are paying for homes.

    Buyers, sellers and other market participants typically monitor fluctuating home values through sale records that legally have to be listed with county clerks. But incentives offered to buyers — ranging from free cars or furniture to cash rebates — are making those prices less reliable as a sign of what buyers actually paid, netting out the giveaways. And that may be misleading lenders and people shopping for homes, some real-estate lawyers and appraisers warn.

    KB Home in January sold a new townhome with green siding in the Denver suburb of Parker for $196,000, according to the deed recorded with the Douglas County clerk. But a disclosure form provided to the buyer and seller of a particular property, which isn’t part of the public record, shows that home builder KB paid $27,600 to another company, which made a cash payment to the buyer. Netting out that effective discount, the price was $168,400.

    Fannie Mae, the nation’s largest investor in home loans, sent a memo to lenders this month warning them to watch out for “practices that may distort or artificially inflate” house prices, such as payments from sellers or builders that effectively rebate part of the recorded price.

    Incentives to buyers are becoming more common in a glutted market. For builders, an incentive can mask a discount that might lower the value of nearby homes the company is still trying to sell — or avoid angering previous buyers who paid more. For buyers, cash from the seller can finance a down payment.

    One risk of these transactions is that they can mislead other buyers into overpaying for similar houses nearby, or give owners of nearby properties an exaggerated notion of their home equity. Lenders can make loans on the basis of an artificially high value, increasing the danger of losses from any default.

    The national builder Lennar Corp., for instance, last year offered buyers in certain Florida communities vouchers to purchase Mustangs from a local dealership. Lennar said the voucher was deducted from the recorded sales price of the homes. A few months ago, a small builder in Tacoma, Wash., offered a $20,000 Harley-Davidson to buyers of a $479,000 home. One buyer skipped the Harley and instead took a $20,000 incentive from the builder, which reduced the sales price of the home. But in other cases, ” the incentive is not always public knowledge,” said an agent involved in the sale, Jeff Jensen of Windermere Professional Partners, Tacoma.

    Distorted prices also can fool computer programs — known as automated valuation models, or AVMs — that estimate home values based on sales of nearby properties and other factors. Lenders often use AVMs to check appraisers’ work or in some cases as a cheaper substitute for a human appraisal. and other Web sites consulted by people shopping for homes also rely on AVMs. estimates the value of the townhome in Parker at about $191,274, or about 14% above the net price paid by the buyer. A spokeswoman for Zillow said the company “looks at many homes in order to extract patterns used for valuing homes” and that the estimate doesn’t hinge on one, possibly distorted past sales price.

    Another transaction that shows signs of price distortion is the sale of a home on Olen Mattingly Road in Avenue, Md. The two-story, 2,158-square-foot home, built within the past two years, was originally listed for sale in February 2005 for $635,000 but languished on the market for more than a year, according to local real-estate agents. The owner, builder Bennett Homes LLC, gradually reduced the price to $469,000 by March 2007. In May, however, the home sold for $600,000, far above the recent asking price. Vangie Williams, a real-estate agent who represented the buyers, says the sale involved a payment by the builder to an organization that collected fees for finding buyers. Officials of Bennett didn’t respond to requests to comment.

    A unit of Wells Fargo & Co. provided two loans to finance the purchase, the first for $479,800 and the second for up to $120,000, for a total of just under $600,000. That is about 28% more than the asking price for the home two months before the sale. A spokesman for Wells says the property was appraised at $615,000. He adds that Wells relies on “objective third-party appraisals in making all lending decisions. While we expect that appraised value [will] be close to market value, that may not always be the case.”

    The house recently was back on the market. The latest asking price: $499,000.

  158. lisoosh says:

    3b – I’ve followed the UK market for years and it has a couple of differences from the US market, which actually might make it fall harder:

    1. Much higher prevalence of 40 year/interest only mortgages (although no-docs didn’t happen).
    2. Most mortgages are adjustable (BIL was surprised that here they are fixed).
    3. There has been unbelievable levels of “investing” in second homes along the coasts and in rural areas that make the problems truly national. People are priced out even in back-of-beyond little fishing villages and crofts.
    4. Their tax system actually encouraged the buying of investment rental properties (there called Buy-To-Let), literally EVERYONE rushed out to buy, rehab and rent out. There is a surplus of rentals that don’t cover costs.
    5. Brits are convinced that there is a housing shortage, and yet there are actually around a million properties sitting vacant. Many in need of work, and owned by absentee landlords, but vacant none-the-less.

    Contrary to Pret’s 10 minutes of anecdotal evidence from the duty-free at Heathrow, retail sales are down, hard. Brits are absolutely tapped out.

  159. chifi / children are -(NPV) says:


    I tripped across this one, and I figured that it would have you sporting a woodie…….one of the Arkansas plans….I’ve heard zippo about it….

  160. Shore Guy says:

    “are they any better off then some of the other guys?”

    Not bad, especially with shallots, garlic, and a splash of white wine.

  161. 3b says:

    #171 lisoosh: Agree, in fact I have relatives there (Coventry) who were visiting here this summer, who told me how much things had slowed,and the absolute insanity that was prevelant there over the last few years.

    Not to mnetion that I myself have visited there many times over the years, but hey what do they or I know.

    But of course pret says Manchester is England’s second city, where as most English people consider Birmingham to be England’s second city.

    As far as British English accents, I doubt he could tell one from the other, and no one over there uses the term British English accents, good thing he did nto say that in Glasgow, Edinburgh,Cardiff, or Truro.

  162. pretorius says:


    Have you been to Manchester and Birmingham recently? Manchester has improved dramatically while Birmingham has stuggled. It is debatable but I would pick Manchester today.

    I know it is anecdotal, but I visited Arnsdale and Trafford in Manchester. Both malls were packed.

    I asked a lot of people living in England the “2nd city” question a few weeks ago. Most answered Manchester.

    “no one over there uses the term British English accents” I agree.

  163. 3b says:

    #175 pret: Yes manchester has improved dramatically, but nonetheless I maintain Birmingham is still England’s second city.

    And stop yourself with the youw ent around and asked people what city they considred to be their country’s second city.

    What kind of silly Yank are you?

  164. Shore Guy says:

    It is not NJ but, maybe some of these folks will be looking to make a deal onthier houses in order to pay for criminal-defense lawyers.

    WASHINGTON — At least four top White House lawyers took part in discussions with the Central Intelligence Agency between 2003 and 2005 about whether to destroy videotapes showing the secret interrogations of two operatives from Al Qaeda, according to current and former administration and intelligence officials.

    Skip to next paragraph
    Blogrunner: Reactions From Around the Web
    The accounts indicate that the involvement of White House officials in the discussions before the destruction of the tapes in November 2005 was more extensive than Bush administration officials have acknowledged.

    Those who took part, the officials said, included Alberto R. Gonzales, who served as White House counsel until early 2005; David S. Addington, who was the counsel to Vice President Dick Cheney and is now his chief of staff; John B. Bellinger III, who until January 2005 was the senior lawyer at the National Security Council; and Harriet E. Miers, who succeeded Mr. Gonzales as White House counsel.

    It was previously reported that some administration officials had advised against destroying the tapes, but the emerging picture of White House involvement is more complex. In interviews, several administration and intelligence officials provided conflicting accounts as to whether anyone at the White House expressed support for the idea that the tapes should be destroyed.

    One former senior intelligence official with direct knowledge of the matter said there had been “vigorous sentiment” among some top White House officials to destroy the tapes. The former official did not specify which White House officials took this position, but he said that some believed in 2005 that any disclosure of the tapes could have been particularly damaging after revelations a year earlier of abuses at Abu Ghraib prison in Iraq.


  165. Shore Guy says:

    Dec. 19 (Bloomberg) — Federal Reserve Bank of Richmond President Jeffrey Lacker said economic growth will be “very weak” into next year as the housing market is set to keep contracting.

    “I expect growth to be very weak for several more months,” Lacker said in remarks at the Charlotte Chamber of Commerce’s Annual Economic Outlook conference in North Carolina. “Most cogent risks to the outlook are on the downside.”


  166. Clotpoll says:

    pret (175)-

    Go to Old Trafford and start with the second city twaddle.

    You wouldn’t make it out of there.

  167. lisoosh says:

    3b – I think what Pret means by his statements here are:

    1. Look at me, look at me, I got sent to the UK on “business”. I’ve been to Britain, I’ve read British newspapers (see, I can name a few), I’ve seen British TV too.

    2. My company sent me overseas to scout out “up and coming” areas for investment. I’ve decided, after visiting a couple of malls and talking to some locals, that Manchester is the new “up and coming” city in Britain. So I told my company to look for investments there.

    3b – You are right, Birmingham is traditionally known as Englands “second city”. I’m not sure of the genesis for that, or the basis, be it cultural, industrial or financial so I won’t comment further – I’m a Scot. I know the cities of Scotland very well, England less so.

    Pret – I’m curious. During this research trip, did you spend time with real financial people, did you research investment habits in the UK, patterns of development, tax set-ups that could influence peoples spending and investing, upcoming legislation? Anything?

  168. grim says:

    So much for the ABX..

    ABX index postponed for lack of subprime deals

    The latest version of the closely watched ABX index is being postponed, in yet another sign of turmoil in mortgage markets.
    The next series of the ABX, a synthetic index of mortgage-backed securities, was due to be rolled out on Jan. 19. But that’s been put off for three months because there have been so few residential mortgage-backed securities issued during the second half of 2007, according to Markit, which helps run the index.

    Under current index rules, only five deals qualified for inclusion in the planned ABX.HE 08-1 index, Markit explained.

    “The dealer community considered amending the index rules to include deals which failed to qualify initially but decided against this approach at this time,” the firm added. “Markit and the dealer community remain fully committed to the index and will update the market as and when appropriate.”

    Markit’s decision shows how badly the secondary mortgage market has been hit by the subprime-fueled credit crisis this year.

  169. grim says:

    No bubble bursting, nothing to see here..

    82 Briar Court, Hardyston NJ
    (Crystal Springs)

    Purchased: 10/18/2004
    Purchase Price: $524,486

    GSMLS# 2427383

    Sold: 12/17/2007
    Sale Price: $395,000
    (25% below purchase price)

    IMHO, the Crystal Springs development in Hardyston (Vernon) may very well be the worst performing new construction in North Jersey.

  170. Clotpoll says:

    lisoosh (180)-

    I think pret works at Dunder-Mifflin.

  171. pretorius says:


    You’re not the first person here to show great imagination when construing my comments.

    Seriously, a great thing about real estate is that you can spend time inside the assets. It is one of the reasons I work in the biz. I really liked the approach of the guy described in the article Grim linked to in post 134. Shows that going a step further than everyone else can pay off.

  172. lisoosh says:

    Well Pret, I previously held off baiting you, it’s not really my thing. However after you had the temerity to inform me that as part of a household “only” making double the median salary I ought to banish myself to the frozen wastelands of the badlands, frankly all bets are off.

  173. chifi / children are -(NPV) says:

    Clotpoll Says:
    December 19th, 2007 at 6:13 pm
    Link to Dunder-Mifflin:

    clot: maybe I’m really out of the loop….is this some spoof related to the American version of that Gervais invention?

  174. pretorius says:

    If I criticized your financial situation, then I apologize. That would be really bad of me.

  175. Clotpoll says:

    ChiFi (188)-

    Yep. I used to watch the BBC version, and this one is just as good (hard to believe, but true). The only TV show I watch other than 24.

    BTW, thanks for the card. Nice model. What agency is he with?
    ; )

  176. 3b says:

    #185 pret:You’re not the first person here to show great imagination when construing my comments.

    Its not imagination, its just plain old common sense. We are simply putting holes, in a lot of your silly comments.

    I mean first you tell tell us you were in Europe spreading knowledge and creating wealth, then you tell us you noticed crowded malls in the UK, (and that means all is well) and then you tell us you went around asking English people what they consider to be there second city.

    I think perhaps you are the one with the over active imagination, coupled with a large dose of dorkiness.

  177. Just me says:

    Question: If I find a home I like in Central NJ
    and want to make an offer ….considering a state of RE market ,what percentage of low-ball offer should I make?

  178. lisoosh says:

    #189 –

    You didn’t criticize my “financial situation”, you were rude, patronizing and condescending.

    And my financial situation is just fine. Boringly middle class and remarkably debt free.

  179. pretorius says:

    Most of the people I asked the 2nd city question to were not English. They were expats doing investments across the UK.

    Real estate values are based largely on local economic conditions. The reason I asked the question was to understand investor opinions about local economic situations in different cities. It is actually very relevant, although I will admit I am a dork with a good imagination when it comes to real estate stuff.

    Don’t know why the 2nd city question has generated so much discussion. But I’m happy to see that people are noticing my posts.

    Lisoosh, probably I mentioned places with low home prices. That is how I react to people who complain about home affordability around here. My point is homes are cheap when they’re located in places that suck. Nobody wants to live in certain places. I know that. And if you want to witness rudeness, look how many names I get called each day. When have I called people names?

  180. syncmaster says:

    The Asbury Park mayor and city council today gave the developer of a stalled ocean-front high rise 30 days to get the project restarted, and five days to answer a litany of questions about the financial status of the project.

    The developer of the Esperanza complex abruptly stopped construction and sales last week because of the cooling real estate market. Asbury Park officials said today that if the complex’s developer, Hoboken-based Metro Homes LLC, does not comply with the city’s deadlines to resume work, the city could go to court to have Metro Homes legally removed as the developers of the property.

  181. Ann says:

    192 Just me

    I’m in the process of buying right now, we just sold in Central NJ.

    We sold for about 3% over 2004 comps (not inflation adjusted). I wouldn’t pay more than that for sure. On the other hand, I personally don’t believe you are going to get a house cheaper than a 2004 comp today. Perhaps in the future though.

    So, I wouldn’t just say, “10% off” because it really depends on the listing price. You may find that the list price isn’t that far off from the 2004 comp. Try to find some comparable homes in the neighborhood and look them up (one site is datauniverse).

    Good luck!

  182. syncmaster says:

    EAST BRUNSWICK — Housing construction in the Golden Triangle redevelopment site will be pushed back by three years, but a proposal to allow the developer to alter the project is on hold for now.

    The township sold the land to Toll Bros. in 2004 for $30 million.

    A request for the schedule change and altering the housing component came from Toll Bros. last week, when the Pennsylvania-based developer cited poor conditions in the housing market.

  183. 3b says:

    #194 pret: You get called names (at least by me), becasue you come off as know it all, and incredibly self important.

    And you contradict, yourself, first you make the statement that Manchester is 2nd city etc.

    Now you are expanding on that explanation, which is fine, you could have done that in the first place.

    At the end of the day I do not take you seriously, as far as your real estate savvy and knowledge etc, because you are the person who said a few weeks ago that massive layoffs on Wall St will not affect real estate prices, because fabulously wealthy people will still buy their unemployed Ivy League grads. 700k condos, and all will be fine.

    Obviously you know little about truly wealthy people, be that as it may, how can any one take you seriously after making a statement like that?

    No imagination again needed , just answring your posts with common sense.

    But I do apologize for calling you a dork,and will refrain from that in the future.

  184. Just me says:

    196 ..Ann thank you ….will do ..its just lil hard since I am not that familiar with the area….have no idea what 2004 pricess were.

    Thank you again !!

  185. Essex says:

    Ted Nelson, Customer: But why do they put a guarantee on the box?
    Tommy: Because they know all they sold ya was a guaranteed piece of sh*t. That’s all it is, isn’t it? Hey, if you want me to take a dump in a box and mark it guaranteed, I will. I got spare time. But for now, for your customer’s sake, for your daughter’s sake, ya might wanna think about buying a quality product from me.

  186. pretorius says:


    I keep reading these “massive layoffs” and “unemployed Ivy League grads” comments attributed to me. Can you show me where I said this, because I think you’re imagining it.

    However I will take credit for writing that family wealth has been making its way into the homebuying equation more and more, and it is a bigger factor around here than in most parts of the country. Do you disagree?

  187. Clotpoll says:

    pret (201)-

    “However I will take credit for writing that family wealth has been making its way into the homebuying equation more and more, and it is a bigger factor around here than in most parts of the country.”

    Ixnay to that statement. Most articles I read about Boomer gift-giving focus on their increasingly notorious stinginess in helping their kids financially. To wit:

    Not to be too anecdotal, but I have a transaction going right now in which the child of a Boomer is in a bit of trouble and is selling her house on the edge of being short the payoff. In fact, she is short $889 right now.

    Her Dad will not lend her the money. Her uncle is the closing attorney, and he will not discount/waive/postpone his fee.

    Quite a heartwarming Christmas story.

  188. rhymingrealtor says:

    Judging from the amount of comments here today, I guess I am the only one who still has to Shop!


  189. Shore Guy says:

    More on AP and Esperanza.

    ASBURY PARK — City officials today announced they have notified Metro Homes President Dean Geibel that his Hoboken-based company is in default after Geibel told the city Dec. 7 he was halting construction and sales of the swanky 224-unit beachfront Esperanza high-rise.

    “We need Metro Homes to get back to work or get out of the way for someone else to do the work,” Mayor Kevin Sanders said at a city press conference this afternoon. “They (Metro Homes) are in violation of their legal agreement with the city…and they have violated their commitment to the people of the Asbury Park.”

    “If the reason for Metro Homes’ decision was the slowdown in the national real estate market, then why are they building in other towns,” the mayor said. ”I know that this administration has kept its commitment to Metro Homes and done everything possible to make this project a success.”

    At the time the shutdown was made public Dec. 10, Geibel said his company was convinced the ”national mortgage crisis now impacting real estate markets around the country represents a temporary setback…”

    A few hours before today’s press conference, Geibel said in a telephone interview that ”the best thing to say is that Metro Homes and Dean Geibel are feverishly working to try to get the project back on track and restarted.”

    “I can’t give more than that right now,” Geibel said. “The point I”m trying to make is that we’re still very much committed to the …rebirth of Asbury Park.”

    Glenn Scotland, one of the city’s redevelopment lawyers, said the city’s agreement with Metro Homes specifies a 30-day cure period of the default, although in some cases it could be as much as 120 days.

    “Our position is 30 days…,” Scotland said.

    According to the letter that Geibel received today, the city said Metro Homes’ was in default because it stopped work unilaterally and taking that step showed it is unable to finance and construct the Esperanza.

    Metro Homes also is in default because it will now fail to meet deadlines and timeframes to complete the Esperanza, and was obligated to make its best effort to construct the project.

    And, the city asserted, the redeveloper failed to inform the city of a change in its financial condition or its capacity to construct the project until Dec. 7.

    “It is apparent from the timing and the course of these events that (the) redeveloper has, for a period of time, had information regarding its inability to proceed with the construction of the project…,” the letter said.

    The city said Metro Homes did not share that information with city officials until moments before the stop work order was given.

    City officials asked that Geibel start the project back up within 72 hours of getting the letter today, cure all defaults, and provide the city with a long list of financial information within five days from being notified.

    Specifically, the city’s seeking Metro Homes’ applications for financing submitted to lenders, any loan commitments and loan documentation for the Esperanza, all sales information on contracts or deposits, all construction costs and expenses
    of the project to date, and all liens or encumbrances on the oceanfront property between Third and Fourth avenues.

    The city says the developer must explain why Metro Homes stopped the Esperanza over other Metro Homes projects, and give a comparison of Metro Homes’ proposed return on investment during the project development compared to the current proposed return on investment on the day of the decision to stop work.

    Geibel said last week that work was continuing on his other projects which he has previously described as large condominium developments — one in Hoboken, and two in Jersey City, one of which he is partnered with Donald Trump.

    Geibel and his partner, Paul Fried, made their interest in Asbury Park development public in 2004, saying they would take on the failed C-8 steel skeletal site of New England builder Joseph Carabetta who filed for bankruptcy in the early 1990s and held the city’s beachfront hostage from development until Asbury Partners bought him out in 2001.

    Metro Homes came into Asbury Park behind the pioneering subdevelopers lined up by Asbury Partners — Paramount Homes, which is completing its first block north of the Berkeley Hotel, and Westminster Communities, which has completed its first
    block next to Wesley Lake, but appears to be getting out, possibly with a sale of its project to the city’s boardwalk retail developer, Madison Marquette.

    Geibel said last week that Metro Homes had pre-sold about 70 of the 224 Esperanza units. The building is to be two towers, 10 and 16 stories. Two or three stories are visible at this point above ground.

    City Manager Terence Reidy said at the press conference that he had talked with Geibel this afternoon and that Geibel said “he understands the city’s position and he is in default and is working as hard as he can to cure the problems…”

    The developer did not have to post a performance bond to buy into the project with Asbury Partners and begin building. Glenn Scotland, one of the city’s redevelopment attorneys, said that was not unusual in projects privately financed.

    City Councilman Ed Johnson said last week and again today that he is going to insist that a performance bond to offset the city’s loss when a project falls through must be required on any future project.

    Geibel has been an ebullient pitchman for the Esperanza, although at a boardwalk luncheon with Asbury Park Chamber of Commerce members in late August, he said the ”stock market and credit markets have everyone frozen in place.”

    “But I”ve been through this before,” he said at the luncheon. “It will sort out. Thank God we have an extremely strong economy. I”m very confident we’ll return to normalcy.”

    On that day, Geibel hinted that he planned also to get involved in a beachfront hotel project.

    The Esperanza was being marketed to be a landmark building with an unusual architectual design of waves and ships, and many hotel-like amenities.

    Councilman John Loffredo said today he wants that building built, and if Metro Homes chose to build something less expensive, the company would have to start over coming before the city’s technical review committee and Planning Board.

    Counciman James Keady said he believes it’s ”100 percent necessary to change the vision of not only that building but what we’re going to put on the waterfront.”

    He said less expensive housing should go up. “What Asbury Park needs is not a plan to line the pockets of developers and investors but a plan that is sustainable,” Keady said.

  190. Shore Guy says:

    # 204 in moderation

  191. 3b says:

    #201 pret: You may deny it, but you did say it.

    If you care to scroll back over the last 4 weeks or so, you will find it.

    The ocnveration went basically like this

    pret- RE will be fine in NYC, everybody makes big bucks, Wall St, innovative and creative, and wealthy people are drawn here, Ivy League graduates etc.

    3b- What happens if there are massive layoffs on Wall St, to which you replied it will not matter, even if these Ivy League graduates cannot get jobs, their wealthy families will buy them the 700k condos, even if they are unemployed. And again you stated the innovative, creative, wealthy et, etc. Real estate will be fine.

    I expressed shock and disbelief, you stood by your statement.

    I apologized for calling you a dork, please do not call me a liar.

  192. Shore Guy says:

    202 “she is short $889 right now.

    Her Dad will not lend her the money. Her uncle is the closing attorney, and he will not discount/waive/postpone his fee”

    Indeed, quite a family. If the father stopped for a moment to think he would realize that is no way to treat the person who might end up picking his nursing home in the future.

  193. Shore Guy says:

    The link to the article stuck in moderation. It is about the “hicup” in redevelopment in Asbury.

  194. pretorius says:

    3b, you have repeatedly attributed a post to me and used it as a basis for negative comments.

    The least you could do is identify the post. A simple google search should turn it up, but all that emerges are your comments about this mystery post. Please find my post and post it.

    I think this could be the post you’re thinking of, although it contains none of the nonsense you repeatedly attribute to me.

    pretorius Says:
    July 3rd, 2007 at 9:33 am
    People seem to be ignoring the surge in American household net worths that has taken place during the past several years. This is one of the fundamental factors behind the recent rise in home prices, I believe.

    Although I don’t have state-by-state figures, it is fair to assume that New Jersey household net worths are significantly higher than the national average.

    In New Jersey, home prices have increased faster, equity portfolios are larger stemming from higher incomes (high earners own more stocks), and the states high immigration level has produced above-average entrepreneurship and small business ownership.

    There is a enormous amount of family wealth in the New York City and North Jersey areas that can be used to finance home purchases. In my view, this affects Hudson County more than other parts of North Jersey because wealthy immigrant families, particularly of Asian heritage, are helping to finance the purchase of
    their children’s first homes.

  195. Everything's 'boken says:

    clot: 202
    Odd that the site includes data for over-65ers. They are NOT boomers. That is still the ‘greatest’ generation, sucking vast amounts of wealth away from boomers via SS and medicare.

  196. Shore Guy says:

    # 209

    “wealthy immigrant families, particularly of Asian heritage, are helping to finance the purchase of their children’s first homes.”

    Whether this is happening in NJ right now, I do not know. That said, this is a strategy that successful families have often used for putting other members of the family on firm financial footing, thus enhancing the family as a whole (and maybe the parents’ prospect for a better nursing home later in life, lol).

  197. syncmaster says:

    New blog software? Looks cool!

  198. syncmaster says:

    I don’t see post numbers anymore.

  199. frank says:

    The BIG cuts at Citi are coming on Jan 15th.

  200. Shore Guy says:


  201. Shore Guy says:

    I leave the blog for a moment and come back and it is sooooo different. It was like when I left for college and when I cam back at the end of the first year it had become a den.

  202. 3b says:

    Pret: Cannot help that you do not remember posting it but you did. it was not that long ago.If you truly want to defend yourself, you Google it.

    Again you post the same tired old infroamtion and rhetoric, higher incomes, larger stock portfolios, (which by the way does that apply to first tiem home buyers?)

    I never said that there were not families that helped theri childdren with down payments, etc. You said they will buy them 700k condos, even if unemployed.

    I apologized for calling you a dork, please do not call me a lair.

  203. Ann says:

    199 Just me

    Here is the website I mentioned

    I found that the best thing to do was to drive around the neighborhood and write down the addresses of the homes that look closest to the ones you are interested in and then search on the address and try to find 2004 sales in there.

    If you find homes that seem alike, you could also ask your realtor to specifically pull up sales of those from that time frame. Most realtors try to give you most recent comps that they can. I found that I could get a good idea just from the app site. From what I saw in our town that we just sold in, there was one more big increase from 2004 to 2005 (I did not sell for as much as my neighbor did in 2005!), so be careful with comps from 2005 and on.

    Anyway, just my opinion, good luck!

  204. Ann says:

    211 Shore Guy

    Don’t all rich families give their kids the downpayment? I thought that was a given. Along with paying for their college, weddings, on and on!

  205. spam spam bacon spam says:

    [207] SG

    I may see the other side…

    I’ve seen a person (or three) borrow money so many times without repayment that it doesn’t matter if the amount is $89, $889 or $8889… The person who is short the cash (yet again) has cried wolf one too many times…

    Sometimes the ATM is empty.

  206. Ann says:

    203 KL

    I was out shopping today too. It was crazy out there. People looked tired and worn out, just grabbing random stuff off the shelves (oh wait, that was me).

    I did my duty as a patriotic American.

  207. spam spam bacon spam says:


    Wow, Thnx Ann. …good link.

  208. Clotpoll says:

    mystery meat (220)-

    I think the ATM in the situation I described (post #202) might end up being me.

  209. jmacdaddio says:

    I’m in the Gen X demographic (34). Almost everyone I know in my peer group who purchased a home in the last few years did so with help from Mom and Dad. I’m agonizing over whether to even ask my parents to borrow a few grand to cover closing costs when I do buy (hopefully spring 2008) since I come from a family where upon turning 17 you received a bus map instead of a car. I wonder how many 28 yr olds who bought townhouses in 2005 did so with their own money and not with down payments courtesy of Mom and Dad – my guess is not many.

  210. Ann says:

    Re 218

    Here’s more…

    Here is the general link for the housing sale data:

    Here’s the sales database

    I think I posted the tax assessment database.

  211. chifi - CFAs do it better says:

    frank Says:
    December 19th, 2007 at 8:35 pm
    The BIG cuts at Citi are coming on Jan 15th.

    frank: come clean….you are Pandit ;-)

  212. chifi - CFAs do it better says:

    FYI – this article
    Property-Tax Frustration Builds
    States, Cities Revise Strategy
    As Homeowners Protest Rising Levies
    December 18, 2007; Page A6

    contains a U.S. Map of Median

  213. chifi - CFAs do it better says:

    trying again

    FYI – this article
    Property-Tax Frustration Builds
    States, Cities Revise Strategy
    As Homeowners Protest Rising Levies
    December 18, 2007; Page A6

    contains a U.S. Map of Median real-estate taxes paid in 2006 by county:
    Highest in U.S. is Hunterdon NJ $7,999

  214. pretorius says:

    3b, I googled it. Only stuff that came up were your accusations.

    I think the post you repeatedly mention is nothing more than a dream in your head. Otherwise, you should be able to dig it up.

    This isn’t the first time imaginations have produced serious accusations, but no evidence. A few months ago, I wrote a post that somebody accused me of plagiarizing from a book. When I asked the guy to ID the book, he suddenly came down with amnesia, but promised to find the book on the weekend. When I followed up, he replied with the following climbdown post:

    “My books, that have been read, are packed in storage.”

  215. chifi - CFAs do it better says:

    pretorius Says:
    December 19th, 2007 at 10:34 pm

    ahem….I’ve only ever head that word used in the past on another website of dubious value…..I don’t like the fingerprints….

  216. chifi - CFAs do it better says:

    head = heard

  217. dreamtheaterr says:

    #172, Chifi,


  218. mkfinancial says:

    Can someone explain this. MLS #20748061 was listed and under contract in the same day. How is this possible. I have seen this a few times and beginning to wonder how realtors are gettoing away with it. Do they take advantage of elderly people looking to sell by lowballing the initial price? Do they have preferred buyers? How does this happen? Something is not right?

  219. Ann says:

    224 jmacdaddio

    Many, many people I know (I’m around the same age as you) get help from their parents for the down payment. But many don’t either, it’s a mixed bag.

    I got help back in 2001 to buy, I admit, but unfortunately it was from a recent inheritance, not the happiest way to get some cash.

  220. 007 says:

    (88, grim),
    Thanks for the info.

    “I’d suggest exploring REO offerings if you are interested in foreclosure properties.”
    — what is a REO? sorry for my ignorance.

    “Given the fact that a significant percentage of foreclosures taking place have either no equity, or negative equity, you won’t find a deal at a foreclosure auction. As mortgage balances are higher than market prices (underwater), upset prices are higher than market. Just doesn’t make sense to bid on these.”

    — do you mean they will still asking higher than market price?


Comments are closed.