Seattle Bubble

News & discussion about real estate & the housing bubble in the Seattle area.

Seattle Bubble - News & discussion about real estate & the housing bubble in the Seattle area.

Entries Tagged as 'bailout'

FHA: The New Subprime

By The Tim on September 18th, 2009 at 11:24 AM · 37 Comments

Three facts:

  • Nearly 7% (and rising) of FHA loans are currently in default (source).
  • The FHA has cash reserves of less than 2 percent (and falling) of the total value of loans they guarantee (source).
  • FHA currently makes about 23% (and rising) of all mortgages in the USA (source).

Here are those first two points presented graphically:

FHA Loans

I’m trying to imagine a realistic, plausible scenario in which the FHA isn’t essentially doomed to be the next big Federal bailout, and I’m afraid to say, I’m coming up empty.

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Comment of the Week: Impulsive Behavior Disorder

By The Tim on August 28th, 2009 at 7:14 AM · 198 Comments

This comment of the week is brought to you by Jonness:

All’s I know is my household income is 6 figures, I have no kids, I have 20% down, and I still don’t feel like I can afford a house priced $400K. How people are pulling the FHA trigger with 3.5% down and $70K in household income is beyond me. I mean, what happens if a spouse loses a job or a family member gets ill? Don’t people care about long-term stability in their lives? It appears to me, a lot of people borrow as much as they possibly can at every new moment in time.

IMO, no houses are affordable right now, because buyers like me have to compete with 10 flaky families overstretching themselves to get a dump on a 6K sq. ft. lot. They do this purely out of ignorance and an inability to control their impulsive behavior disorder. Then when they default, I pay taxes to bail their irresponsible arses out. Meanwhile, the govt. floods the market with borrowed dollars in order to artificially inflate the price of the foreclosed home so that the crazy banker who made the outrageously risky loan can continue to live in a house that I cannot afford to buy.

This game is crazy.

So what’s the cure for impulsive behavior disorder? Is there one? Surely there must be a way out of this self-destructive cycle, right?

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Poll: Bailouts / “stimulus” / rule changes…

By The Tim on April 5th, 2009 at 12:05 AM · 16 Comments

Please vote in this poll using the sidebar.

Bailouts / "stimulus" / rule changes...

  • ...will save the economy. (7%, 12 Votes)
  • ...are delaying the inevitable reset. (55%, 91 Votes)
  • ...will only make things worse. (38%, 63 Votes)

Total Voters: 165


This poll will be active and displayed on the sidebar through 04.11.2009.

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Some Brief Thoughts on the New Car Tax Break

By The Tim on March 30th, 2009 at 9:53 AM · 36 Comments

Just a quick comment on one aspect of Obama’s just-announced plan to “see the auto industry through these difficult times.” I’ll keep this brief since it has little to do with either real estate or the Seattle area.

Here’s a portion of the president’s speech:

…the IRS is today launching a campaign to alert consumers of a new tax benefit for auto purchases made between February 16th and the end of this year – if you buy a car anytime this year, you may be able to deduct the cost of any sales and excise taxes. This provision could save families hundreds of dollars and lead to as many as 100,000 new car sales.

[Clarification: Obama is referring to the tax break for any new car purchase (not just American-made cars) that was passed as a part of February's "stimulus" bill.]

Let’s just say that hypothetically I’m in the market for a car. For the purposes of this example, we’ll choose a fuel-efficient, American made branded car: the Chevrolet Aveo.

I have two choices:

  1. Buy a new 2009 Aveo, priced at local dealers between $11,000 and $17,000. I get to deduct up to about $1,700 in taxes from my taxable income, and save approximately $425 on my 2009 taxes (at the most).
  2. Buy a used 2007 or 2008 Aveo, priced at local dealers between $9,000 and $10,000. Save $1,000 to $8,000 compared to buying new.

Tough choice, isn’t it? Maybe someone can explain to me how this program is supposed to convince even one person that now is a great time to buy a new car.

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Poll: Favorite Government Bailout (so far)?

By The Tim on February 22nd, 2009 at 12:05 AM · 39 Comments

Please vote in this poll using the sidebar.

Favorite Government Bailout (so far)?

  • Foreclosure Prevention Act of 2008 (4%, 4 Votes)
  • Fannie / Freddie takeover (9%, 8 Votes)
  • TARP (15%, 14 Votes)
  • FHFA Streamlined Modification Program (3%, 3 Votes)
  • Super Stimulus (29%, 27 Votes)
  • Proposed Obama Foreclosure Rescue (11%, 10 Votes)
  • Other (29%, 27 Votes)

Total Voters: 92


For more information on any of these programs, browse the “Government Meddling” tag.

This poll will be active and displayed on the sidebar through 02.28.2009.

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Foreclosure Rescue Plan Open Thread

By The Tim on February 18th, 2009 at 10:00 AM · 121 Comments

Here’s a good summary of Obama’s proposed foreclosure rescue plan from our friends over at Calculated Risk.

This plan rewards those homebuyers who speculated with excessive leverage. I think this is a mistake.

Another problem with Part 2 is that this lowers the interest rate for borrowers far underwater, but other than the $1,000 per year principal reduction and normal amortization, there is no reduction in the principal. This probably leaves the homeowner far underwater (owing more than their home is worth). When these homeowners eventually try to sell, they will probably still face foreclosure – prolonging the housing slump. These are really not homeowners, they are debtowners / renters.

Personally, I feel that foreclosures are part of the solution, not part of the problem.

Here is The Tim’s 4-point foreclosure plan:

  1. Require banks to inspect the loan documents from all home loans issued between 2003 and 2008.
  2. Any mortgages found to be based on falsified information are immediately nullified.
  3. The home “owner” must either qualify for a full-doc loan based on current standards, or forfeit the house.
  4. Ta-da! Foreclosure “crisis” solved.

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