Subprime 2.0

From the Huffington Post:

Wall Street Has Found Its Latest Dangerous Financial Product, Activists Warn

Housing and consumer activists warn that Wall Street is about to crash the housing market — again.

The activists said they are particularly concerned about the growing number of companies looking to issue bonds backed by rental properties — bonds that a coalition of groups described as “eerily like” those mortgage-backed securities that helped fuel the last housing bubble.

“We are poised to experience another crisis if federal regulators fail to recognize and take corrective action to address red flags that are all too familiar,” more than 75 housing and consumer groups wrote in a letter Tuesday to federal bank and housing regulators.

The 2008 housing crisis happened because banks were willing to give even risky borrowers a mortgage, driving home prices to unsustainable peaks. Those mortgages got sold into bonds that defaulted once homebuyers stopped making their monthly payments.

This time, gun-shy bankers are hard-pressed to give anyone but the most stellar borrowers a mortgage, said the groups, which include California Reinvestment Coalition and the National Consumer Law Center. Yet, home prices are rising again.

That’s because Wall Street investors with deep pockets and the ability to pay cash for homes are muscling out ordinary buyers in places hard-hit by the housing crisis, like Phoenix and Atlanta. Once these wealthy investors have bought the homes, they flip them into rentals — often covering up large issues like plumbing and mold with cosmetic fixes.

The letter demands “immediate federal intervention” to rebalance the housing market in favor of qualified borrowers who currently can’t get affordable mortgage loans, and away from Wall Street and other cash investors who in some markets are buying nearly half of all available houses.

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59 Responses to Subprime 2.0

  1. Comrade Nom Deplume, back as Captain Justice says:

    Frist

  2. Comrade Nom Deplume, back as Captain Justice says:

    This would seem to be counter to the trends discussed here . . .

    http://blog.regus.com/latest-news/workers-dumping-long-commutes-opting-work-burbs/

  3. grim says:

    Regus value prop = outsource your real estate

  4. grim says:

    By which I mean that piece is obviously biased. Besides, any large corporation worth their salt has employees interacting globally on a day-to-day basis without direct face contact (other than the back office folks in finance already outsourced to Guragon). Who needs to be face to face? Already this morning I’ve had meetings with associates in Eastern Europe, Western Europe, and North Africa. Through the day I’ll skip through the timezones where I’ll probably finish up with the Kiwis.

    The benefit isn’t to commuters or big corporations, it’s to startups and new companies who can more wisely use their capital towards growing the business, and not towards big class A leases.

  5. anon (the good one) says:

    besides extracting value by pushing millions into permanent unemployment, what other benefits Private Equity provides to society?

    @WSJ: Apollo CEO Leon Black took home $546.3 million in 2013, little more than double his take in 2012. http://t.co/NTsqvRQZlE

  6. anon (the good one) says:

    amazing how many criminals came out of Drexel Burnham Lambert. all multimillionaires. see Leon Black

  7. 30 year realtor says:

    What am I missing about this Huff Post story? The buyers of these rental properties are paying below market value prices. When these homes are repaired and rented the landlords are subject to the same laws concerning housing maintenance, habitability and tenancy as every other landlord in the local jurisdiction. Bonds and other investment products all have inherent risks. Nowhere is there any accusation of misrepresentation of the investment product being offered.

    If real estate values in these areas hard hit by the financial crisis are artificially low, these bulk purchases should serve to reduce inventory and put a floor into the market. The comparable sale data they establish should still set a below market price level because typically these types of purchases are in the range of 60% to 75% of market value.

    In the long run large landlords cannot survive by running substandard housing. A large corporate landlord big enough to sell bonds backed by their real estate holdings cannot risk painting over mold as a part of their business model, the liability is too great.

  8. grim says:

    7 – How is this any different from the massive apartment REITs, which have been SOP for years now.

  9. chicagofinance says:

    I recall at least that in Hudson County (i.e. Hoboken / Jersey City) that rent control laws, to which small time operators were subject (e.g., rent out your condo, small apartment buildings), were waived when large developers built mega-sized rental properties. All the big boys had these benefits, as well as pilots…..who knows what else they managed to negotiate…..they also had the muni-courts under control too, since there was big pressure to not piss off the cash cows…..

  10. Ascent of the Robots says:

    Bulldozer the slums and plant turnips.

    Funny; I met a guy last week who picked up a parcel adjacent to his commercial property with the intention of doing a community garden. Turns out it’s an old railroad right of way and totally contaminated with creosote. Now he’s on the hook for a big remediation.

  11. Painhrtz - Disobey! says:

    Nom when I used to go into corporate headquarters in North Chicago I would fly into Milwaukee to avoid O’Hare and 94. Commute from the airport was 15 miles longer and a half an hour shorter

  12. Comrade Nom Deplume, back as Captain Justice says:

    [11] pain

    My hatred of O’Hare is on par with my hatred of a soc1alist troll of a lawyer in Tennessee, and eclipses my hatred of the Canadiens, Arsenal, and the Yankees.

  13. Comrade Nom Deplume, back as Captain Justice says:

    [4] grim,

    Doubtless biased but are they trying to create justification for filling existing space or stating that they are expanding in those locations to capitalize on what they view as a trend? Since I can’t trust the messenger, my question is whether there is something of a counter trend to the abandonment of suburbs for cities? Or is the influx more residential, a la Philadelphia which is becoming a bedroom community for people who work in suburbs?

  14. Painhrtz - Disobey! says:

    Nom Atlanta has eclipsed my hatred of O’Hare but not by much.

  15. xolepa says:

    (10) That’s why you should always separate ownership of property and business into different legal entities. That fellow didn’t get good legal advice.

  16. xolepa (15)-

    Funny. The guy told me he didn’t trust RE agents or lawyers. If he’d mortgaged his purchase, the bank would’ve made him do an environmental inspection, but he paid cash.

    It will be a nice community garden once this schnook spends his life savings on remediation.

  17. I thought I gave him pretty good advice when I told him to torch everything and disappear.

  18. Comrade Nom Deplume, back as Captain Justice says:

    [14] pain,

    Only flew thru Atlanta once and it wasn’t eventful.

    [15] xolepa,

    Yup.

  19. 1987 Condo says:

    #19…you need to rent a car and drive to Alpharetta and back to appreciate Atlanta….

  20. Comrade Nom Deplume, back as Captain Justice says:

    [20] condo

    I did rent a car and drove all over. I was hugely unimpressed by Atlanta. No desire to go there unless forced to.

    By the way, the last night I was there was a Sunday on the eve of a Falcons – Jets Monday night game. I was in a sports themed restaurant having dinner with my family and suddenly from across the room the cheer went up J-E-T-S, Jets, Jets, Jets. Instinctively I reacted aloud with S-U-C-K, suck, suck, suck. The natives were a bit horrified but nodded with approval.

  21. Comrade Nom Deplume, back as Captain Justice says:

    Some would think that this was a mild attack piece, and that the Times has gone off the reservation. But I see this as a subtle way of helping Booker burnish his street cred.

    http://www.nytimes.com/2014/03/04/nyregion/leaders-words-dont-tell-the-real-story.html?smid=fb-share&_r=0

  22. Juice Box says:

    re: #22 – Bah election is in November. There is no way he can lose except perhaps if they found a dead boy in his office or something.

  23. chicagofinance says:

    I am stunned how DeBlasio and his wife are so consistent with stereotype. It is as if they were picked by central casting…..what a pair of louts…..totally poisoned by a certain constituency in NYC……and the apologists who feel guilt.

    Former Gracie Mansion chef offended by First Lady McCray’s reference to ‘servant’

    Mitchel London, who lived in an attic apartment and cooked for Mayor Ed Koch, said he was taken aback by First Lady Chirlane McCray’s comment to The New York Times online. ‘I can tell you, with confidence, there will not be a servant living there,’ she said of how the de Blasio family will use the attic.

    I may have slaved away in the kitchen but I’m no servant, says a former Gracie Mansion chef offended by First Lady Chirlane McCray’s use of the term.

    A chef who lived in an attic apartment at Gracie Mansion and worked for Mayor Ed Koch said he was offended that McCray would refer to him as a ‘servant.’

    “No way the first lady of the city of New York would be referring to the staff of Gracie Mansion as servants in this stage of the game!” London said. “Could you imagine if (Mayor Michael) Bloomberg used the s-word?”

    ‘Ed Koch was always gracious and grateful to the Gracie Mansion staff for their many kindnesses to him,’ a Koch official told the Daily News.

    A high-ranking Koch official said London was never treated like the hired help.

    “Ed Koch was always gracious and grateful to the Gracie Mansion staff for their many kindnesses to him,” the official told the Daily News.

    Rebecca Katz, a spokeswoman for McCray, said the first lady did not mean to offend London. “Chirlane meant absolutely no disrespect,” she said.

  24. chicagofinance says:

    BTW – check the freakin market……bunch of shorts got wrong footed….

  25. chicagofinance says:

    Atlanta is a pit…..filled with a bunch of underachievers and do-nothings….

  26. Painhrtz - Disobey! says:

    Chi they would make a great politburo family

  27. Juice Box says:

    Six seats in is all it takes for the Republicans to really take over in the Senate usher in O the lame duck.

  28. Comrade Nom Deplume, Guardian of the Realm says:

    Interesting list:

    http://www.therichest.com/rich-list/poorest-list/10-most-indebted-members-of-the-u-s-congress/?utm_source=OT-US&utm_medium=Content-Distribution&utm_campaign=OT-US

    Only 2 republicans on the list. Interestingly, the reason they are in neg equity is due to family business debt, and one of them appears to be a going concern.

    Nearly all the dems on the list are in debt for the same reason: Mortgages. Except for Alcee Hastings. He has mortgage debt and a boatload of legal fees.

  29. Libtard in Union says:

    Once Radio Shack ended their battery of the month club, it was all over. I think I may still have a few of those old punchcards.

    About the only thing the Shack is good for these days is to find hard to replace power adaptors. There was a time when hobbyists electricians could go in there to buy, say a transistor or resistor. Unfortunately, the days of people dabbling in the blue collar trades is mostly over.

  30. Comrade Nom Deplume, Guardian of the Realm says:

    I figured something like this might happen. This is why you don’t ever, ever have a press release when you make a find like this.

    http://gma.yahoo.com/10m-gold-coin-hoard-found-yard-may-stolen-141317823–abc-news-personal-finance.html?vp=1

    Instead, you slowly and anonymously put the coins on the market, preferably in another country. AND KEEP YOUR HOARD QUIET. Before this case, it was already settled that the government would confiscate any gold coins that come onto the market that predated the Gold Confiscation Executive Order. These folks ran to a camera when they should have run to a lawyer.

  31. Street Justice says:

    Man I love twitter. so much good information comes from it.

    https://twitter.com/NJsenatePrez

  32. Comrade Nom Deplume, Guardian of the Realm says:

    I figured something like this might happen. This is why you don’t ever, ever have a press release when you make a find like this.

    http://gma.yahoo.com/10m-gold-coin-hoard-found-yard-may-stolen-141317823–abc-news-personal-finance.html?vp=1

    Instead, you slowly and anonymously put the coins on the market, preferably in another country. AND KEEP QUIET. Before this case, it was already settled that the government would seize any gold coins that come onto the market that predated Roosevelt’s gold se1zure order. These folks ran to a camera when they should have run to a lawyer.

  33. JJ says:

    creosote reminds me of a the plumber I knew. He used to remove absestos and stuff and charge a cheap price considering. Anyhow he was friendly guy, so I am like what do you do with all the lead, absestos, etc. He was like many years ago in the middle of nowhere in upstate NY he bought a few hundred empty acres of land with an old barn, in the center of it he has some big holes so basically whenever he gets a truck load of the suff just dumps it into one of the homes and when filled he covers it up.

    I go then what, he goes well I aint never selling as land is worthless and taxes dirt cheap, holes are towards middle of property anyhow and I ain building there and it is private land.

    I always wondered is he even breaking any laws. Couple of pits in the unbuildable parts of land filled with absestos and lead litterally hundreds of acres from the nearest house. Lets say he drops dead, lives it to kid who obviously knows and says look never sell just pay the taxes. By that time 70 years later what difference does it make. Who knows if the holes would ever be found. It is not like the police are going to be looking for it.

    Guy with the posion should be able to do this. He also told me he had some rich guy buy a mansion in Kings Point once at a decent price but did not question it, turns out had a massive oil leak on property over several years. Town was about to order an investigation and he hired a bunch of landscapers on a long three day weekend to remove remove top three feet of dirt and the landscapers went to this plumbers place upstate and dumped multiple piles of dirt came back with three feet of top soil and sod. Come tuesday when town reopened and inspector came he was fine and plumber got 20K cash for dumping this stuff.

    However, when his kid dies estate will sell that land 70 years ago dirt cheap in a cash deal the new owner most likely will evenutally get a suprise, maybe when he sees Deers and owls with two hears and fish with five eyes on the property

  34. chicagofinance says:

    I always pegged you as a dead-on TRS-80 maven…..

    Libtard in Union says:
    March 4, 2014 at 12:24 pm
    Once Radio Shack ended their battery of the month club, it was all over. I think I may still have a few of those old punchcards.

    About the only thing the Shack is good for these days is to find hard to replace power adaptors. There was a time when hobbyists electricians could go in there to buy, say a transistor or resistor. Unfortunately, the days of people dabbling in the blue collar trades is mostly over.

  35. Painhrtz - Disobey! says:

    I could see lib going for the remote control cars. the internet and a sh!tty business model killed radio shack

  36. Libtard in Union says:

    I did have a trash-80. I had the Model III. To make a long story short, my failure birth dad used to manage a Radio Shack out in Long Island somewhere. We used to get all the goodies. Police scanners, weather radios, 200 in 1 kits and a lifetime supply of batteries. It was about the only positive influence he had on my life. You know, I built a voice synthesizer for that trash 80 that was well ahead of its time. Built and programmed it from scratch. Which says a lot considering my computer had 48K RAM and a tape recorder for storage. I was an I/O master in those days. Today, I’m happy if I can find the strikethrough command in Word.

  37. Libtard in Union says:

    Radio Shack got killed by the lack of hobbyist/enthusiasts. Not much they could have done. Let’s face it…no one knows electronics anymore. I can’t even get Gator Jr. to play with his Snap Circuits. Meanwhile, I’m figuring out how to fix his $20 RC helicopter for three hours because the parts are so small that only child labor in the far East could possibly assemble these things.

  38. grim says:

    There is a huge and very strong diy electronics community that is far beyond Radioshack transistors, don’t be so quick to paint us all as dead. We all abandoned RS years ago when they decided to resell cell phones instead.

    http://www.makezine.com

    Nowadays we’re all playing with Arduino and Raspberry Pi.

  39. ccb223 says:

    Anon — a few things for you to think about regarding private equity:

    1. A lot of the biggest investors in PE shops are your people (Public Pension plans, unions, college endowments, etc.). The PE shops have made a hell of a lot of money for these institutional investors and helped them meet their increasingly uncontrollable obligations.

    2. They do tend to go in and make companies more profitable, often times plucking them from the brink of bankruptcy. So what’s better, layoffs for some or no jobs for all (which is what would happen if these places went under as many would be headed that way without the operational help and other benefits (contacts with vendors/suppliers etc.) from PE shops)?

    3. They also help generate tons of legal fees…thank god for that, else I would have no beach house.

    Don’t hate…appreciate it.

  40. Libtard in Union says:

    Sorry Grim, but I really don’t think that it’s quite like it used to be. I stopped tinkering in college after I learned to read ICs with a Heath kit (I think that was the name of it). It’s been a while. I still bust out the soldering iron a rare occasion though.

  41. chicagofinance says:

    My junior high school friend’s older brother was obsessed with his Commodore VIC-20 (I think)…definitely the one before the 64. When we were playing games, we kept hearing his voice synthesizer sounding off the stations of the Ronkonkoma branch of the LIRR. Then one time we went to take a dump, and his computer program had some bug and it started up and we had to sit through this computer voice saying “Ronkonkoma……Massapequa” for about 10 minutes…..when he finally shut it off, I said “WTF is your problem? Were you jerking off?” He got red in the face, and I felt bad, because I guess he was……

    Libtard in Union says:
    March 4, 2014 at 12:58 pm
    You know, I built a voice synthesizer for that trash 80 that was well ahead of its time. Built and programmed it from scratch. Which says a lot considering my computer had 48K RAM and a tape recorder for storage.

  42. chicagofinance says:

    Then one time we went = HE WENT …..yowch!! Freudian Slip :(

  43. Juice Box says:

    Memory lane for nerds.

    http://www.radioshackcatalogs.com/

  44. Nicholas says:

    Radio Shack is beat and doesn’t have much of anything anymore. They chased some retail dream of selling useless items. I went in there once, didn’t find what I needed and never went back again.

    The real store that you are looking for is Fry’s. Here is a list of store locations and they are what Radio Shack should have been had they continued. Unfortunately they do not have physical stores in Maryland or New Jersey but you can order parts online.

    http://www.frys.com/ac/storeinfo/storelocator/?site=csfooter_B

    Additionally, NJ is a very big market for electronic components and Radio Frequency (RF) equipment. Pasternack Enterprises, www(dot)pasternack(dot)com is a good place to search through for cables, connectors, terminators. The problem is that they don’t seem to have any physical stores but you can order all your parts online.

    Don’t discount the electronics industry just because you don’t see a storefront in a strip mall.

  45. nwnj says:

    The theft story makes sense, and I did assume that a claim(or several) on the gold would be forthcoming by the “rightful owner.” It seems extremely unlikely that an individual would spend a lifetime collecting mint-only coins and would store them in tin cans on his property(or someone else’s).

    Comrade Nom Deplume, Guardian of the Realm says:
    March 4, 2014 at 12:28 pm

    I figured something like this might happen. This is why you don’t ever, ever have a press release when you make a find like this.

    http://gma.yahoo.com/10m-gold-coin-hoard-found-yard-may-stolen-141317823–abc-news-personal-finance.html?vp=1

    Instead, you slowly and anonymously put the coins on the market, preferably in another country. AND KEEP QUIET. Before this case, it was already settled that the government would seize any gold coins that come onto the market that predated Roosevelt’s gold se1zure order. These folks ran to a camera when they should have run to a lawyer.

  46. Anon E. Moose says:

    Sorry if this was noted already, but as predicted, the story of that little Morris Catholic brat suing her parents has gone national.

    http://shine.yahoo.com/parenting/nj-teen-sues-parents-for-cash-and-college-tuition-201404488.html

  47. Comrade Nom Deplume, back as Captain Justice says:

    [46] nwnj

    Irrespective of any claims, the Feds can, and would have, seized the coins. This happened to some people who asked the treasury to verify that coins found in the family were real. Treasury said they were, then refused to hand them back. The claim was that the coins were unlawfully withheld from the government under Roosevelt’s gold conf1sc@tion orders so they were the rightful property of the government. The case went to court and the Feds won.

  48. Comrade Nom Deplume, back as Captain Justice says:

    [47] moose

    And the term “Pyrrhic Victory” comes to mind here as well.

    This so reminds me of the case of Blair Hornstine from several years ago. Also New Jersey. After getting un-accepted by Harvard for her antics (and her father’s), she went to Dickinson. She is now a special ed attorney for Daddy’s small law firm.

  49. Ben says:

    When I read that story about the people finding the gold, I thought why the hell do you issue a press release? Are they that starved for attention? I know if I issued a press release, the first thing that comes knocking is every dead beat family member and friend I ever had. Instead, they will have the government come a knocking and take the whole thing.

  50. Juice Box says:

    re: #47 – What if I were to tell you that this is perhaps a scam? Kids loses in court and Judge pretty much orders her emancipated and a college can no longer use her parents income to determine financial aid?

    Her old man is a retired Lincoln Park police Chief now double dipper in Budd Lake, became a cop at perhaps 18 yrs old in 1985. Made Chief in 2005 then retired in 2009, now is the Budd lake township administrator. I don’t know if the wife works but they
    are the 1% in NJ for government workers.

    http://www.linkedin.com/pub/sean-canning/38/573/148

  51. nwnj says:

    It appears to be a collection from the start(same cans, condition) leads me to think they were taken from somewhere in the cans and not accumulated over time.

    If they were a personal collection hidden to avoid confiscation then I think the owner would have found a better place to put them than a hole in the ground.

    Getting ripped off from an someone else and stashed in a crude container like this sounds much more like something a thief would do — no emotional attachment at all.

  52. nwnj says:

    #50

    They’ve been pretty tight lipped about the details, name, location, etc. I think the publicity was driven by the auctioneer who wants to drum up the bidding.

  53. Juice Box says:

    A bit of research shows if someone can proves they were determined to be emancipated they can get Federal aid ie grants for college. A ” legal judgment from a court emancipating you from your parents” shows up in a few Google searches.

    Worth a shot to save over $100 grand?

    http://www.fafsa.com/understanding-fafsa/fafsa-dependency

  54. anon (the good one) says:

    @NJSP: Want to become a NJ Trooper. Come 2 Career night. 2nite 7p to 9p at SP museum in W.Trenton. View link for details. http://t.co/D6WelOksxi

  55. Theo says:

    Juice #53

    Just be sure to get your kid an Obamacare plan. My understanding is most employer medical plans won’t cover emancipated children.

  56. Michael says:

    51- thanks for the info. I honestly have no respect for double dippers. Wrong in so many ways. That’s pretty sick that he was in a position of locking up people for stealing, but now robs the taxpayer everyday. Guess it’s not illegal to steal from the taxpayer.

  57. Michael says:

    How did he manage his staff if he can’t even manage his family?

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