Monday Open Thread (2012-01-02)

Here is your open thread for Monday January 2nd, 2012. You may post random links and off-topic discussions here. Also, if you have an idea or a topic you’d like to see covered in an article, please make it known.

Be sure to also check out the forums, and get your word in the user-driven discussions there!

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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

87 comments:

  1. 1
    Dirty Renter says:

    Tatiana & Natalia,
    What I’m dying to know is……do you know Casey Serin? I realize he was from a different FSU nation, but I think he’s from Sacramento.

  2. 2
    Pegasus says:

    RE: Dirty Renter @ 1 – Casey Serin? I have not heard that name for a while. Did he ever get prosecuted for what he did?

  3. 3
    Pegasus says:

    FHA says: Flip that house

    In an effort to help stabilize housing prices and unload some of the foreclosures that are flooding low-income communities, the mortgage insurer extended a waiver of its anti-flipping regulations through 2012.

    In addition, if the new sale price is 20% or more above the previous selling price, the lender has to document and justify the increase and meet other conditions, such as making sure the home has been inspected.

    Since the waiver went into effect in February of 2010, the FHA has insured more than 42,000 loans to purchase homes that were being resold within 90 days. These totaled more than $7 billion in mortgage principal.

    http://money.cnn.com/2011/12/29/real_estate/FHA_flipping_waiver/index.htm?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fmoney_latest+%28Latest+News%29

  4. 4

    RE: Pegasus @ 3 – It’s actually a fairly significant problem, and the anti-flipping rules are about as big of an example of stupid as there could be.

    Flippers like to buy crappy houses and fix them up as fast as possible to put them back on the market. Time is money for them. Banks sell a lot of crappy houses either at foreclosure sales or REOs. They want to get as high of price for them as possible, and that means increasing demand. If flippers have difficulty reselling their properties because of anti-flipping rules, that decreases the demand for foreclosures and REO, reducing the recovery banks get on their distressed properties.

    What the anti-flipping rule is varies by type of loan. Some are three months, some six, some (the smart ones) don’t care. Some might refuse to do the loan under any conditions, while some might want the flipper to provide receipts of what they spent fixing up the house. I believe some require two appraisals, because that’s what this really gets down to–them not having faith in the appraisal when it shows a much higher value than a recent sale.

    Beyond the decreasing demand factor, what is also stupid about it is it only hurts the best flippers–the ones that know what they are doing. Take six months to fix up a house, because you don’t know what you’re doing, and you won’t have any problems.

  5. 5
    Pegasus says:

    RE: Kary L. Krismer @ 4 – A lot of these flips are because the normal retail buyer can not come up with the cash to bid at an auction or the 20 percent down where conventional financing is required. The flipper holds the property long enough for a retail buyer to obtain financing. Yes sometimes the flipper rehabs the house with more than cosmetic repairs. If the industry were smart about it they would find a way to cut out the middleman(flipper) with financing thus probably getting a higher price and the consumer would benefit with a lower price and a more solid mortgage payment benefiting themselves and the bank. Of course this assumes that bankers are smart and are trying to do the right thing….

  6. 6

    RE: Pegasus @ 5 – Both Freddie and Fannie offer rehab loans. I believe on pretty good terms for owner-occupants.

    Unfortunately I’ve yet to have a buyer carry through on a rehab project. I’d really like to see one of those through, because I do think that they could present a very good opportunity for a buyer.

  7. 7
    Pegasus says:

    ‘Occupy Wall Street’ Participation To Earn Class Credit At Columbia U.

    Columbia University will offer a new course for upperclassmen and grad students next semester. An Occupy Wall Street class will send students into the field and will be taught by Dr. Hannah Appel, a veteran of the Occupy movement.

    The course begins next semester and will be divided between class work at Columbia’s Morningside Heights campus and fieldwork that will require students to become involved with the Occupy movement outside of the classroom.

    The course will be called “Occupy the Field: Global Finance, Inequality, Social Movement” it will be run by the anthropology department.

    http://newyork.cbslocal.com/2012/01/01/new-class-at-columbia-focuses-on-occupy-wall-street/

    Reminds me of the 1960’s. You get an “A” for the course if police taze and arrest you.

  8. 8
    Macro Investor says:

    RE: Pegasus @ 7

    Another useless college program. Then these kids will wonder why they have $200k in student loans and can only get a job serving coffee.

  9. 9
    Pegasus says:

    RE: Macro Investor @ 8 – They could become the President someday.

  10. 10

    By Pegasus @ 7:

    Reminds me of the 1960’s. You get an “A” for the course if police taze and arrest you.

    That should have gotten you an “A” since it would have required your first developing a working Taser! ;-)

  11. 11

    By Macro Investor @ 8:

    RE: Pegasus @ 7

    Another useless college program. Then these kids will wonder why they have $200k in student loans and can only get a job serving coffee.

    Useless? That’s being very narrow minded. They’re being taught how to live on the streets!

  12. 12
    Scotsman says:

    RE: Macro Investor @ 8RE: Pegasus @ 7

    Given the cost of attending Columbia and the average course load the cost of that class, to the students, (or their parents) is between $7-8,000.

    They would have gotten greater benefit from traveling the world and seeing how the truly poor and oppressed live, or go out and try to start a cofffee hut on a street corner in Manhatten. Then see what real oppression is- from their own government and the never ending stream of taxes and regulations.

  13. 13
    Pegasus says:

    RE: Kary L. Krismer @ 10 – It was two thoughts as the mind drifts…back to the past(1960’s) and then forward to the present(tasers and a class credit). Sorry to confuse you. The college student demonstrators were the common thread. Berzerkley, Columbia and all of that.

  14. 14
    Pegasus says:

    RE: Scotsman @ 12 – You forget… you are talking about a school with an agenda as to what they produce politically. You can’t just pay enough to get that, you have to live it.

  15. 15
    No Name Guy says:

    http://www.zerohedge.com/contributed/iceland-success-through-failure

    Start clip from first few paragraphs:
    Iceland pursued better policies than Ireland or Latvia when the three countries’ economies collapsed in 2007 because the Reykjavik government allowed banks to fail, according to a new report by the influential Bruegel think tank.

    The report by economist Zsolt Darvas looked at the response of the three small and open economies. The three countries all initially allowed the credit boom to fuel property speculation and investment imbalances. As the crisis began, property prices fell, banks went bust and all three countries had to turn to the International Monetary Fund (IMF) for help.

    The governments then introduced fiscal austerity programmes, structural reforms and reforms of the banking system. These similarities allow economists to compare the different responses in an attempt to determine what worked best.

    “The experience with the collapse of the gigantic Icelandic banking system suggests that letting banks fail when they had a faulty business model can be the right choice,” the report notes.
    End clip.

    Hmmmm….you mean letting insolvent and bankrupt entities face the music and clearing out the dead wood is GOOD? Who would have thought that? (snark).

    Charles Hugh Smith at “Of Two Minds” had a post recently where the bailouts and can kicking were compared to the policy of fire suppression in the western forests. As a result, instead of a low and slow fire every few years that renews the forest by releasing nutrients, there’s a full on firestorm that incinerates everything due to all the accumulated debris. In a similar manner, all these bailouts (the fire suppression) are going to lead to a far worse result when (not if, but when) the zombie banks start to fail. Instead of a few bankruptcies and the related sell off of useful assets and write off of bad debt, there will be wholesale slaughter as bank after bank folds in an unstoppable cascade of failures.

  16. 16
    Pegasus says:

    Is there some new NCAA rule that in college football bowl games that the defense can not participate? Geez!

  17. 17
    David Losh says:

    RE: Pegasus @ 5

    Once again you are proving smarter than a Real Estate professional.

    You are exactly correct. A flipper is different from a rehabber.

    A flipper buys, and sells at the same time. They buy from the bank for as much of a discount as they can get, then sell to a retail purchaser, and retain, I’m told, I’ve never seen it done, I’ve never been involved, but I have heard rumors, that they hold a “phantom” second, as the down payment for the secondary sale.

    In most cases they are “cashed out” of the investment they have while retaining an income from the second Notes, and Deed of Trust, that remains unrecorded unless something goes wrong.

    Flippers became a huge problem, continue to be a huge problems, and in my opinion, will be a huge problem going forward.

    Just as Real Estate professionals began mucking about with Short Sales, and REOs, these really smart flippers will muck up, repeatly, and more, and more people will be out a lot of money.

    It’s just one more reason why they are all coming back.

  18. 18

    RE: David Losh @ 17 – You seriously think that’s what the FHA waiver is about?

    Also, I love how you simultaneously say you’ve never seen something, but it became a huge problem.

  19. 19

    RE: Pegasus @ 16 – Not sure what you’re talking about, but I did find it a bit funny that at the end of the first half of the Ducks game neither the two announces nor the head coach of Wisconsin apparently knew the rule on when the clock continues to run. I wonder how much annual salary is spent on them collectively?

  20. 20
    Pegasus says:

    RE: Kary L. Krismer @ 19 – Yea watching the Duck game. After the Dogs scored 56 and lost to Baylor who scored 67 I am wondering if they are trying to beat the total points scored(123) at the Alamo Bowl during the Rose Bowl? Better than a tight defensive battle but a score of 123 points shows a total lack of defense from both sides and right now we have 83 points scored in the Rose Bowl.

  21. 21
    David Losh says:

    RE: Kary L. Krismer @ 18

    Yes, if you read the article it has to do with low income. Low income isn’t saving up the 20% down payment that lenders now like, and require.

    As much as Real Estate professionals want to say that FHA is such a good deal, private lenders have a way of working the system.

    It is a huge problem that is getting worse, not better.

    You should see the new crop of foreclusre investors.

    Vestus is crawling with really, really sharp, and smart guys wanting to rape, rob, and steal as much as they can.

    That’s the face of flippers. Most rehabbers know the margins are tight, and there is no gautantee that a property will sell. The rehabber market place has been pretty much been taken over by scum, low life scum, the kind we have always been warned about.

  22. 22

    By David Losh @ 21:

    RE: Kary L. Krismer @ 18 – Yes, if you read the article it has to do with low income. Low income isn’t saving up the 20% down payment that lenders now like, and require.

    It’s only talking about low income communities in that those communities are harder hit by foreclosures. That doesn’t mean that they’re talking about a different kind of flipping than what I was suggesting.

    BTW, conventional lending has always required 20% down. Less than that and you needed either a second for the balance (bad idea), or PMI, or FHA, or VA, etc.

  23. 23
    David Losh says:

    RE: Kary L. Krismer @ 22

    I’m sorry, but this is a very important point, and has been for decades. There are more foreclosures, in theory, due to predatory lending in low income communities. It’s a reverse districting, or red lining.

    You find a lot of “helpful” people making side deals that sound good that turn out bad.

    I understand how financing works, just fine, thanks for sharing, but what I’m saying is that some flippers, and in my opinion a growing number, have a lot of cash to spread around, and are making a killing by doing easey, sleazy deals.

    FHA shouldn’t be involved or encouraging this behavior.

    What would be better than preying on the consumer is to encourage lenders to lend on a more realistic value of property rather than sales price.

    In the other thread Dorthea asked about commercial property. In commercial, loans are made on financial fundamentals, rents, land value, obsolescence, and a tighter time frame of five, seven, ten, and fifteen years, with payments based on a thirty year amortization.

    In residential too much emphasis is put on the “promise” to pay.

    In commercial loans, and honestly all loans on Real Estate have a commercial value, more emphasis is given to the commercial value of the property.

    Banks should just be rubber stamping loans at this point if these sales prices are such a good deal.

  24. 24
    karl says:

    lets keep flipping et al in the private sector. FHA had a charter at one time…what happened? The government has no business in investment finance.

  25. 25
    Pegasus says:

    RE: Kary L. Krismer @ 22 – Kary the only thing keeping the real estate market alive is loans being made that require less than 20 percent down or tax credit pumps. Why do you think FHA, VA and RHS loans have exploded in relationship to conventional loans? It is the only thing along with artificially low rates that is keeping real estate prices from being down 20 or 30 percent more down at this point. Will the pricing eventually reach those numbers later then sooner? Aye, there’s the rub.

  26. 26

    RE: Pegasus @ 25 – FHA is doing a lot more right now because the 80/20 craze left the PMI companies out in the cold for years. You could view that as a good thing for them, because they largely missed a lot of the losses, but it also left them much smaller entities. There simply was no way for them to pick up the slack, especially in a declining market.

    So yes, if it wasn’t for FHA the market would have declined a lot more. We could debate where the country would be if that had occurred, but it didn’t.

  27. 27
    Haybaler says:

    I’m starting to see articles like this in my reading materials….

    Home | Street Talk
    Tags: hedge | funds | bet | housing | recovery
    Hedge Fund Heavies Bet on Housing Recovery

    Friday, 30 Dec 2011 11:19 AM

    By Dan Weil
    Share:
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    Several signs have emerged that the housing market has bottomed, and major hedge funds are acting on those signals by loading up on housing-related investments.

    The group includes Caxton Associates, SAC Capital Advisors, Avenue Capital, and Blackstone Group, The Wall Street Journal reports.

    In addition, research firm Zelman & Associates, which formerly held a negative view on housing now forecasts a recovery, and so does Goldman Sachs.
    ____________________________________

    Read more: Hedge Fund Heavies Bet on Housing Recovery
    Important: Can you afford to Retire? Shocking Poll Results

    Personally, I’m starting to think that I might be picking up a couple houses this year in the Tacoma area in the $35K range. I’d question whether that indicates a recovery but it sure surprises me to find that I’m thinking this way already after all that I went thru to get out of investment housing the past couple years.

  28. 28
    pfft says:

    By Scotsman @ 12:

    RE: Macro Investor @ 8RE: Pegasus @ 7

    Given the cost of attending Columbia and the average course load the cost of that class, to the students, (or their parents) is between $7-8,000.

    They would have gotten greater benefit from traveling the world and seeing how the truly poor and oppressed live, or go out and try to start a cofffee hut on a street corner in Manhatten. Then see what real oppression is- from their own government and the never ending stream of taxes and regulations.

    dude taxes have been going down for years. regulations save lives.

  29. 29
    pfft says:

    By Macro Investor @ 8:

    RE: Pegasus @ 7

    Another useless college program. Then these kids will wonder why they have $200k in student loans and can only get a job serving coffee.

    you people should be very worried about OWS. lots of liberal activists who are getting their training on the streets. these people will be activists for life. a great foundation for liberal causes for decades to come. many social movements like the environmental movement still to this day carry political clout. same with the civil rights movement. this is very good for liberals and they are everywhere! getting arrested and camping out only energizes the movement.

    I have much respect for the those people.

  30. 30
    pfft says:

    By No Name Guy @ 15:

    http://www.zerohedge.com/contributed/iceland-success-through-failure

    Start clip from first few paragraphs:
    Iceland pursued better policies than Ireland or Latvia when the three countries� economies collapsed in 2007 because the Reykjavik government allowed banks to fail, according to a new report by the influential Bruegel think tank.

    The report by economist Zsolt Darvas looked at the response of the three small and open economies. The three countries all initially allowed the credit boom to fuel property speculation and investment imbalances. As the crisis began, property prices fell, banks went bust and all three countries had to turn to the International Monetary Fund (IMF) for help.

    The governments then introduced fiscal austerity programmes, structural reforms and reforms of the banking system. These similarities allow economists to compare the different responses in an attempt to determine what worked best.

    �The experience with the collapse of the gigantic Icelandic banking system suggests that letting banks fail when they had a faulty business model can be the right choice,� the report notes.
    End clip.

    Hmmmm….you mean letting insolvent and bankrupt entities face the music and clearing out the dead wood is GOOD? Who would have thought that? (snark).

    Charles Hugh Smith at “Of Two Minds” had a post recently where the bailouts and can kicking were compared to the policy of fire suppression in the western forests. As a result, instead of a low and slow fire every few years that renews the forest by releasing nutrients, there’s a full on firestorm that incinerates everything due to all the accumulated debris. In a similar manner, all these bailouts (the fire suppression) are going to lead to a far worse result when (not if, but when) the zombie banks start to fail. Instead of a few bankruptcies and the related sell off of useful assets and write off of bad debt, there will be wholesale slaughter as bank after bank folds in an unstoppable cascade of failures.

    wrong.

    explain sweden then.

  31. 31
    Tatiana Kalshnikov says:

    RE: Dirty Renter @ 1

    Mr. Dirty Renter, Casey Serin (aka Casey Konstantin Serin) makes all of us in our community so shamed. Natasha and I both know this family, and on several occasions have spoken to Casey and his wife, Galina. But as with all confidence men, he is not as smart as he thinks he is. He enjoyed a brief notoriety, mostly due to luck and good timing. But his 15 minutes of fame are gone. And those of us in our tight community,we say “Good Riddance.”

  32. 32
    Natalia Orinko says:

    RE: Kary L. Krismer @ 26

    My neighbors, a couple in their 30’s bought their home two years ago using a FHA loan at 3 & 1/2 % down. They bought the house for $305,000. It is now valued at $220,000. And they are getting divorced. So this home, already a repo in the past, is going to go through it again. Is the FHA route really in our best interests??

  33. 33
    Chris says:

    RE: Tatiana Kalshnikov @ 31
    Interesting story. While he’s definitely not a hero, I respect how he put all the information out there for all to see. According to the article he was investigated for his income stated loans. It would have been absurd for him to be prosecuted instead of the banks so it looks like they backed off.
    http://en.wikipedia.org/wiki/Casey_Serin

  34. 34
    Chris says:

    RE: Natalia Orinko @ 32
    Do you have any strong feelings about the US government taking over whole sectors of the economy (like real estate)? Do you think any government can determine the proper value for things? I’d be interested to get the perspective from someone who lived in the Soviet Union.

  35. 35
    Pegasus says:

    RE: pfft @ 29 – You do realize of course that a lot of the money funding OWS wants to see America fail? This movement has a lot of legs and a lot of wannabes joining not because they feel strongly about a cause if they even can point to one but they want to be part a movement not unlike the hippies. In the 1960’s a lot of the protesters were funded by foreign governments. The movement will grow and become more violent. I suspect once it warms up and we near the political conventions that we will have nationwide full scale riots. I don’t object to free speech, demonstrations and a lot of the items mentioned but it appears it will end in revolution and it won’t be peaceful. Even revolutions begun in the best of intentions often end up with the populace in worse shape after the change in power. There is a lot to protest against but I am not sure the OWS is the answer.

  36. 36
    pfft says:

    By Pegasus @ 35:

    RE: pfft @ 29 – You do realize of course that a lot of the money funding OWS wants to see America fail? This movement has a lot of legs and a lot of wannabes joining not because they feel strongly about a cause if they even can point to one but they want to be part a movement not unlike the hippies. In the 1960’s a lot of the protesters were funded by foreign governments. The movement will grow and become more violent. I suspect once it warms up and we near the political conventions that we will have nationwide full scale riots. I don’t object to free speech, demonstrations and a lot of the items mentioned but it appears it will end in revolution and it won’t be peaceful. Even revolutions begun in the best of intentions often end up with the populace in worse shape after the change in power. There is a lot to protest against but I am not sure the OWS is the answer.

    I laughed the entire time I was reading this! too much fox news?

  37. 37
    pfft says:

    By Chris @ 34:

    RE: Natalia Orinko @ 32
    Do you have any strong feelings about the US government taking over whole sectors of the economy (like real estate)?

    what are you talking about?

  38. 38
    Pegasus says:

    RE: pfft @ 36 – Post that after the Democratic and Republican National Conventions so that everyone can laugh either with you or at your continued ignorance.

  39. 39
    redmondjp says:

    RE: pfft @ 36 – So pfft, care to provide any objective evidence that what he said isn’t true? Freeloaders living on the street and trashing public spaces, costing taxpayers millions of dollars, how is this beneficial?

    Now for a constructive suggestion: pick one corporation, any one, in which said top executives are being paid way too much. Now, organize enough shareholders to vote en masse to do something about it. That would be constructive, wouldn’t cost city governments a lot of money that they don’t have, and might actually accomplish something!

  40. 40
    Chris says:

    RE: pfft @ 37
    Pfft, I’m not interested in a regurgitation of your organization’s talking points but maybe you heard the government has been supporting the real estate sector?

    BTW looks like your union is backing SOPA: http://www.thenewamerican.com/usnews/politics/10391-why-does-big-labor-support-the-stop-online-piracy-act

    What’s their/your talking point about that? You guys want to shut down Seattlebubble.com or something?

  41. 41

    By Natalia Orinko @ 32:

    RE: Kary L. Krismer @ 26

    My neighbors, a couple in their 30’s bought their home two years ago using a FHA loan at 3 & 1/2 % down. They bought the house for $305,000. It is now valued at $220,000. And they are getting divorced. So this home, already a repo in the past, is going to go through it again. Is the FHA route really in our best interests??

    On those facts the bank would be taking a loss even with 20% down. Divorce always has been a leading cause of both bankruptcy and foreclosures. That’s because the couple’s expenses go up, but not their income. It’s sad really, and something you should think about whenever you hear about someone who is not “wealthy” going through a divorce.

    What I was alluding to though was the fact that without the government support of housing, the entire banking and financial system could have collapsed, because their losses on those loan assets would have been much greater as the market over-adjusted downward. So yes, I do think preventing that possibility is in our best interests.

  42. 42

    By Pegasus @ 35:

    <There is a lot to protest against but I am not sure the OWS is the answer.

    That’s because they don’t have a clue and don’t even purport to have an answer. Also the 24/7 method is really pretty stupid because all they do is become a homeless camp. That has to be a great distraction.

  43. 43

    By Pegasus @ 38:

    RE: pfft @ 36 – Post that after the Democratic and Republican National Conventions so that everyone can laugh either with you or at your continued ignorance.

    I don’t like predictions, but that one seems to be one fairly likely to become true. They were protesting after the Rose Bowl Parade. I would think the conventions would attract their attention.

  44. 44
    Chris says:

    RE: Kary L. Krismer @ 41
    Kary – I appreciate your information but do you think these no money down loans are the way to approach it? And how long should the government occupy the field in the residential real estate business? At least for state/county governments needing excise taxes and for people who rely on commissions, it seems many would be in better shape with lower house prices rather than dragging this out. It seems to me we’re trying to drink away a hang-over.

  45. 45

    By Kary L. Krismer @ 19:

    RE: Pegasus @ 16 – Not sure what you’re talking about, but I did find it a bit funny that at the end of the first half of the Ducks game neither the two announces nor the head coach of Wisconsin apparently knew the rule on when the clock continues to run. I wonder how much annual salary is spent on them collectively?

    This not understanding basic rules repeated itself at the end of the Rose Bowl. There was a pass caught in bounds which gained a first down, and the clock stopped at 2 seconds for the chains to move. Wisconsin lined up and snapped the ball into the ground in a foolish attempt to stop the clock.

    During the replay one of the two announces thought something was wrong because the clock started before the ball was snapped. But beyond that though, for a coach to call an in bounds play and not have a second play called to be snapped ASAP is really bad time management.

    Again I have to wonder how much annual salary we’re talking about to make these types of basic decisions.

  46. 46

    By Chris @ 44:

    RE: Kary L. Krismer @ 41
    Kary – I appreciate your information but do you think these no money down loans are the way to approach it? And how long should the government occupy the field in the residential real estate business?

    No money down is VA, and that’s a government benefit for those who served. Also, my understanding is those loans have a relatively low default rate.

    As to how long for government involvement, that’s a tougher question. The problem is they’ve been involved for decades. My thought would be if you’re going to lessen their involvement, it would be when the market is heading up. That would moderate the rise without risking a collapse. Imagine if that had happened sometime between 2000 and 2005!

    One more point. One idea behind Fannie and Freddie was to make loans available to areas of the country which were not doing well economically. The idea was to help out those areas. When problems arose though, it drug down the entire economy.

  47. 47

    RE: Chris @ 44 – One more thing on the topic.

    Yesterday the commercial market came up, and one of the issues I mentioned was that there was concern a few years ago about those loans largely being short term (e.g. 3 years), and the ability to refinance when the loans came due. At the time I was critical of the government spending so much effort on residential, while seemingly completely ignoring commercial. Seemingly though that has worked itself out, without that market collapsing.

    That said, apparently part of the reason that worked itself out is the government’s policy of low interest rates. That made commercial property more valuable than what it would have been with higher rates, so in a sense government did prop up that market too.

  48. 48
    Chris says:

    RE: Kary L. Krismer @ 46
    Thanks for that information. I agree VA loans should be done as a benefit for those who served, however I wonder about the default rate. During the last big downturn in real estate in the 1990s the VA had a program that allowed people to sell their home at a loss and the VA paid the difference to the bank. I don’t know if that would fit the definition of “short sell” but they wrote it off and didn’t report it on credit. I don’t think they 1099ed the person either. I suspect they have the same program now. I doubt it ended on the books as a default but I bet that program cost the VA a bunch. Do you happen to know the FHA down requirement? I think it’s about 3% isn’t it?

  49. 49
    Blurtman says:

    RE: Pegasus @ 35 – Hope you are right about the riots. Doubt your revolution prediction. BTW, your statement that “In the 1960′s a lot of the protesters were funded by foreign governments.” is a new one for me. How about a few references? Jeepers, imagine if a foreign power funded a takeover of the USG. That privelege is only reserved for the evil empire.

  50. 50
    Chris says:

    RE: Kary L. Krismer @ 47
    Interesting. It sounds like the jury is still out on commercial real estate. All landlords I know say they’ve never had it so good. Do you know if they are financing commercial loans with longer terms now (non-balloon)?

  51. 51
    David Losh says:

    RE: Kary L. Krismer @ 47

    The commercial market self regulates with cash. Bank involvement happens from time to time, based on the financials of the property.

    What is happening now is more cash buying out bank loans, at a hefty discount. Banks take the deal because to a bank it is all funny money. They will make it up elsewhere.

  52. 52

    RE: pfft @ 29

    As Much As I Dislike the OWS Ambiguity on Issues

    I do agree with you Pfft….take the Hippies demonstrating in the 60s/70s, what did it get ’em? High paying union jobs, benefits, and many turned conservative and rich as a result….demonstrating really hurt ’em….the kids are shafted today, if they’re afraid to speak up.

  53. 53

    By Chris @ 48:

    RE: Kary L. Krismer @ 46
    Thanks for that information. I agree VA loans should be done as a benefit for those who served, however I wonder about the default rate. During the last big downturn in real estate in the 1990s the VA had a program that allowed people to sell their home at a loss and the VA paid the difference to the bank. I don’t know if that would fit the definition of “short sell” but they wrote it off and didn’t report it on credit. I don’t think they 1099ed the person either. I suspect they have the same program now. I doubt it ended on the books as a default but I bet that program cost the VA a bunch. Do you happen to know the FHA down requirement? I think it’s about 3% isn’t it?

    What you describe at the first part of that post is the nature of a VA guaranteed loan (or even a SBA loan or a loan that requires PMI). If there’s a default, the bank gets fully or partially repaid, depending on the terms of the program.

    I’m a bit surprised that they wrote off the amount though. At one point they were trying to go after people in Washington after non-judicial foreclosures, claiming the anti-deficiency provisions of our law didn’t apply to federal entities. The Ninth Circuit shut them down on that.

    The current FHA down is 3.5 percent. They changed that from three about a year and a half ago (from memory).

  54. 54

    By Chris @ 50:

    Do you know if they are financing commercial loans with longer terms now (non-balloon)?

    I don’t know, but I doubt it. I’m only familiar with one loan that would be possibly considered commercial as a stretch, and it was renewed for 5 years with a balloon.

  55. 55

    By softwarengineer @ 52:

    I do agree with you Pfft….take the Hippies demonstrating in the 60s/70s, what did it get ’em? High paying union jobs, benefits, and many turned conservative and rich as a result….demonstrating really hurt ’em….the kids are shafted today, if they’re afraid to speak up.

    I don’t remember those demonstrations helping the union movement much, except perhaps those working in the fields. If anything, the 60s were the beginning of the decline for the union movement.

    I agree though that their “generation” (they’re about 10 years older than me) transformed into something that wasn’t anything like what they were protesting for. About the only thing they accomplished was making the country very anti-war for about 20 years.

  56. 56

    RE: Kary L. Krismer @ 55

    Unions Were Doing Well After the Hippie Protests

    Hades Boeing Machinists made more money than Boeing engineers then.

    There has been no real protesting in the 90s and the 2000s and the unions went down the tube then, recently too.

    As far as making the country anti-war, what’s wrong with that Kary?

    We could really end wars, famine, disease, etc, etc….by depopulating to 3 billion….ask any demographer skilled in population science planning…..don’t ask Microsoft for their low wage [high population] opinion….they’ll tell you to donate to World Vision or something like that and it just fixes the symptoms a bit, but it gets far worse and unfixable later doing nothing.

  57. 57
    Pegasus says:

    By Blurtman @ 49:

    RE: Pegasus @ 35 – Hope you are right about the riots. Doubt your revolution prediction. BTW, your statement that “In the 1960â�²s a lot of the protesters were funded by foreign governments.” is a new one for me. How about a few references? Jeepers, imagine if a foreign power funded a takeover of the USG. That privelege is only reserved for the evil empire.

    “It has been suggested that non-aligned peace groups have received funding from the Soviet Union. Russian GRU defector Stanislav Lunev said in his autobiography that “the GRU and the KGB helped to fund just about every antiwar movement and organization in America and abroad,” and that during the Vietnam War the USSR gave $1 billion to American anti-war movements, more than it gave to the VietCong.[19] Lunev described this as a “hugely successful campaign and well worth the cost”.[19] According to Time magazine, a US State Department official estimated that the KGB may have spent $600 million on the peace offensive up to 1983, channeling funds through national Communist parties or the World Peace Council “to a host of new antiwar organizations that would, in many cases, reject the financial help if they knew the source.”[13] Richard Felix Staar in his book Foreign Policies of the Soviet Union says that non-communist peace movements without overt ties to the USSR were “virtually controlled” by it.”

    http://en.wikipedia.org/wiki/Soviet_influence_on_the_peace_movement

  58. 58

    By softwarengineer @ 56:

    Unions Were Doing Well After the Hippie Protests

    Hades Boeing Machinists made more money than Boeing engineers then.

    As far as making the country anti-war, what’s wrong with that Kary?

    There are still some strong unions today–the best example being Longshoremen. So I don’t think you can look at the wages at a single place to determine the strength of the union movement. I was focusing more on the percentage of workers who are unionized.

    Edit: This 2004 link indicates union membership in absolute numbers (not percentages) peaked in 1979.

    http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CCEQFjAA&url=http%3A%2F%2Fdigitalcommons.ilr.cornell.edu%2Fcgi%2Fviewcontent.cgi%3Farticle%3D1176%26context%3Dkey_workplace&ei=0TwDT4PgCYmbiQLZtfmBCQ&usg=AFQjCNGtxTxqTrE7T11RY54f6Db_xU4z6g&sig2=_xWrP2kq4YlONZ8K1GwwGQ

    Another link headline said that today most union members are government employees. As such they really don’t have much power. End Edit.

    As to the anti-war comment, I wasn’t suggesting that was good or bad. Only that it was about the only thing they accomplished.

  59. 59
    Chris says:

    RE: Chris @ 50

    I recently received a quote for a 20 year amortization with a 10 year balloon at 5.25% for a nonprofit (but treated as “commercial”) property – the rate adjusts after 5 years though. Quite a bit more favorable than the quote I received in Nov 2009 which was a 5 year balloon at 6.75%. With a strong balance sheet and an LTV of less than 50% I’m hopeful that we’ll refinance and save the organization about $10k a year.

  60. 60

    RE: Kary L. Krismer @ 54RE: Chris @ 59 – I can see why the banks set these things up as short term, but aren’t they also setting their customers up for never paying off the loan? If you started with a loan amortizing over 20 years with a 5 year balloon, and then repeatedly renew 5 years into it with another 20 year amortization, you’ll never pay off the loan!

  61. 61
    Chris says:

    RE: Chris @ 59
    Just to be clear, there are (I think) four Chrises on here. I’m the one with an avitar from a morphed photo of W Bush and Obama :)

  62. 62

    RE: Kary L. Krismer @ 58

    Gotcha Kary

    I never use nuts to describe a blogger but in a general way, nuts would describe those advocating for more wars [and IMO, overpopulation too, same thing].

    Government unions are destroyed too today Kary, IMO, Hades the 0% COLA for 3 years for government workers sums it up.

  63. 63
    Blurtman says:

    RE: Pegasus @ 57 – Spasiba, comrade. Perhaps China is funding Target and Walmart ads.

  64. 64
    Dirty Renter says:

    RE: Pegasus @ 2
    I have no idea.
    The comments on his blogs provided lots of laughs. I can’t walk by the local Jamba Juice without thinking of Casey. And his treatises on passive income….sorry Casey, it’s never passive, sort of like, there’s no such thing as ‘free love’.

    Tatiana – thanks for your honesty. I thought Casey’s story provided a valuable lesson for everyone…success doesn’t come easy. It usually take a lot of hard work and sacrifice.

  65. 65
    Dirty Renter says:

    RE: Blurtman @ 63
    Ne shagoo nazad.

  66. 66
    Blurtman says:

    Sell your stocks now!!!!! OMG!!!!!!!! WTF is Obama doing about this???

    Starbucks raises prices in two parts of the U.S.

    http://money.cnn.com/2012/01/03/pf/starbucks_prices/

  67. 67

    RE: softwarengineer @ 62 – I’ve never really understood the dislike for unions among the working class. Whoever created the propaganda which lead to that result should be studied as part of a class on how to get people to believe almost anything.

  68. 68
    Chris says:

    RE: Kary L. Krismer @ 53
    I had a relative on active duty in San Diego when the bubble burst there (mid-90s). When he moved back to the area, as I recall it, they allowed him to sell the house for market and then wrote the bank a check for the difference. The VA said they couldn’t represent the debt as forgiven (taxes?) but they said they wouldn’t pursue it. They never did come after it and I’m pretty sure he never was 1099ed. Never showed a bad mark on his credit. I’m not sure of every detail but that was the jist of it. I don’t know how it was carried on the books but I doubt it would show as a default. I heard those stories about the the VA coming after people. I think they take the gloves off when the property goes through foreclosure as I’m sure that blows a lot of money compared to a short sale (at least I assume that’s the case). I think when dealing with the VA they are a lot easier to work with before there’s a missed payment. Thanks for the info Kary.

  69. 69
    redmondjp says:

    By Kary L. Krismer @ 60:

    RE: Kary L. Krismer @ 54RE: Chris @ 59 – I can see why the banks set these things up as short term, but aren’t they also setting their customers up for never paying off the loan? If you started with a loan amortizing over 20 years with a 5 year balloon, and then repeatedly renew 5 years into it with another 20 year amortization, you’ll never pay off the loan!

    Exactly. And sadly, one – well, let’s just call it a tax-exempt organization that I am associated with, has these types of loans to the tune of $25M. I asked the leaders at the most recent annual business meeting what the plan was for paying these loans off, and the answer I got was: “We are actively working with several banks to refinance these loans now” (balloon payments due in 1.5 years). Talk about kicking the can down the road! Is this the new ‘normal’ for financial planning? Scary stuff . . .

  70. 70
    Sparky says:

    RE: Kary L. Krismer @ 45 – It was Kirk Herbstreit who was the announcer who made the comment about the clock starting before the ball was snapped. I imagine he knew the rules as he was a starting QB himself at one time. I figure that as an announcer you more or less have your stream of conciousness going out to millions of people; you’re bound to misspeak every once in a while as you forget the situation that got you to where you’re at for a moment (i.e. – clock stopped for 1st down, and not an incomplete pass or a receiver going out of bounds).

    I do agree that the Wisconsin coaching staff could have done a better job with the clock management right at the end, and either Bielema or Chryst (the offensive coordinator) should have had an actual play called. As to how much salary Bielema gets, it looks like $2.5 million/yr. Even in the coaching staff’s case, though, it doesn’t seem like a “basic decision.” They were in a really high pressure situation, with hardly any time to evaluate what was going on and coordinate that with the 11 guys on the field. I guess it’s not a big deal for the infallable Kary L. Krismer, but the rest of us don’t always get everything right all the time. Monday morning quarterback is a way easier position than Rose Bowl quarterback.

  71. 71
    David Losh says:

    RE: redmondjp @ 69

    Your comment is more to the point.

    Commercial loans mean commerce. The loans get paid off by trading.

    It’s hard to explain, and much harder in today’s market place. It’s like musical chairs, and now the music has stopped. That is where cash investors come in and make deals to discount the Notes.

    You have to factor in a lot of variables, most are that the interest income will off set some losses. Those losses also have a value in tax conequence.

    Many properties get paid off over the course of a five to seven year Note by buying down the amortization schedule. What is sad is these Notes are sold to cash investors when they could be renegotiated, like with a non profit.

  72. 72
    David Losh says:

    RE: Chris @ 68

    My brother in law did the same with Chase in a short sale. There was never a 1099, nor any mark on his credit. It depends on the circumstances, and his were well documented, his file was complete.

  73. 73

    RE: David Losh @ 72 – If he didn’t get a release of the debt there wouldn’t be a 1099 until six years later.

    If there were a release of the debt, I’m not sure whether a 1099 would be required if it were a tax exempt transaction under the legislation from a couple of years ago protecting homeowners. Often 1099s are required even if it’s not taxable.

    If it were BOA rather than Chase, I’d say they probably sent the 1099 to the address of the property your brother-in-laws sold, or some address he never had, and he simply doesn’t know about it! I had BOA do that with a 1099 on an account which contained only the proceeds of a property I sold. Just part of their incompetence.

  74. 74
    Chris says:

    RE: redmondjp @ 69
    Isn’t that what the consumer loan companies and payday loan outfits do? Its almost like an interest only loan. I wonder what percentage of commercial real estate loans are made like this.

  75. 75

    RE: Sparky @ 70 – I would agree as to the announcer at the end of the game, but not the end of the first half. On the otherhand, someone making $2.5M a year should know what they are going to do at end of half/end of game situations before they even occur. They should know that before the season even begins. To try to figure that out while you are also making play calling decisions would be impossible. Here the coaching staff blew it at the end of each half, which I find pretty unacceptable.

    End of half clock management is one of my pet peeve issues.

    Finally, I hardly claim to be perfect. But these two rules being discussed are very common situations. Both situations happen many times during every game. Note I wasn’t critical of the coach for not knowing that the rule that the touchback wasn’t reviewable. I didn’t know that, nor did I know the college rule for when the ball goes out too far. I would, however, be critical of the announces thinking that the coach could call a timeout in a manner that literally stopped a play, and then get it back. They affected the game at that point.

  76. 76
    David Losh says:

    RE: Kary L. Krismer @ 73

    He got a letter from Chase thanking him for being a good customer, no action was pending.

    We actually got him a pretty good price for the property. In my opinion, from what has happened since I think they are simply grateful.

    The other comment was also from a sale in the 1990s. That also makes sense.

  77. 77

    By Chris @ 74:

    RE: redmondjp @ 69
    Isn’t that what the consumer loan companies and payday loan outfits do? Its almost like an interest only loan. I wonder what percentage of commercial real estate loans are made like this.

    It’s not quite interest only. Depending on the interest rate you’d knock off probably 10-15% of the original loan amount.

    It’s really more similar to what some people do to themselves–refinance their homes into a new 30 year loan. If you did that every five years you’d be in the same boat.

  78. 78
    David Losh says:

    RE: Chris @ 74

    I’m going to talk in more general terms because by using myself as an example it is much harder to explain. Each situation is different.

    Commercial loans are based on an over all portfolio. It’s the ability to pay. There is cash flow, and the value of the assets being lent on. In a non profit there can be any number of side lined assets. Some people pledge properties as gifts.

    In the example of the WaMu tower you can see that the current owner spent more than they took in to keep the property. Since they now have it nearly fully leased, again, the asset has an over all value.

    Some management groups can take a property that isn’t doing well, turn it around, have it cash flow, and resell the property for a profit.

    There are also groups that have tons of cash that they have invested in properties that they will eventually sell after they have off set income with losses.

    A better example that is closer to home is if you own multiple apartment buildings. Some people will dedicate the cash flow from one or more buildings into the loan of a prized property. They then sell off the other properties, or refinance, and continue the process.

    There are a thousand variables to commercial paper. It’s more than a good job, and 20% down. It is sound, in many cases, financial reasoning.

  79. 79
    Blurtman says:

    Something very Oedipal about this….

    Mother of LA arson suspect charged with fraud

    LOS ANGELES (AP) — The mother of a German man accused of setting numerous fires in Los Angles has been charged in Germany with 19 counts of fraud.

    Court documents unsealed Tuesday say Dorothee Burkhart was charged in Frankfurt in case in which she is accused of not paying for a 2004 breast-augmentation surgery.

    Her son Harry Burkhart was arrested early Monday for investigation of the outbreak of arson late last week. Dorothee Burkhart was arrested Dec. 28 on a warrant from Germany.

    Dorothee Burkhart made a brief appearance in federal court, seeming perplexed and repeatedly asked a magistrate judge where her son was.

    She wondered aloud if he was dead or had disappeared, and at one point she stated that he is mentally ill.

    http://www.google.com/hostednews/ap/article/ALeqM5jlsuPsEIZ0hICtEMkeNPZBlXzG6g?docId=5292bee9e18146ea8815f8bca59a847e

  80. 80
    Blurtman says:

    RE: Sparky @ 70 – That’s Mr. Krismer to you, Sparky. Or is it Barrister Krismer? In any event, I’d be careful. He has a writ and he knows how to use it.

  81. 82

    RE: Blurtman @ 80 – One thing I’ve never used is Kary L. Krismer, Esq. But hey, Sparky seems okay, but for maybe voting against my follow up post! ;-)

    RE: Scotsman @ 81 – I had actually considered doing that at one point, because I like working on properties (as long as I’m not living in them–then I hate it). But I am way too risk adverse to buy a property with the intent to flip. You’d have to have an iron stomach.

  82. 84
    ricklind says:

    By Blurtman @ 79:

    Something very Oedipal about this….

    Mother of LA arson suspect charged with fraud

    LOS ANGELES (AP) � The mother of a German man accused of setting numerous fires in Los Angles has been charged in Germany with 19 counts of fraud.

    Court documents unsealed Tuesday say Dorothee Burkhart was charged in Frankfurt in case in which she is accused of not paying for a 2004 breast-augmentation surgery.

    Her son Harry Burkhart was arrested early Monday for investigation of the outbreak of arson late last week. Dorothee Burkhart was arrested Dec. 28 on a warrant from Germany.
    snip…
    http://www.google.com/hostednews/ap/article/ALeqM5jlsuPsEIZ0hICtEMkeNPZBlXzG6g?docId=5292bee9e18146ea8815f8bca59a847e

    I guess it’s safe to say she kept abreast of the news about the arsons.
    Ew.

  83. 85
    ricklind says:

    RE: Kary L. Krismer @ 75
    Great games yesterday!!
    I was pleased at how quickly the announcers (Kirk Herbstreet) problem solved and told us about the clock starting when the referee signaled for play to start, not at the snap, and that on a touchback the ball is not in play in the field until it completely crosses the field of play line. Wisconsin Badgers wiffed on the last play but sometimes you get the Duck, and sometimes the Duck gets you.
    Great game!

  84. 86
    Blurtman says:

    RE: ricklind @ 84 – Rimshot! Don’t go away folks, we’ve got a great line up tonight.

  85. 87

    By ricklind @ 85:

    RE: Kary L. Krismer @ 75
    Great games yesterday!!

    Yes, there were a lot of good games yesterday. Thanks to the DVR I did virtually nothing else. I even watched the Ducks a second time, because the wife didn’t see it the first time.

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