Carpe Diem

More reports on strong October home sales

1. Kansas City new and existing home sales increased 24% in October from 2011, while the average price of existing homes rose 6%.

2. Iowa home sales increased 13.3% in October, and the median sales price increased 5.4%.

3. Orlando home sales increased 14% in October,  while the median home price increased 9.2%.

4. Based on a survey of MLS data in 52 metropolitan areas, Re/Max reports that homes sales increased 17.8% in October over last year. The median home price rose 2.1% over last year, representing the ninth month in a row that prices have been higher than the same month last year.

Updates:

5. Wichita-area home sales increased 35.7% in October compared to last year.

 

34 thoughts on “More reports on strong October home sales

  1. Come on Mark. The foreclosures were suppressed before the election and FHA is now looking for handouts. None of that would be happening if you had a healthy housing market.

    • Yes, we all know the banks holding foreclosed houses were all eager for an Obama reelection. For example, no doubt Bank of America was just *dying* for an Obama victory, especially since the Obama administration recently sued BofA for $1 billion due to mortgage fraud.

      Rising home sales are surely a sign of an unhealthy housing market. So are rising prices.

      Good news is really bad news. And bad news is even worse.

        • Vangel, you live in a parallel universe, where no fact or manifest truth will satisfy you. You’re also paranoid.

          Statements like: “As many have pointed out on this site the FHA, which (along with the Fed) was mainly responsible for the dead cat bounce in real estate is now looking for a handout because it is broke”

          “The foreclosures were suppressed before the election and FHA is now looking for handouts. None of that would be happening if you had a healthy housing market.”

          are presposterous nonsense. You’re a shrill, obnoxious little man who has no regard or patience for the facts.

          • The facts are on my side. The housing market has been propped up by the Fed and FHA. Now the FHA is looking for a huge bailout and the Fed is talking about debt forgiveness. If the market were as healthy as Mark has been touting why would any of that need to happen? And how would the losses be handled?

            The election is now over and the backlogs of mortgages that are behind will have to be dealt with. That means that we will either get debt forgiveness that will piss off all of the responsible people or a new wave of houses that will drive the price much lower in real terms. In either case I would rather own gold, silver, or oil than a home.

          • No, the facts are NOT on your side, and while monetary policy did promote the bubble, the chief cause was reckless underwriting by lenders who had NO affiliation with public policy or the GSEs, whose loans were then sold and then leveraged, and backed with derivatives that became worthless.

            And once again: as with the GSEs, despite SHRINKING mortgage share, you blame the housing price spike on them, which is a statistical impossibility.

            Give up. You lost.

          • I explained how you will see a reduction of defaults among borrowers with a bad credit history by pointing out the Bernanke comment about equity extraction. I have pointed out that the GSEs increased their loan volumes because they had an implicit guarantee that allowed them to borrow at a lower rate than the private sector. I pointed out how the CRA forced banks to make loans that they would not choose to make without the legal mandates. I pointed out how the Fed used the FHA, GSEs, and the banks to inject massive amounts of new money and credit into the general economy.

            These are all government related actions that distorted the free markets and created a massive bubble. My solution is to get the government out of the housing market. That means no FHA, no GSEs, and no Fed monopoly on the creation of money.

          • Sir, who do you think you’re talking to? You’ve been caught in a lie, and in attempt to salvage your credibility, even anonymously, you come up with this lame brained answer.

            Let us proceed again:

            “I explained how you will see a reduction of defaults among borrowers with a bad credit history by pointing out the Bernanke comment about equity extraction.”

            Once again: if a borrower cannot handle what’s on his plate now, NO ONE IS GOING TO LET HIM TRADE UP TO A BIGGER HOME WITH A BIGGER MORTGAGE, OR EVEN THE SAME MORTGAGE. This is what Bernanke’s statement reinforced, He made NO mention of pulling out cash, and again, for the third time, no LEGITIMATE “A” paper lender is going to give a second lien to a borrower who can’t tackle his first lien.

            Get in the game. Like I said, you’re no doubt a impoverished fellow with low wages who thinks the GOP is going to make you “free” to earn millions, because it is obvious you never applied for a mortgage in your life.

            “I have pointed out that the GSEs increased their loan volumes because they had an implicit guarantee that allowed them to borrow at a lower rate than the private sector.”

            LOL!! I can tell you’re starting to read Wallison’s crap. Know what the yield spread is on a non-agency ‘A” paper loan to a GSE loan is? 25 basis points, in most cases. Not exactly a barn burner, but you’re very cute in bringing this up. Of course, it further demonstrates how little you know.

            ” I pointed out how the CRA forced banks to make loans that they would not choose to make without the legal mandates.”

            Again, banks were NOT forced to make loans to the unqualified and the performance of these loans under the most stressful economic conditions proves the point. Its hard to argue against raw statistics.

            “I pointed out how the Fed used the FHA, GSEs, and the banks to inject massive amounts of new money and credit into the general economy. ”

            No sir, the GSEs do not create “new money” only the Federal Reserve can do that.

            Everything in your response was utterly asinine.

          • Sir, who do you think you’re talking to? You’ve been caught in a lie, and in attempt to salvage your credibility, even anonymously, you come up with this lame brained answer.

            What lie? And what anonymity? I think that you seem to have trouble having a mirror held up to you so that you can see the empty suit that you really are. My arguments, in case you have failed to miss are all fairly simple and based on facts. The government, GSEs, and the Fed created a massive bubble by distorting the housing markets. The brokers, insurers, and rating agencies were also all complicit by using the regulations and the implied protection to take risks that could not be justified in a free market.

            That’s it. Which of the statements above are you having trouble with and are saying is wrong? Do you really think that the Fed or the regulators had nothing to do with the housing bubble? What about the government legislation that distorted the market? Are the government protected rating agencies innocent? What about the insurers of horrible paper guaranteed to default but rated AAA?

            You were claiming that it was OK to make loans to bad credit risks because the defaults were low. But Bernanke illustrated why that outcome was not to be expected in a rising market. When homes went up people could refinance or sell and take a profit. When you have a huge bubble you get very few defaults. That means that you can’t look at default rates and see what is going on. (That said, you were provided with a Fed document that showed that before the bubble started to accelerate the CRA loans were twice as likely to default and not as profitable. Since that did not fit your narrative you rejected the findings.)

            Once again: if a borrower cannot handle what’s on his plate now, NO ONE IS GOING TO LET HIM TRADE UP TO A BIGGER HOME WITH A BIGGER MORTGAGE, OR EVEN THE SAME MORTGAGE. This is what Bernanke’s statement reinforced, He made NO mention of pulling out cash, and again, for the third time, no LEGITIMATE “A” paper lender is going to give a second lien to a borrower who can’t tackle his first lien.

            But they did. GMAC was approving people in minutes, giving 125% loans, offering no-doc loans, and letting people extract equity from homes that had risen in price. Your own example was of a $300K home that has gone up threefold. There would be no liens or foreclosure because the owner could sell the home and use the $600K in profit to make up any shortfalls.

            This is all simple math. We do not need to hide behind narrative to understand it and certainly need to keep intentions and motives from muddying the picture. No wonder you are so confused.

          • Sir, I am going to pay you ONE compliment. Even I don’t believe you’re this stupid. Let’s try it again, and this should cover it once and for all:

            My arguments, in case you have failed to miss are all fairly simple and based on facts. The government, GSEs, and the Fed created a massive bubble by distorting the housing markets.”

            Again: the Fed creates the money, and what people do with it is left up to the markets and what free people, making decisions on their own do with it. There is no correlation with what the GSEs do. Someone wants to buy a home, they come in with a down payment and clean credit, and the GSE purchases and then securitizes the loan by selling it out to investors. If the Fed wants to slow home buying, its only legal tool is to jack up interest rates. Your entire statement rests on an imaginary mechanism WHICH DOES NOT EXIST, AND NEVER HAS.

            “The brokers, insurers, and rating agencies were also all complicit by using the regulations and the implied protection to take risks that could not be justified in a free market. ”

            No, Sir, the “brokers, insurers, and rating agencies were NOT “complicit by using the regulations.” As I told you before- GSE loans are NOT RATED, and those that are HAVE NOTHING TO DO WITH GOVERNMENT SPONSORED LOANS. WTF is so hard for you to understand? You’re mixing totally different asset classes, originated and sold through different channels, and lumping them all together.

            “That’s it. Which of the statements above are you having trouble with and are saying is wrong?”

            I have NO trouble, YOU do. No matter how many times this is explained to you, you’re still in la-la land.

            “Do you really think that the Fed or the regulators had nothing to do with the housing bubble?”

            Monetary policy had much to do with asset inflation. However, the GSEs have NOTHING to do with monetary policy set by the Federal Reserve, and the two institutons are not connected in any way.

            “What about the government legislation that distorted the market?”

            There are none. What distorted the market, as I have told you as nauseum, WERE THE NON AGENCY B&C LENDERS, NOT THE GSE LENDERS.

            “Are the government protected rating agencies innocent?”

            Idiot: the rating agencies are not “government protected.” Stop this before you embarass yourself further.

            “What about the insurers of horrible paper guaranteed to default but rated AAA? ”

            They are in the process of being sued by dozens of public and private organizations in courts of law around the world.

            “You were claiming that it was OK to make loans to bad credit risks because the defaults were low.”

            I never said that once in all the postings I’ve done here. This is another statement that proves you cannot internalize what I am telling you and backing up with hard data and accept it. This is a common pathology with people like you. Most people believe Obama raised taxes, when he actually cut them, they think Keystone will lower gas prices when it cannot, and on and on and on.

            “But Bernanke illustrated why that outcome was not to be expected in a rising market. When homes went up people could refinance or sell and take a profit.”

            Third time now: Bernanke said NOTHING about pulling cash out of an existing home, and merely pointed out that trade up business was dead. If a person sells at a profit than there is no credit event, yet you seem to think that is a problem.

            “When you have a huge bubble you get very few defaults. That means that you can’t look at default rates and see what is going on. (That said, you were provided with a Fed document that showed that before the bubble started to accelerate the CRA loans were twice as likely to default and not as profitable. Since that did not fit your narrative you rejected the findings.)”

            Sir- that piece was written in the year 2000, and all we got was an abstract. The default rate in those days for a conventional loan was less than 2%, and again- 2000th time- in sheer loan volume, if the default rate on CRA loans was 40%, it wouldn’t have caused a ripple in the housing market.

            Once again: if a borrower cannot handle what’s on his plate now, NO ONE IS GOING TO LET HIM TRADE UP TO A BIGGER HOME WITH A BIGGER MORTGAGE, OR EVEN THE SAME MORTGAGE. This is what Bernanke’s statement reinforced, He made NO mention of pulling out cash, and again, for the third time, no LEGITIMATE “A” paper lender is going to give a second lien to a borrower who can’t tackle his first lien.

            “But they did. GMAC was approving people in minutes, giving 125% loans, offering no-doc loans, and letting people extract equity from homes that had risen in price.”

            ONCE AGAIN: GMAC IS NOT A GSE LENDER, AND WAS NOT A PARTICIPANT IN ANY WAY, SHAPE OR FORM AND WAS NOT SUBJECT TO FEDERAL HOUSING POLICY.

            “Your own example was of a $300K home that has gone up threefold. There would be no liens or foreclosure because the owner could sell the home and use the $600K in profit to make up any shortfalls.”

            Hey, sh&t for brains: if the owner sells at a profit, THERE IS NO FORECLOSURE EVENT. YOU HAVE A PROBLEM WITH THIS? Its no different than selling a stock that’s appreciated.

            “This is all simple math. We do not need to hide behind narrative to understand it and certainly need to keep intentions and motives from muddying the picture. No wonder you are so confused.”

            God, are you an idiot! :)

          • Again: the Fed creates the money, and what people do with it is left up to the markets and what free people, making decisions on their own do with it.

            That is true to a point. But it is also true that governments distort the markets by getting people to speculate in certain areas like housing. Both Clinton and Bush were pushing home ownership. HUD, the GSEs, FHA, and other institutions were pushing easier lending standards to create more mortgages and stimulate home building activity.

            There is no correlation with what the GSEs do. Someone wants to buy a home, they come in with a down payment and clean credit, and the GSE purchases and then securitizes the loan by selling it out to investors.

            That is not exactly true. The GSEs wound up with plenty of loans made to people with questionable credit and underwater homes. That is why they needed the bailouts that people like me were predicting during the early stage of the market. By having an implicit guarantee the GSEs can borrow cheaper and take more risks without having to pay up.

            If the Fed wants to slow home buying, its only legal tool is to jack up interest rates. Your entire statement rests on an imaginary mechanism WHICH DOES NOT EXIST, AND NEVER HAS.

            The Fed can increase reserve requirements and impose conditions on the system that it is regulating. The mechanism is real. When regulators mandate that banks throw money into home purchases in poor neighbourhoods and the price of homes in those neighbourhoods will go up. Those increases will cause the price of other, better homes, in better locations to go up. As easy credit becomes more readily available, rates decline, and the lifting tide causes most homeowners to see an increase in equity that allows many to reach for higher priced homes that they could not afford previously. The bubble gets bigger and bigger until it pops. That was evident quite early in the game and many rational analysts pointed out that there would be some serious consequences if nothing was done to stop the reckless credit expansion. The critics were right and the bubble ended very badly. The promoters and ignorant who could not see the bubble in the first place created the narratives that you are using. Now the very people who failed to see the crisis developing are calling those that predicted it ignorant and stupid as they deny the effects of the lousy policies that created the problem. And yes, that includes the CRA that you find so benign but has wound up destroying more pool people than the supposed right wingers who discriminate against them.

            No, Sir, the “brokers, insurers, and rating agencies were NOT “complicit by using the regulations.” As I told you before- GSE loans are NOT RATED, and those that are HAVE NOTHING TO DO WITH GOVERNMENT SPONSORED LOANS. WTF is so hard for you to understand? You’re mixing totally different asset classes, originated and sold through different channels, and lumping them all together.

            Perhaps you misunderstood what I was saying. I have not been only speaking out against the GSEs or the Fed or the regulators. I have stated that all of them were complicit in creating the massive bubble. No one element can be used as the entire excuse for everything that happened. But they all had their part to play.

            In the case of the CRA, it sparked the boom in low priced homes that was the trigger at the low end of the market. I do not blame the banks for packaging up those loans and selling them off as quickly as possible because that is exactly what anyone would have done when forced to make loans that they did not want to make.

            Monetary policy had much to do with asset inflation. However, the GSEs have NOTHING to do with monetary policy set by the Federal Reserve, and the two institutons are not connected in any way.

            I did not say that the institutions have a direct relationship. I said that the Fed found a great way of funnelling liquidity through the GSEs. It was the GSEs expansion of their balance sheets that allowed the Fed to expand credit as rapidly as it wanted to because most of the effects went into the housing market, which the government wanted to see do well. The treasury, Fed, GSEs, and the banking system worked together to make the bubble as large as possible. And we got exactly what was predicted by the critics.

            There are none. What distorted the market, as I have told you as nauseum, WERE THE NON AGENCY B&C LENDERS, NOT THE GSE LENDERS.

            It was the CRA that force the banks to lend to poor credit risks. It was the regulators who turned a blind eye to the actions of the GSEs even as critics were pointing out the problems with their activities.

            http://www.international-economy.com/TIE_Su04_Noland.pdf

            The fact that you are ignorant of the warnings that came quite early in the bubble shows that you know far less about the market than you claim to. By looking at minutiae and ignoring the bigger picture you ensure that you will never be able to see the full reality.

            Idiot: the rating agencies are not “government protected.” Stop this before you embarass yourself further.

            Sure they are. There is a rating cartel that the regulators protect from competition. As the article in Business Insider pointed out, “But the problem isn’t really that the people working at the Big Three were lazy or stupid. They were hard-working, smart people who were very often doing the best job they could. The problem was that the government protection of their businesses eliminated any external market checks that would have indicated to them that they were doing a poor job.”

            http://articles.businessinsider.com/2009-08-03/wall_street/29985124_1_ratings-agencies-rate-mortgage-bonds-favorable-ratings

            As I said, for a guy who claims to be knowledgeable about the market you do not really understand or know all that much.

            I never said that once in all the postings I’ve done here. This is another statement that proves you cannot internalize what I am telling you and backing up with hard data and accept it. This is a common pathology with people like you. Most people believe Obama raised taxes, when he actually cut them, they think Keystone will lower gas prices when it cannot, and on and on and on.

            You said that the CRA was not a problem. Since it forced banks to make loans that they would choose not to you accept the idea of making bad loans for social or political purposes. Now you can try to rationalize your position but you can’t change the facts.

            Third time now: Bernanke said NOTHING about pulling cash out of an existing home, and merely pointed out that trade up business was dead. If a person sells at a profit than there is no credit event, yet you seem to think that is a problem.

            It is the sae process. Your home goes up in value. That means that you can’t default even if you have trouble. Your options is to extract equity by refinancing or to sell and take the profit. In either case there is no default even if you never should have received the mortgage.

          • Sir- that piece was written in the year 2000, and all we got was an abstract. The default rate in those days for a conventional loan was less than 2%, and again- 2000th time- in sheer loan volume, if the default rate on CRA loans was 40%, it wouldn’t have caused a ripple in the housing market.

            Actually, you could have gotten a hold of the paper by using Google. Your postings here show that you seem to have trouble finding information so I understand how you could have missed the problem.

            And I know that the paper came out in 2000 and that it was written by authors favourable to meddling in the markets. But even they could not hide the fact that when prices were stable default rates for CRA loans were much higher than for normal loans. Of course that would all change during a bubble when prices were rising but that did not change the fact that the loans should never have been made in the first place.

            Once again: if a borrower cannot handle what’s on his plate now, NO ONE IS GOING TO LET HIM TRADE UP TO A BIGGER HOME WITH A BIGGER MORTGAGE, OR EVEN THE SAME MORTGAGE. This is what Bernanke’s statement reinforced, He made NO mention of pulling out cash, and again, for the third time, no LEGITIMATE “A” paper lender is going to give a second lien to a borrower who can’t tackle his first lien.

            But that was not the case. As I pointed out GMAC and other companies were ready to step up and give people whose homes had gone up in value new mortgages that allowed them to extract a substantial amount of equity. There were no doc loans, 125% of equity loans, 35 year amortization loans, no interest payments for a year or two loans, etc., etc., etc. The lending market was an orgy of excess and I have no clue how you could have missed it.

          • “But that was not the case. As I pointed out GMAC and other companies were ready to step up and give people whose homes had gone up in value new mortgages that allowed them to extract a substantial amount of equity”

            Once again: GMAC was not a Fannie/Freddie lender, and had no connection to any policy. If anything, it was the “free market” you champion, unregulated and cut loose on people, that allowed these loans to be underwritten.

            If you did NOT want them underwritten, then every single loan originated would have to be done so under Fannie/Freddie underwriting standards.

            I see your subsequent answers repeat the same idiocies that have been refuted time and time again.

            You’re either a troll or a genuinely stupid person, so I’ll just ignore you and let everyone else decide for themselves.

          • If you did NOT want them underwritten, then every single loan originated would have to be done so under Fannie/Freddie underwriting standards.

            Fannie and Freddie also got into the subprime mortgage business in 2005. That was right after the fraud scandals finally died down. And if you look at the GSEs today you find that they are stuck with mortgages that will probably require another bailout. So far the tab for the taxpayer has come out to over $140 billion. The government should have let them go under and let the creditors take the hit instead of the taxpayers.

          • Sir, you’re learning this as you go along obviously. Fannie had to apply to get permission to buy these loans, due to their precipitous decline in market share, which again, were not exactly “Sub Prime” in the way that you think of them. There are only two problems for you:

            1) The amount they bought was rather inconsequential.
            2) the actual realized default rates on this paper were still low. Remember: just because a mortgage falls outside of Fannie and Freddie underwriting standards, it does not fate them to foreclosure.

            Also regarding the “frauds.” One, the accounting itself had nothing to do with the housing bubble, and Freddie actually UNDEREPORTED profits, in a process they called “smoothing.”

            Lastly, by the time F&F started buying these, the die was cast. The fate of the housing market was already sealed.

            Anything else you want to try? Unlike you, I don’t have to look anything up. I know this sh&t cold.

          • Can this loud-mouth idiot really be as clueless as he sounds? It’s obvious he has a reading problem, as he keeps responding to things other than what you write.

            He’s just like Larry, only louder, except that even Larry admits “I’m not a banker or a loan officer and don’t pretend to be.

          • Your answer only proves you’re as incoherent as he is.
            Reading problem? That’s a schoolyard tactic “I know you are, but what am I?”

            This jerk can’t even comprehend, after paragraphs of posts and documented evidence, that CRA was NOT given to people with poor credit, was numerically so insignificant it couldn’t possibly affected the nation’s housing market, tells us that the rating agencies were in cohoots with the Fed while GSE and FHA loans were never rated, talks about GMAC giving 125% LTV loans out that the GSEs or FHA ever made, and fails to understand that GMAC is not a thrift, nor were the other B&C lenders I repeatedly listed, and were completely unregulated by any authority. Not only that, he tells us prices were able to climb, even as GSE and FHA market share crumbled! That’s not even possible!

            He THEN tells us the mortgage industry was an “orgy of excess” when the institutions he blames played absolutely no role in it!! Pure genius, huh?

            Reading problem? Both you and him are dumber than a bag of hammers.

          • But Maxie, if you don’t have a reading problem, why do you keep building those beautiful strawmen? I can’t think of anyone else who comments on this blog who is so mired in trivial details while not seeing the big picture. Pull your head out of your ass for a moment & look around.

            And, do yourself a favor – learn some economics before you continue embarrassing yourself.

          • Read and learn:

            Misunderstanding Credit and Housing Crises: Blaming the CRA, GSEs

            Thursday, October 02, 2008 | 07:00 AM

            in Credit | Derivatives | Fixed Income/Interest Rates | Psychology/Sentiment | Real Estate | Taxes and Policy

            “It’s telling that, amid all the recent recriminations, even lenders have not fingered CRA. That’s because CRA didn’t bring about the reckless lending at the heart of the crisis. Just as sub-prime lending was exploding, CRA was losing force and relevance. And the worst offenders, the independent mortgage companies, were never subject to CRA — or any federal regulator. Law didn’t make them lend. The profit motive did.”

            -Robert Gordon, American Prospect

            >

            >

            I have been meaning to get back to this issue, but events in the market have kept me a tad busy.

            Making the rounds amongst a certain subset of wingnuts on CNBC, at IBD and other selfconfoozled folks has been the meme that the entire housing and credit crisis traces to the the Community Reinvestment Act (CRA) of 1977. An alternative zombie myth is the credit crisis is due to Fannie Mae and Freddie Mac. A 1999 article from the New York Times about the GSE’s role in subprime mortgages has been circulating as if its the rosetta stone of the credit crisis.

            These memes have become a rallying cry — cognitive dissonance writ large — of those folks who have been pushing for greater and greater deregulation, and are now attempting to disown the results of their handiwork.

            I feel compelled to set the record straight about this pseudo-intellectual detritus. As we have painstakingly discussed over the past few years, there were many direct and indirect causes of the current financial mess.

            Let’s clarify the causes of current circumstances. Ask yourself the following questions about the impact of the Community Reinvestment Act and/or the role of Fannie & Freddie:

            • Did the 1977 legislation, or any other legislation since, require banks to not verify income or payment history of mortgage applicants?

            • 50% of subprime loans were made by mortgage service companies not subject comprehensive federal supervision; another 30% were made by banks or thrifts which are not subject to routine supervision or examinations. How was this caused by either CRA or GSEs ?

            • What about “No Money Down” Mortgages (0% down payments) ? Were they required by the CRA? Fannie? Freddie?

            • Explain the shift in Loan to value from 80% to 120%: What was it in the Act that changed this traditional lending requirement?

            • Did any Federal legislation require real estate agents and mortgage writers to use the same corrupt appraisers again and again? How did they manage to always come in at exactly the purchase price, no matter what?

            • Did the CRA require banks to develop automated underwriting (AU) systems that emphasized speed rather than accuracy in order to process the greatest number of mortgage apps as quickly as possible?

            • How exactly did legislation force Moody’s, S&Ps and Fitch to rate junk paper as Triple AAA?

            • What about piggy back loans? Were banks required by Congress to lend the first mortgage and do a HELOC for the down payment — at the same time?

            • Internal bank memos showed employees how to cheat the system to get poor mortgages prospects approved that shouldn’t have been: Titled How to Get an “Iffy” loan approved at JPM Chase. (Was circulating that memo also a FNM/FRE/CRA requirement?)

            • The four biggest problem areas for housing (by price decreases) are: Phoenix, Arizona; Las Vegas, Nevada; Miami, Florida, and San Diego, California. Explain exactly how these affluent, non-minority regions were impacted by the Community Reinvesment Act ?

            • Did the GSEs require banks to not check credit scores? Assets? Income?

            • What was it about the CRA or GSEs that mandated fund managers load up on an investment product that was hard to value, thinly traded, and poorly understood

            • What was it in the Act that forced banks to make “interest only” loans? Were “Neg Am loans” also part of the legislative requirements also?

            • Consider this February 2003 speech by Countrywide CEO Angelo Mozlilo at the American Bankers National Real Estate Conference. He advocated zero down payment mortgages — was that a CRA requirement too, or just a grab for more market share, and bad banking?

            The answer to all of the above questions is no, none, and nothing at all.

            The CRA is not remotely one of the proximate causes of the current credit crunch, Housing collapse,and mortgage debacle. As I detailed in Barron’s, there is plenty of things to be angry at D.C. about — but this ain’t one of them.

            If you were to ask me to reveal the prime causative factor for the Housing boom, I would point you to Fed Chairman Greenspan taking rates to 1%, and then leaving them there for a year. The prime factor in the bust was nonfeasance on the Fed’s part in supervising bank lending, allowing banks to give money to people who couldn’t possibly pay it back.

            The root legislative cause of the credit crisis was excessive deregulation. From exempting derivatives from regulation (2000 Commodities Futures Modernization Act) to failing to adequately oversee ratings agencies that slapped a triple AAA on junk paper, the pendulum swung too far away from reasonable oversight. By taking the refs off of the field and erroneously expecting market participants could self-regulate, the powers that be in DC gave the players on Wall Street enough rope to hang themselves with — which they promptly did.

            There are too many people who are trying to duck responsibility for the current mess, and seeking to place blame elsewhere. I find this to be terribly important, as we seek to repair the damage amidst an economic crisis. Rather than objectively evaluate the present crisis in an attempt to craft an appropriate response, the partisan hacks are trying to obscure the causes of the current situation. Like burglars trying to destroy the surveillance tape, they are all too aware of their role in the present debacle.

            Shame on them for their foolishness or cowardice.

            Whenever I see a CRA proponent blathering, I have a “Star Trek moment.” That’s when Captain Kirk proves to some random alien computer that its basic programming is logically inconsistent. It’s the AI (artificial intelligence) version of cognitive dissonance. The computer, recognizing the fraud its entire existence was based upon, seeing the futility of its belief system, at least has the dignity to blow itself up. No such luck with the wingnuts, who merely move on to their next piece of spin . . .

            “You can fool some of the people some of the time and some of the people all of the time. That’s usually enough.”

            -MILTON BERLE

            ~~~

            Note in the Sources section, we have a few subtopics: “Sources” is what I use to show where data, quotes and charts are from. “Previously” discusses commentary on this subject we have written in the past. “Related” is a good jumping off point for further reading; lastly, Consistently Wrong is where we point out the willfully misleading tripe written by people who should know better, but publish nonsense anyway. In the case where it appears some are trying to mislead the public, the least we can do is call them out.

          • I am amazed that we have found two people who manage to make Larry look like a genius. One is our friend above. The other is our old buddy juandos when he argues with Larry on military spending. Hell, our friend would even make Walt look like a genius.

          • Your personal insult will not deflect from your own ignorance. You have been beaten senseless on every single point you made.

            You’re a fool.

          • But that is the problem Max; you are absolutely wrong about the big picture. The GSEs did hold subprime mortgages. CRA did force the banks to make loans that they would otherwise not have made. The rating agencies are protected from competition. These are all well known facts to anyone who has looked at the housing crisis and no narrative can change them. As Ron pointed out, you are so focused on the detail that you really can’t see the bigger picture.

          • Troll a thon continues:

            “But that is the problem Max; you are absolutely wrong about the big picture. The GSEs did hold subprime mortgages.”

            That didn’t default. Once again, you don’t know how to define a “SubPrime” loan, because you know zilch about credit metrics.”

            ” CRA did force the banks to make loans that they would otherwise not have made.”

            Which again, performed admirably.

            “The rating agencies are protected from competition.”

            No they are not. Anyone can apply to be an NRSRO. Is there ANYTHING you DON’T misconstrue?

            “These are all well known facts to anyone who has looked at the housing crisis and no narrative can change them.”

            I’m using facts as to how the business really works, which you simply ignore. Get a girlfriend.

          • That didn’t default. Once again, you don’t know how to define a “SubPrime” loan, because you know zilch about credit metrics.”

            Of course they don’t default. As long as there is a bubble prices go up and the rising tide takes care of the lousy credit risks as well as the good ones. Read the Bernanke quote again and try to figure out the implications instead of building straw men that can easily be knocked down. None of the critics said that there would be a default crisis if the prices kept going up. They were simply pointing out that once the price levels stabilised all those bad loans would matter and would trigger a collapse. That is exactly what happened.

          • “Of course they don’t default. As long as there is a bubble prices go up and the rising tide takes care of the lousy credit risks as well as the good ones.”

            DOPE: IF THE PRICE OF YOUR HOUSE DOUBLES AND YOU CAN’T HANDLE THE MORTGAGE, YOU’RE STILL IN THE SAME BOAT. A RISING HOME VALUE DOES NOT COVER YOUR MONTHLY NUT, YOU FLAMING MORON.

          • DOPE: IF THE PRICE OF YOUR HOUSE DOUBLES AND YOU CAN’T HANDLE THE MORTGAGE, YOU’RE STILL IN THE SAME BOAT. A RISING HOME VALUE DOES NOT COVER YOUR MONTHLY NUT, YOU FLAMING MORON.

            Really? A buy a home for $300K and have a 6% mortgage. I have trouble making payments but when I look around I see that rates are 4% and the home is worth $600K, leaving me with $300K of profit and lower payments. I refinance and take some equity out to cover the shortfalls. I am still up substantially and have no problems as my $350K mortgage is now requiring a lower payment amount each month AND I sit with more than $250 of equity. How is any of this being in the same boat as before?

            You sure you were in real estate? I thought that you had to understand a bit of math to be in the field.

          • Get in the game. Like I said, you’re no doubt a impoverished fellow with low wages who thinks the GOP is going to make you “free” to earn millions, because it is obvious you never applied for a mortgage in your life.

            Wrong as usual. I am your typical engineering type who prefers logic and has little time for self important drivel coming from empty suits. I worked for 15 years in the aircraft field and retired at 40 when I saw that I could make a lot of money from the crisis that I saw coming in the late 1990s. I have now been semi-retired for the past 12 years and have far more money than when I left the workforce even though we have had two very serious crashes.

            I have no problem making predictions about future outcomes and have little time for empty narrative about past events that cannot be supported by actual facts or by statements made before the events.

            I had no problem pointing out that the shale gas ‘boom’ was not economically possible because producers could not generate positive cash flows from their operations and were overestimating the EURs. Now that most of what I wrote is evident I note that the promoters have switched horses and are now touting the shale liquids producers who have very similar problems with cash flows and debt.

            I have no problem pointing to the artificial demand for treasuries and arguing that we have a huge bubble that dwarfs what we saw in housing and tech stocks. In fact, I have no problem looking at the current system and pointing out that the Fannie, Freddie, and FHA will need a huge bailout once the current dead cat bounce is over. Or look to the Fed’s balance sheet and note the vulnerability to interest rate shocks that would force the Treasury to buy impaired paper and by doing so create a USD crisis. All of these events, and many others, are fairly predictable if one understands human action and real world economics. That may seem strange to Keynesians like you but we can chock that up to your ignorance of the fact that most of the things that you think you know are not true.

      • The GSEs, which hold most of the bad loans preferred Obama. They still might although that should change once the next contraction comes along and the phoney economy is exposed for what it is.

        • Remember that Case Shiller is a PRICE INDEX, I have mostly been reporting increases in HOME SALES. Even with flat prices, or moderately increasing prices, the double-digit gains in home sales means that home sales and HOUSING SALES VOLUMES are booming. Flat home prices might actually be a good sign that the housing bubble is not re-inflating. But with home sales BOOMING around the country, the housing market is definitely in RECOVERY.

          • Housing sales have been booming because interest rates and lending standards are falling again. The problem is that the Fed can’t keep lowering rates and buying mortgage paper for very long without risking destroying the currency. And why do you consider 3% down FHA loans a good thing, particularly when FHA is looking at a serious solvency problem without a handout from Congress.

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