Today’s WSJ had a run of Real Estate related articles that quite frankly, were rather surprising in their gentle naiveté.
The first is the somewhat surprised acknowledgment that speculators were involved in the run up and subsequent deflation of Housing prices.
Of course, every asset class attracts speculators when prices rapidly rise. Its why every big boom ends in a final blow off top — that’s the impact of late-to-the-party speculators — followed by the inevitable spectacular collapse.
The latest after-the-fact revision (see our discussion on "predatory borrowing") has a new name: occupancy
This new nonsense word is a way to duck responsibility for failing to do appropriate due diligence prior to lending out money. Here are the details:
"As lenders pore over their defaulted mortgages, they
are learning that the number of people who bought homes as investments
is much greater than previously believed. Such borrowers turn up frequently in analyses of loans
that defaulted within months after origination. In many cases, these
speculators lied on loan applications, saying they intended to live in
the homes in order to obtain more favorable loan terms or failed to
provide the requested information.
Roughly 20% of mortgage fraud involved "occupancy
fraud," or borrowers falsely claiming they intended to live in a
property, according to an analysis by BasePoint Analytics, a provider
of fraud-detection solutions in Carlsbad, Calif. Another study, by
Fitch Ratings, looked at 45 subprime loans that defaulted within the
first 12 months even though the borrowers had good credit scores. In
two-thirds of the cases, borrowers said they intended to live in the
property but never moved in."
Speaking of fraud — I am curious about these lenders, now claiming they were defrauded by speculators. How many of them asked the following questions, and then did the due diligence to verify the data:
- Do you presently own your primary residence?
- Is your home currently listed for sale? Or, are you in contract ?
- What is the asking price? Who is your real estate agency?
- RE Agent name? What’s their phone number?
Of course, none of these questions were asked, and no due diligence was performed, as these lenders were
whoring clerking out loans as fast as they could process them. After the fact, this lack of due dilly has become "Occupancy Fraud."
If there was any genuine interest in not lending to speculators, its easy enough to verify . . .
Not surprisingly, all of this unchecked speculation ended badly. This has led to a big upswing in empty houses:
"Nationwide, the homeowner-vacancy rate, which measures the number of
vacant homes for sale, rose to 2.8% in the fourth quarter, the Census
Bureau recently reported. That matches a record set in the first
quarter of 2007 and is the highest since the government began tracking
vacant homes in the 1960s.
The current vacancy rate could be the highest since the Great
Depression, when an exodus of Americans left the Dust Bowl states for
the West Coast, says Mark Zandi, chief economist at Moody’s
Economy.com.. Data "strongly suggest that vacancies are at their
highest level since the 1930s," he says, adding that the empty homes
aren’t only depressing property values, "they are weighing on the
collective psyche of communities. … It’s kind of like playing for a
losing team. It’s debilitating."
High vacancies in Florida, Nevada and California partly reflect
overbuilding during the housing boom along with rising foreclosures.
Cities in the Midwest have some of the highest vacancies, due not only
to foreclosures but also to weak economies and population declines. In
Cleveland, for example, the number of vacant homes has reached as many
as 12,000, about 10% of the city’s total housing stock, according to
the treasurer of Cuyahoga County, which includes Cleveland."
Astonishing. Zero adult situation across the entire process, and now, wild ass covering and blame shifting.
Ongoing Impact of the Housing Sector
Assigning blame for all of the problems in the credit market
Tuesday, August 28, 2007 | 11:45 AM http://bigpicture.typepad.com/comments/2007/08/the-ongoing-imp.html
Speculators May Have Accelerated Housing Downturn
Rising Number of Defaults Also Could Complicate Effort to Help Homeowners
By RUTH SIMON and MICHAEL CORKERY
WSJ, February 6, 2008; Page B8
As Houses Empty, Cities Seek Ways To Fill the Void
MICHAEL CORKERY and RUTH SIMON
WSJ, February 6, 2008; Page B1
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