Zandi goes all in

From the Washington Post:

To boost housing market, policymakers need to get credit to the creditworthy

But it would be premature to declare housing healthy again. Policymakers can make this happen. During the Great Recession, residential construction plunged to a post-World War II low of 500,000 units per year. The pace has since risen to 900,000 homes, and is set to double to 1.8 million in the next few years. Even this will be only enough to meet demand in an average year in which 1.25 million households are formed, 350,000 houses are irreparably damaged or demolished, and another 200,000 are built for use as vacation or second homes. Some progress has been made in getting more loans to more creditworthy families. The Home Affordable Refinance Program gives underwater homeowners a chance to refinance at lower rates. HARP requires Fannie Mae and Freddie Mac — the largest providers of mortgage credit, and part of the federal government since they were put into conservatorship in 2008 — to make refinancing easier and cheaper. An estimated 2.5 million homeowners have done so. But Fannie and Freddie still are not promoting refinancing as aggressively as they should. With a few reasonable tweaks to the program, several million more homeowners could participate in HARP. Legislation languishing in Congress — the Responsible Homeowner Refinancing Act — would break down the biggest roadblocks to HARP refinancing. Policymakers should make similar efforts to promote home-purchase loans, which have been stymied by similar barriers that have impeded refinancing. To further increase the flow of credit and improve the health of housing, Washington needs to attract more private lenders back into the mortgage business. Fannie, Freddie, the Federal Housing Administration and the Department of Veterans Affairs make nine out of every 10 new home loans. The remaining few are made by the nation’s biggest banks, which are reluctant to make more. For mortgage credit to flow sufficiently to support a strong housing market, much more private lending is needed. This additional private lending, in turn, requires a revived mortgage securities market. In other words, Wall Street must participate. This does not mean a return to the bad old bubble days, when exotic mortgage securities fed subprime lending and set the stage for the financial panic. Wall Street can do securitization safely, as long as regulators provide proper guidance. … These steps may seem small compared with the huge questions Washington faces over how to wind down Fannie Mae and Freddie Mac. Their limbo status makes little sense, and uncertainty about their ultimate fate discourages lending. But resolving their situation will be much easier if housing and the economy are in full swing. Policymakers can make this happen quickly by taking these doable steps and eliminating the remaining impediments to getting more creditworthy families into homes.

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55 Responses to Zandi goes all in

  1. Natasha says:

    From previous thread

    Clot #78

    Does your daughter like sports? Even if she’s not the greatest ever, participation is great for pretty much any girl.

    My daughter played soccer, basketball, and softball through elementary and middle school. She took dance, swimming, gymnastics, tae kwon do and ice skating in early years and in between. You would think she is into it, but she actually is not very aggressive or athletic. She has chosen not to play any sports in high school, bummer. I think we might try dance again. I want to keep her moving.

  2. Mike says:

    Good Morning New Jersey

  3. Fast Eddie says:

    I just did a quick search on a few sites of the Hillsdale and Woodcliff Lake area for the first time in a month. The spring market is in flames! lol! The same pathetic, over-priced sh1t, scattered foreclosures and dreamers looking for a k1ll abound! I know, I know… transactions are up 700%, multiple bids over asking within nano seconds, blah… blah… blah.

    And I love the taxes… nothing under 14K! You know, it’s for the children. I’ll say it again: anyone falling for this housing “recovery” in our area is subject to the biggest hoodwink of their lives. Please, spare me… been there, done that. If you fall for the “exclusive and different” sales sh1t, then enjoy your new position. Just make sure you bring some l.ube and lipstick, you’re gonna need it! lol!

  4. Fast Eddie says:

    grim, unmod me. :)

  5. The cries are coming from everywhere to oil up the sausage machine and get it humming again. Juice up the dead and rotting credit extension mechanism to make risky, low-yield loans against an asset class that is the textbook definition of dead money. And, by the way, forget all about that worthless paper still washing around from the last collapse and that the Fed continues to transfuse a rotting cadaver to the tune of 45 billion a month.

    The latest “rally” in housing is simply the result of yet another scheme (much like clunkers for houses) to create sound and fury in order to then present that sound and fury as some sort of legitimate “recovery”.

    Housing is dead money for 50-100 years. Nothing will ever improve until the bad, unpayable debts are acknowledged and written down. We will soon experience another “unforseeable” collapse in RE that will dwarf the first one and signify the first steps in the collapse of Amerikan civilization.

    Any questions?
    Any questions?

  6. Think what you want about Jamie Dimon, but JPM did not rush into questionable mortgage lending during the biggest boom in history. A lot of their current strength is due to not having had to devote serious resources to cleaning up the same sort of mess that other banks did in the aftermath.

    What incentive does JPM now have to loosen lending standards into a false recovery in a ZIRP environment? What kind of lending activity currently available to banks is higher-risk or lower in yield than loans against houses? If you were a major JPM shareholder, what would you think or do if, all of a sudden, Dimon were to go all-in on mortgages?

    There is a reason that Phony/Fraudy/FHA are involved in 9 out of 10 mortgages these days. Two of them are already giant, festering garbage cans of bad paper, and the third is being prepped as the garbage can for the coming implosion.

  7. “That’s why they call it the American Dream, because you have to be asleep to believe it.” ― George Carlin

  8. I defy anyone to read Zandi’s article carefully 2-3 times and build a case here that we are not headed for a catastrophic, giga-deflationary economic collapse.

  9. Correct me if I’ve misread it, but Zandi is arguing that lenders who either no longer exist- or are hanging by a thread- because of Dodd-Frank should now act against their own self-interests by making loans in an environment where both the expected return on those loans and uncharted regulatory waters (the actual QRM guidelines are not even in writing yet) are screaming signs to any prudent lender to avoid making the loans.

    He is also making a case for two giant financial garbage cans that are brimming over with festering paper- and destined to be shut down- to increase refinance activity against worthless collateral to borrowers of questionable ability to repay.

    Somebody please tell what I’ve got wrong here.

  10. Fast Eddie says:

    This additional private lending, in turn, requires a revived mortgage securities market. In other words, Wall Street must participate. This does not mean a return to the bad old bubble days, when exotic mortgage securities fed subprime lending and set the stage for the financial panic. Wall Street can do securitization safely, as long as regulators provide proper guidance.


  11. Dead man walking.

    “This additional private lending, in turn, requires a revived mortgage securities market.”

  12. Bystander says:


    In other words, we need the game of mortgage hot potato to drive this “recovery”. And to quote, Fast…what about the f-in taxes? Is any industry pundit ever going to mention the unprecedented rise in property taxes in last 15 years that hangs as an anchor around the Northeast? P&I&I..but don’t ever mention the T in any article about house prices and affordability. Beyond ludicrous…

  13. Natasha says:

    There is a reason that Phony/Fraudy/FHA are involved in 9 out of 10 mortgages these days

    Yeah-there aren’t any really qualified buyers out there.

  14. Mike says:

    7 George Carlin also said : In America, anyone can become president. That’s the problem.

  15. Juice Box says:


  16. Essex says:

    7. I F~in Love That.

  17. Phoenix says:

    [14] natasha,
    not true. there are plenty of qualified buyers, myself being one, and Fast Eddie being two. No doubt plenty more. We are expected to go out and fund someone’s retirement by purchasing their 1970’s home with 1970’s single pane windows for 400k. All so they can take their “good credit” aka cash and buy something new in S. Carolina and pocket 200k. At the same time I get to fund the retirement of officer Joe, who retires at 55 years of age and will live to be 90, all while having to pay for his replacement. At the same time, saving for my own retirement as no check coming my way, the old guy down the street getting the full nut S. Security /Medicaid/ Medicare while they try to stick me with a “voucher” aka 20% off coupon, and means tested medicare. I did not even mention those who just collect/obamaphonetypes. I was dumb and chose an industry where Americans think what I do is something they have a “right” to, and that it’s “owed” to them. Whoops, there goes my soapbox.

  18. cobbler says:

    – You can buy something in S.Carolina for 200K yourself, if you are so inclined. The houses are worth so much less there for multiple reasons including not having many jobs paying enough to buy 500K houses
    – You don’t seem to kind if the mutual fund you are invested in via 401K buys stock that triples (or better) in price for the last X years, and the previous owner of the stock can retire to S. Carolina
    – You can buy new construction if it is important to you to personally not enrich someone from your parents’ generation who bough a house 20 or 40 years ago and now wants to sell it…

    Rant off…

  19. cobbler says:


  20. Juice Box says:

    Phoenix – wow!

    Have y0u been out in the trenches? Regardless of stink it still is 600k or higher is the price. Thank the bottomless chasm of bitcoins via Bernanke and Co.

  21. Phoenix says:

    point taken. #1, agree with you on S. Carolina wages vs home values. #2, general things I am reading (not in finance) is that the rules keep changing with lots of unknowns, maybe a win, maybe not but officer Joe gets a guaranteed check, I guess it depends on if you like to gamble or not. (exception is if you are as smart with money as JJ or Chifi, I hope one day to save enough to get someone of that level interested in taking my calls).
    #3, love that idea. can do that but the only one who loves that idea even more than me is the local tax man. Do you spend 300k only to leave one old foundation wall standing so you don’t get taxed as new construction?
    I apologize for my rant tonight. And Juice, you are right also. Problem with buying a 1970’s home is if the house price doesn’t kill you, the energy costs will. I have to think long term so can’t buy a house that all the walls need to be taken down to have the newspaper replaced with fiberglass. For that “luxury”, even in a 3 bedroom ranch is 480+. I need to buy a house on a one income salary, just over 100k as a little breathing room is necessary for me. I don’t want to count on 2 salaries just in case one of us loses a job, and in this economy anything can happen. I think I am wasting my time home shopping and maybe its time for a career change instead.

  22. chicagofinance says:

    Finally the rationale behind the ZIRP is exposed….
    “Even Federal Reserve Chairman Ben Bernanke’s son can’t expect to escape the debt burden. The elder Bernanke testified before Congress last year that his son is on track to leave medical school with $400,000 in loans.”

  23. grim says:

    We are expected to go out and fund someone’s retirement by purchasing their 1970′s home with 1970′s single pane windows for 400k. All so they can take their “good credit” aka cash and buy something new in S. Carolina and pocket 200k.

    Renters are doing a bang-up job funding my parents retirement.

  24. grim says:

    30yr – Nicely done, what, 2 weeks on market?

  25. grim says:

    Problem with buying a 1970′s home is if the house price doesn’t kill you, the energy costs will. I have to think long term so can’t buy a house that all the walls need to be taken down to have the newspaper replaced with fiberglass.

    The modern era of fiberglass insulation started in the 1950s, by the 60s it was commonplace, and by the 70s, you’d be hard pressed to see much of a difference compared to modern insulation.

    In my mid-60s ranch, the insulation was extremely well done in the walls that were opened up. Only reason I had replaced any of it was because we needed the stud cavities exposed for rewiring and plumbing. Attic on the other hand, a bit thin, but I’m not going to bother replacing it. When I have a free weekend in the fall, I’ll rent an AttiCat and blow in a couple more inches of insulation to bring it up to modern standard, shouldn’t run me more than a couple hundred bucks. All in all, my gas bills are relatively low, and I know for a fact my nat gas consumption is significantly lower than many cavernous McMansions, even with my archaic 80% efficiency cast iron boiler. By the way, short of a brand new high efficiency condensing boiler, even a “new” boiler isn’t going to be significantly more efficient than a 1960s unit in good condition. Hell, Weil McLain and the other boiler manufacturers still sell units that would be hard pressed to push an efficiency higher than the mid 80s. I see these units (CGa) in remodeled homes ALL THE TIME, probably because they are a third of the cost of a high efficiency unit, and half the cost to install (vs going direct vent condensing).

    By “newspaper” I assume you mean cellulose. You do know that modern recycled cellulose “blow-in” insulation they use today is recycled newspaper?

    Moral of the story – You are underestimating the “efficiency” of a 70s era home. If you want to talk 20s and 30s era, then I’ll agree with you 100%.

  26. grim says:

    Likewise, 70s era single pane windows in good shape with properly installed storm windows aren’t as bad as you think. Good condition (no air leaks) wood single panes with storms has an R-Value of around 2, give or take a little.

    You do realize that the R-Value of many non-E-Star replacement double pane windows is around 2, and even in high performance windows with Low-E coatings is barely above 3, right? You are into astronomically expensive territory to get to R-5, and will be starting to talk triple pane. You will not find these on most modern homes or new construction. In addition, the efficiencies gained by Low-E coatings will only ever be realized by the windows that see directly sunlight (Not the north facing windows, or shaded windows, so the realized efficiency will not be as great).

    The exterior stud wall immediately around the window is likely somewhere around R-15-20. So, even brand new windows are only a little better than a gaping hole in the wall.

    I would wager a guess that I could easily find a house with shitty double pane vinyl replacements that were poorly installed, that are actually less efficient than the wood single panes they replaced, in this case the “payback” would be zero/negative. I’ve seen estimates on the order of 40-100 years payback for vinyl double pane replacements.

  27. charlie says:

    My 70s 4br 2000sqft colonial w/ orginal windows and furnace burns ’bout $300/month in energy – gas/electric – winter/summer respectively….not a deal breaker…

  28. grim says:

    I’d say 1960s to current, you could get an extremely good bang for your buck with the following:

    Case of Great Stuff expanding foam – Probably the single easiest way to improve energy efficiency. Spend a day in the attic, fill every penetration down into the stud cavities of walls (plumbing/electric). If you have large penetrations, seal off the cavities using rigid foam that is glued down. Do the same in your basement for every penetration going upwards. The most critical ones are on the exterior walls. Turn off all the lights, let your eyes acclimate, look for any signs of “daylight” on the exterior walls. If in the winter, use your hand/face to feel for signs of draft at the sills (although this will be fixed with rim joist insulation).

    Blown-over attic insulation – You can easily add a few inches of loose fill attic insulation over your existing insulation using the Corning AttiCat system. This is great news for DIYers that didn’t have access to gear like this before. The equipment rental is free in most cases. Make sure you foam up any penetrations before you blow in, it’ll be very difficult afterwards.

    Use 2″ rigid foam (Foamular) to insulate your rim-joists. Cut out the squares, glue them in, and use spray foam to ensure a seal against the floor, joists, and sill plate.

    If you have exposed block walls, that are above grade or partially above grade, insulate your basement walls using rigid foam (please, follow fire-codes). Do not insulate the ceiling of the basement.

    Make sure your temperature controlled attic fan is working properly, if you don’t have one, add one. Ensure you have proper airflow from the soffits (if applicable) or have some other way of exchanging air to ensure your attic doesn’t turn into the 8th circle of hell during the summer.

    Front/Side/Back doors – Check to see if you have bad air leaks in the winter, could be worth replacing the door with a newer insulated Fiberglass door if you can’t easily correct the problem with weatherstripping.

    Programmable thermostat that is actually programmed (not just installed and set to “Forced On”. If you have forced hot air, look into the “Nest” thermostat, especially if you are a geek. These are actually really freekin’ cool and will save energy if you use them religiously.

  29. Another sign of the coming apocalypse:

    “Ever since Moody’s head economist Mark Zandi, together with Princeton’s Alan Blinder, authored a paper in July 2010 titled “How We Ended The Great Recession” (which incidentally is wrong on two key counts: i) it is a great depression not recession, and ii) it has not ended) it became clear that the Keynesian sycophant would not rest until he somehow found a way to penetrate deep inside one or more of the darkest administrative orifices of the Obama regime. Surely, Zandi must have been heartbroken when it was not him but Jack Lew picked to replace Tim Geithner – a post the Keynesian had a desperate craving for. Yet his recent appointment to head up the ADP “payroll” joint venture, which was nothing more than a test of his propaganda skills, should have given us advance notice something was cooking. Further notice should have emerged when the US Department of Injustice launched its rating agency witch-hunt campaign only against S&P, not Moody’s, where the abovementioned Zandi still officially works. Last night all of this finally fell into place, when the WSJ reported that Zandi has emerged as the leading candidate to head the FHFA – the regulator in charge of the two zombiest of zombie US institutions: the still insolvent Fannie and Freddie, in the process kicking out current FHFA head Ed DeMarco who recently emerged as Obama’s persona non grata number 1 for his stern refusal to espouse soci@list practices and wholesale debt forgiveness and principal reduction.”

  30. yome says:

    Famed Economist Mark Zandi Is A Front-Runner To Replace Edward DeMarco As FHFA Head: Report

  31. Phoenix says:

    I should rant more often. Your reply was informative. I will look for these things while house shopping. Thanks.

  32. grim says:

    I hear recycled denim batt insulation is the trendy thing these days.

  33. Essex says:

    Walmart doesn’t make anything. But the giant retailer could play a part in the manufacturing rebound that is taking place in the U.S. with its promise to buy $50 billion more U.S. made goods over the next decade for its Walmart and Sam’s Club stores. It’s a bit ironic, given Walmart’s vast global sourcing organization. But the same forces that are making the U.S. a more hospitable place for manufacturing —higher shipping costs and wage rates overseas among them—have prompted the company to reevaluate its sourcing on a variety of products. “This is a commitment around manufacturing and more economic renewal. We see it as a critical issue for us in the American economy,” says Duncan Mac Naughton chief merchandising and marketing officer for Walmart U.S.

  34. cobbler says:

    50B for the decade is less than 2% of the overall Walmart sales… totally incomparable with the damage the outfit had done to the U.S. middle class and domestic manufacturing… all to allow the Walton kids to have prominent spots on the billionaires list.

  35. Essex says:

    Kneel before Zod.

  36. Comrade Nom Deplume a.k.a. general Zod says:

    [37] Essex

    You will be rewarded my loyal minion.

  37. Comrade Nom Deplume a.k.a. general Zod says:

    Is everyone watching the Masters ?

    All except for JJ. He isn’t impressed after playing a round at Bethpage Black and shooting a 17.

  38. Essex says:

    Love me some Masta’s….

  39. Essex says:

    Cabrera can putt!

  40. Essex says:

    OMG! The long putter hits a perfect shot…..for Scott.

  41. Comrade Nom Deplume a.k.a. general Zod says:

    Cabrera looked comfortable.

  42. Essex says:

    I see this as a victory for traditional putters everywhere.

  43. Libtard at home says:

    The long putter is like cheating.

  44. Fast Eddie says:

    I wanted Cabrera to win. D.amn!

  45. chicagofinance says:

    cobs: don’t shoot the messenger; if it wasn’t Walmart, then it would have been someone else; yeah the Waltons have blood on their hands, but in reality, it is India, China, the rise of the Internet, and the virtual desktop. If it was such a moral outrage, then the same people losing their jobs wouldn’t shop at Walmart, but they do. Says it all…..

    cobbler says:
    April 14, 2013 at 2:24 pm
    50B for the decade is less than 2% of the overall Walmart sales… totally incomparable with the damage the outfit had done to the U.S. middle class and domestic manufacturing… all to allow the Walton kids to have prominent spots on the billionaires list.

  46. 30 year realtor says:

    #26 Grim – which one?

  47. cobbler says:

    For some reason, India, China, the rise of the Internet, and the virtual desktop, had allowed Germany and Japan to keep their manufacturing… Walmart became a major contributor to its decline here when it grew so big that it realized that is was able to keep the same rate of profit growth only by squeezing the suppliers’ margins – and since Walmart’s buyers demanded the access to the suppliers cost structure (and were getting it), the squeeze was all the way to below zero – and forcing them to choose between going out of business and taking their business to China. No retailer before Walmart had such a monopoly power over the suppliers.

    As for the shoppers, majority of the people go for the lowest price, period… you can’t expect penny-pinching unemployed or minimum wage earners to not buy something at Walmart to make a point.

  48. chicagofinance says:

    cobs: you are holding up Germany and Japan as role models…….effectively invalidates any other details of your argument…..if it is not apparent, you can hold out the U.S. government as the enemy of the people…..Walmart just took advantage of what Congress allowed…..I agree, the Walton have blood on their hands, but again, I rather have Walmart’s dotted around the U.S. than WuMarts or DesiMarts…..

  49. cobbler says:

    chi: I don’t want to get in a silly argument about patriotic (Germany/Japan) and unpatriotic businesses – but what Walmart had been doing was an open-eyed destruction of the American jobs to boost EPS faster than the natural rate of growth. Historically, major U.S. retailers treated their suppliers as partners – which implied understanding that profits are accrued and should be taken on every step of the chain. Walmart was the principal destroyer of this relationship model and change to “supplier shall be screwed” approach.

  50. Essex says:

    Public Pensions in Bankruptcy Court

    Published: April 13, 2013

    Like many cities hit hard by the bursting of the housing bubble, Stockton found its finances in a mess. Even after drastic cuts to city services that have sent the crime rate soaring, the city of 300,000 people about 80 miles east of San Francisco has an annual budget deficit of $26 million. It has laid off a quarter of its police force, which has meant that officers often respond only to crimes in progress.

    The city’s crisis is not unique. San Bernardino in Southern California has also sought bankruptcy protection, and numerous other municipalities in the state and elsewhere are on a financial precipice. To fix its finances, Stockton is asking the bankruptcy court to restructure debts totaling about $250 million. But the city’s creditors, which include bondholders and insurance companies that have guaranteed some of its bonds, say the plans are unfair. They want the city to reduce the $30 million it spends annually on pension benefits for its 2,400 retirees.

    Unlike private companies, which have often renegotiated labor contracts in bankruptcy, few municipalities have sought bankruptcy protection and used it to reduce vested pensions. The California Public Employees’ Retirement System, which manages Stockton’s pensions, argues that the state’s Constitution and court rulings forbid state and local governments from ever lowering the pensions of retirees and current employees.

    The creditors assert that federal bankruptcy law, which lets judges break contracts, should trump state law. So far, city officials have said they do not intend to trim pensions, though they have reduced health benefits for retirees.

    The case raises many fundamental and difficult questions about whether federal bankruptcy law should pre-empt state laws. Many legal analysts say that the Stockton case could eventually be appealed to the Supreme Court.

    While a Supreme Court decision would help clarify an important area of the law, a drawn-out court case is the last thing Stockton needs. The way to get the city back on its feet is for city officials, creditors and retirees to negotiate a fair settlement quickly. Sophisticated investors and bond insurers have to recognize that they made terrible decisions when they lent the city money during the bubble years and will have to take big losses. Retirees, especially those who were awarded unsustainably generous pensions and health care benefits, should also come to the table by forming a committee, as the bankruptcy judge recently suggested. There are few winners in bankruptcy. It is time for all sides to acknowledge that reality.

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