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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Spekulatius who wrote (35413)	9/20/2009 2:49:38 AM
From: Spekulatius	Read Replies (2) \| Respond to of 78748

OT- Interesting article in the LA times: Homeowners who 'strategically default' on loans a growing problem A study shows that people who abruptly and intentionally abandon their mortgages often have high credit scores, in stark contrast with most financially distressed borrowers. latimes.com Something I suspect would happen in a large scale for quite some time. I know a few "prime" homeowners who let go of their homes and their mortgages.

To: Spekulatius who wrote (35413)	9/20/2009 6:48:31 AM
From: Madharry	Respond to of 78748

another interesting article for your consideration: HA Director David Stevens came out last week with a statement that their 2% minimum capital rule will be broached this fall. Mr. Stevens swore that this was not going to be a problem and no federal bailout was going to be required. He came forward with a list of things to address the problem. As near as I could tell none of these changes will have a significant impact on the results. The proposed measures will not be implemented until after 1/1/2010. By then it will be too late. In my view FHA will most likely require a federal support package sometime in the 1st quarter of 2010. FHA is on a tear to provide new mortgages. One needs only to watch cable TV and see their endless ads to confirm that. FHA makes high LTV loans. They lend as much as 96.5% of a purchase price. This coupled with the first time buyer credit of $8,000 makes them a provider of 100% financing. The history of this type of lending shows very high default rates in the first eighteen months of a loan. Between now and January their capital cushion will be eroded and we will have another Fannie and Freddie story to deal with. FHA is not a public company, it is owned by Congress. They do not publish the wealth of information that F/F does. It is therefore difficult to determine just how sick they are. Rummaging through their web site I did come across something that I thought was interesting. FHA sets ceilings on its credit extensions based on geography. This make sense as RE values vary across the country. There are some predictable results and a few surprises. The major East/West Coast cities have the highest limits: But if you live in one of the Nation’s other Cities you are not so lucky: And if one lives in some not so expense (but still very nice) parts of the country you have been red lined by the Feds: One has to wonder if RE prices drove these limits or if these limits drove RE prices. An example: The FHA has set very high loan limits for a number of major ski resorts. It is certain that the availability of cheap FHA loans with 96.5% LTV has been a boon to the development of these areas. I have to wonder as to the social implications of this. These are Federal dollars being spent in support of a rich man’s sport in rich man’s Counties. Other FHA factoids: -The highest advance rate for FHA is in Maui, Hawaii. There you can borrow up to $790,000. While I understand that RE is pricey in this beautiful spot I am not convinced that Uncle Sam should be supporting those high prices. -In San Juan, Vermont the limit is $271,050, In San Juan, Puerto Rico the limit is more than double that; $606,500. -In Saipan you can get an FHA mortgage for up to $613,000. In Guam the limit is $651,000. In St. John, Virgin Islands you can get a 96.5% mortgage for up to $623,000. -In three important counties in S. Florida the limits are as follows: Miami-Dade – $423,750 Palm Beach- $423,750 Collier- $531,250 By way of comparison the following twenty-seven counties in Puerto Rico have FHA limits of $606,250. Go figure that one out. Guaynabo, Gurabo, Hatillo, Humacao, Juncos, Florida, Tao Alta, Tao Baja, Trujillo Alo, Vega Baja, Vega Ala, Yabucoa, Yauco, Loiza, Maniti, Maunabo, Morivis, Naguabo, Naranjito, Orocovis, Quebradillas, Rio Grand, San Juan and San Lorenzo.

To: Spekulatius who wrote (35413)	9/21/2009 4:55:49 PM
From: Madharry	Respond to of 78748

the aig story is really remarkable. The incompetence of Congressmen appears to be unlimited. If I understand it correctly, since they are having trouble selling assets in order to repay the government, they are now proposing a 4 th restructuring and reducing the equity that taxpayers have from 80% to 20%, reducing the interest rate, and lengthening the repayment term. I suppose $186 Billion of taxpayer money just isnt enough. That's probably over $1,000 per taxpayer already. It wouldnt shock me if we revisit the French revolution at this rate. Newt Gingrich had one great idea and that was term limits.