Housing Doom

Here’s Bill Donoghue of Marketwatch who’s Wednesday’s article gave me a "Dang, I wish I’d said that ." moment this morning.:  [Thanks L!]

SEATTLE (MarketWatch) — Call this the perfect financial storm or what you will; Wall Street has made fools of financial institutions around the world with their CMOs, CDOs, and greedy boo-boos.

At least they didn’t lose as much as their customers. The stock market is in distress, bond insurers are looking for a $200 billion bailout, junk-bond markets are at risk of further losses and life-, home- and auto insurers’ risk has not yet been fully assessed.

We need real ready-to-go financial leadership and we need it now. Tell the presidential candidates, Congress and economists to stay home. We need regulators with clear priorities.

Former Federal Reserve Chairman Paul Volcker, former FDIC Chairman Bill Isaacs and anyone they trust would be good choices. They beat inflation and presided over the savings and loan cleanup. Tell Ben Bernanke to go home.

As for you personally, it’s every person for themselves and their family. Study the charts: This is a bear market.

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Renters- a word of warning- keep an eye on your landlord’s finances:

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A big hat tip to the "Angry Citizen" for this one.  Here’s a company that advises you on how to walk away from your mortgage:

This seems so wrong on so many levels, it’s hard to know where to start.  But let’s look at what they do-

This company sells a "protection plan and kit" for "three easy payments" of $332.  So what does this provide, exactly?

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If you missed the "60 Minutes" segment on housing last Sunday, I recommend this:

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HousingDoom will be going down for a few minutes for a software upgrade.

In last Friday’s post, HousingDoom pointed out a change in Fannie Mae’s website that we felt was significant.  Diana Olick of CNBC agreed, and took up the subject on her blog and on CNBC Friday morning.  Here’s the video:

Diana said in her blog post Friday:

I want to show you something interesting–but first a big shout-out to housingdoom.com and Debi, who pointed this out to me.

“About Fannie Mae” web page circa 2005: About Fannie Mae.
Now take a look at the same page today: About Fannie Mae.

The focus has clearly shifted from families:

In 2005: “Our public mission, and our defining goal, is to help more families achieve the American Dream of homeownership. We do that by providing financial products and services that make it possible for low-, moderate-, and middle-income families to buy homes of their own.”

to lenders:

In 2008: “We exist to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market. Fannie Mae has a federal charter and operates in America’s secondary mortgage market to ensure that mortgage bankers and other lenders have enough funds to lend to home buyers at low rates. Our job is to help those who house America.”

I’m not criticizing the shift, just noting it. I did call Fannie, and as soon as I get a response, I’ll post it.

Fannie Mae did respond later in the day:

Fannie Mae quickly sent this response to my query about the change in the site. They also want to make clear that the page didn’t change this week but changed sometime around the beginning of 2007:

“Fannie Mae’s mission always has been and continues to be increasing the availability of mortgage funds for low-, moderate- and middle-income borrowers. We achieve this by raising global capital and bringing it to local communities. The change in language on our website over the years reflects our role as a secondary market institution to provide liquidity, stability, and affordability to America’s housing market through our partners,” said Amy Bonitatibus, Fannie Mae spokeswoman.

Right.  Many thanks to Olick for helping to bring attention to this change in focus.

For those of you who prefer your "Doom" live, Twist will be on Charles Goyette’s radio show 7:30 MST tomorrow. 

If you are in the Phoenix area, you can listen on 1100 AM.  Outside the Phoenix area [or if you prefer online], you can listen live here. [Click the "listen live" button.]

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Arizonans, Californians, Nevadans, Floridians- the following video should take you back.  It’s an Austin realtor talking about how Austin’s market will not see real problems–the story the rest of us heard a year or so ago:

There’s rumblings on the horizon though:

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Talk about a sweet deal:

LOS ANGELES (AP) - KB Home Chief Executive Jeffrey T. Mezger has been awarded a $6 million bonus for his job performance in fiscal 2007, according to a regulatory filing Friday.

The company’s compensation committee also designated bonuses ranging from $350,000 to $450,000 for three other senior executive officers, according to documents filed with the Securities and Exchange Commission.

KB’s committee also determined that any fiscal year 2008 incentive compensation for Mezger and three other executives will be tied to performance goals based on pretax income or loss by the company.

The filing did not specify the performance goals.

KB Home, one of the nation’s largest homebuilders, has been battered by the U.S. housing slump.

In its fiscal year 2007, ended Nov. 30, the company lost $929.4 million, or $12.04 a share, versus a profit of $482.4 million, or $5.82 per share, a year earlier.

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Yesterday  the U.S. government decided to cure the economic ills brought on by irresponsible spending by doing more irresponsible spending.  ["Hair of the dog" economic theory???]  Among the more hair-brained proposals to come out was the idea to have Freddie and Fannie buy risky jumbo loans–loans which the private sector isn’t dumb enough to want–and believe that it is a GOOD Idea.  According to the Arizona Republic:

There was, however, a glimmer of good news Thursday for buyers, sellers and homeowners, especially in such high-cost states as California and Florida, where home prices are falling and foreclosures are soaring. Congressional leaders struck an agreement on a stimulus package that includes a one-year rise in the loan limit for Fannie Mae and Freddie Mac, to $729,750.

Currently, Fannie and Freddie can buy only mortgages that are $417,000 or less. Larger loans, called jumbos, have higher rates because they’re riskier for investors, and that’s hurt borrowers in places like California, where the median home cost about $489,000.

The congressional package also raises the dollar limit on loans that can be insured by the Federal Housing Administration, which caters to first-time and working-income families, to $729,750 from $367,000. In today’s market, most lenders require 10 percent down payments; the FHA loans need only 3 percent.

In a rare moment of reason from a government official yesterday, James Lockhart, director of the OFHEO disagreed.  The OFHEO released the following statement yesterday:  [No link provided.]

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