foreclosure wave about to hit -- again! -- and with a thunderous roar no less (per TG's ladyfriend)

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Submitted by Rich Toscano on April 5, 2010 - 4:31pm

TG has always made fun of Mr Mortgage for predicting the foreclosure wave that never arrived... will he adopt the same attitude when the prediction comes from his own unrequited love (or at least lust) Diana Olick?

http://www.cnbc.com/id/36179757

I eagerly await your response, TG... ;-)

Anyway, Olick has never been a permabear or anything, as far as I know, so it's interesting to hear this prediction coming from her.

Rich

Submitted by Aecetia on April 5, 2010 - 5:27pm.

Yeah, TG, what say you? We know you have an opinion on this, so step up to the plate.

Submitted by JC on April 5, 2010 - 5:35pm.

would someone be so kind as to post the content of Olick's article? i keep getting a message about the site being blocked b/c of exploits.

Submitted by Rich Toscano on April 5, 2010 - 5:37pm.

Let the Short Sales Begin
SHORT SELLS, SHORT SELLING
Posted By: Diana Olick | CNBC Real Estate Reporter
cnbc.com
| 05 Apr 2010 | 01:57 PM ET
Today the Administration's Home Affordable Foreclosure Alternative Plan takes effect, offering incentives to borrowers, servicers, investors and second lien holders to push short sales through the system. Yep, everyone gets a cut of government funds to get these troubled borrowers out of their homes and get them sold, even if the sale price is less than the value of the loan.

I find it interesting that before the plan even went into effect today, the Administration upped the incentives a week ago, doubling the amount of cash to $3000 offered as borrower "relocation expenses" and juicing the payoffs to the others as well. Of course they want to push short sales because of course they know that their modification program isn't working as planned.

But the biggest impediment to the plan is the lenders themselves, who have to weigh what's going to save them the most money and cause them the least bleeding on their books.

Is it a short sale or a foreclosure sale?

We're already seeing inventories shrinking way down out West, where banks are holding on to foreclosed properties and manipulating prices to their advantage.

I'm also starting to hear rumblings among the number crunchers that the wave of foreclosures we keep hearing about is about to hit with a thunderous roar.

Servicers are ramping up the mod process and pushing those who don't qualify out the door more quickly than ever. A big jump in inventories, which we already saw last month, right in the midst of the Spring market will turn home prices on their heels.

Don't get me wrong, I'm loving the jump we saw today in the Pending Home Sales Index, but there was just something a little too hesitant in the Realtors' report. They seem to be talking about hints and hopes, rather than real change.

Submitted by temeculaguy on April 5, 2010 - 6:50pm.

You are right Rich, my beloved Diana has always been a moderate through this whole thing, she seemed bearish at the peak, but always backed it up with facts and not twisted ones used for hype. I read that article when it first came out because it is the lead story on cnbc and was a bit shocked she didn't qualify her statement about banks out west holding onto properties to manipulate prices. She did qualify her statement about the tsuinami. She gets more inside scoop than we do and parses it out as needed, usually she is right. While not the hottest of the cnbc sirens, she is the smartest, so she gets my goat than the others.

With the employment numbers getting better by the day and actually revising to the good, the stock market flirting with 11k and the rise in pendings as we enter the strong season, I can't figure out why my girl has turned bearish. All I can say is that there may be something on the horizon that we have not been made aware of, there has to be a reason why her compass is pointing South when all the rest point North, because that is not how she usually rolls.

In case she reads this, the offer is still on the table: A weekend in a five star hotel, room service for every meal, a fistfull of viagra, remember to rest up and pack light, I'll make you see god.

Submitted by mercedes7 on April 5, 2010 - 7:13pm.

Wow TG that is some proposition. I thought you were taken...LOL.

Submitted by waiting hawk on April 5, 2010 - 8:48pm.

Dont forget how So Cal was in recession for years after the nation was out of recession in the 80s and 90s. We still have many years of crap for so cal.

Submitted by barnaby33 on April 5, 2010 - 8:03pm.

Wow TG, turned the corner on unemployment?!? Sad to see a good man go bad.
Josh

Submitted by moneymaker on April 5, 2010 - 8:29pm.

Maybe it's because interest rates are about to take off as the 10 year T-bills cross 4%.

Submitted by socrattt on April 5, 2010 - 11:05pm.

Here is where TG gets it all right and we get it all wrong. The numbers are so manipulated that it's nearly impossible to predict the market. I personally believe the inevitable won't happen for sometime as the government is so intertwined with the banks that it really makes no difference on the default numbers.

At some point down the line we will probably suffer some sort of financial collapse over a short term period unless the guys we all think are brain dead are in fact genius, i.e. Bernanke and Geithner. I don't know anymore what to believe. I thought my tin foil hat was becoming trendy. Nowadays the hat comes off until I read what the Piggs write! Boy did I have it all wrong!

Submitted by Aecetia on April 5, 2010 - 11:14pm.

Maybe she knows the big one is coming (earth quake) that is, and that should drag down a big part of the economy, although in the long run is should spur a lot of rebuilding.

Submitted by KIBU on April 5, 2010 - 11:35pm.

There are still that 3 possible outcomes for housing that I ponder:

1. Armageddon or something similar to it. (what I was hopping for).

2. Armageddon but in super slow motion that no one in the movie risk dying except by old age...that is, I can't see what's the practical point of waiting the bottom forever in such a sticky environment created by government.

3. The heroes: Ben, Obama and all tax payers are bailing out the housing crisis relatively successfully and we are pretty much near or at bottom.

I believe in #2.
---------------------------------
TG, don't make your neighbors in the 5 star hotel run out to the street thinking there's an earthquake.

Submitted by an on April 5, 2010 - 11:49pm.

Nicely put KIBU. I hope for #1 as well, but I believe we'll see somewhere between #2 and #3.

Submitted by temeculaguy on April 5, 2010 - 11:52pm.

I am currently between romantic entanglements, so I'm free to throw down the gauntlet. Someone with my unique faults is rarely "taken" for long.

Now here is how I read the tea leaves, but also why Diana's tone has me concerned.

1. The stock market has been trending up for a while, the only mistakes I've made in the last year is to not invest against the grain, against the tin hat people and against the piggy doomsdayers. Ford, Harley, homebuilders like KHOV, banks and other stocks, considered at the end of their rope, are all between 500% and 1000% up in the last 13 months. Stocks usually lead the actual economy by a few months to a year.

2. Home price declines have either stopped or bounced off bottom, traditional affordibility metrics have returned to 90% of the market, maybe not the one's the more active posters are looking at, but sanity has retrned to most of the country. A recent visit to the southeast, I saw evidence of even greater bubble bursting than we have seen here, yet the golf course I was on set a record for the number of golfers in a single day.

3. Odd cheerleader behavior

http://www.cnbc.com/id/36183826

kudlow is a cheerleader to the nth degree, one with more pom poms than I have failed relationships. But today's article, listed just below Diana's, is out of character. He's asking fellow conservatives to stop attacking the employment numbers, obamanomics and all the rest for fear of losing credibility. His argument makes sense, if you claim the sky is falling every day, and it doesn't, then nobody will listen to you. Instead, since the numbers are good, try assigning credit away from your political foe, claim it will be even better without him or that he had nothing to do with it, just stop beating the same drum because the numbers will be on his side.

I hate politics, I could care less and I never listen to kudlow because he always has an agenda. Normally I would just say that he is trying to keep the market rolling and telling critics to be quiet, but this white flag looks different. I read the politically slanted opinions to gauge reality, even if I don't buy into it.

4. The Tarp and other bailout measures actually kicked ass, the gov't earned about 7.5% on it's investments(err bailouts). I have money in those same banks and got about .5%, had it been a donation it would have beat the going rate by 13x.

5. Roubini said it would go just like this, he's been right so far, I can attribute some of my good fortune to him, so I'm petting that dog till it bites me.

So, yes, My tin foil hat is back in the closet, I see recovery as the year progresses and a decent 2011, now it's time to figure out where the next bubble will be, because there is always a next one.

But then Rich posts an article from Diana, it is in contrast to what the tea leaves have been telling me. She has been a very reliable source of both lust and mainline information for me. It's like a faithful old girlfriend or booty call who never refuses your call, and suddenly, she won't answer. You run to the mirror to see if you still have your looks, then to the scale to see if you gained weight. You can't find a reason, is she engaged? Is she still alive? Did the earthquake knock down her cell phone tower? What gives, something is amiss.

So retrieve your tin foil hat from the closet, because there just maybe something unexpected around the corner. I for one, will be retrieving my wine and watching to see if the elusive tsuinami theory takes it's last opportunity to manifest itself. If it does, I'm ready to double down.

Submitted by socrattt on April 5, 2010 - 11:59pm.

temeculaguy wrote:

So retrieve your tin foil hat from the closet, because there just maybe something unexpected around the corner. I for one, will be retrieving my wine and watching to see if the elusive tsuinami theory takes it's last opportunity to manifest itself. If it does, I'm ready to double down.

TG, you might want to check the label on that thing you call wine. I am starting to think you might be quenching your thirst with rubbing alcohol after reading that post :).

On a serious note, there is no way in heck 2011 will be a good economically for the US. I'm just saying this in the hopes that I am completely wrong.

Submitted by CA renter on April 6, 2010 - 1:51am.

Part of my prediction for 2010 on the HBB:

The GSEs will become the ultra-super-SIV, and principal reductions will become the norm on GSE loans. IMHO, one of the reasons inventory has been kept off the market is because the PTB wanted housing prices high enough that borrowers can refi into GSE loans. I believe a good portion of the toxic loans now belongs to the GSEs, and they can now do what they’ve wanted to do, without the complications of multiple layers of investors in the private, securitized market.

http://www.thehousingbubbleblog.com/?p=5...
------------------

IMHO, the PTB are not stupid. They know we cannot prop up the housing market forever; and forcing U.S. workers to continually overpay for housing will prevent us from competing with other countries with lower wages.

We need to allow for lower wages, and we cannot do that until we let housing prices fall to afordable levels (at these reduced wages).

IMHO, all the moratoriums, govt programs, inventory suppression, etc. were required to get as many private bank loans refinanced into publicly guaranteed or held loans (FHA or GSEs). They had to keep prices artificially inflated for political reasons -- the prices had to drop AFTER the risks were already transferred, or the public would have been up in arms about making Goldman Sachs (or the public pensions) whole on the taxpayers' dime. They needed to refi a $500K loan (from the private lenders) into a $500K (or $450K) loan (to the public lender), or else there would have been a public outcry.

Once they've done everything they can to save the banks, they will allow the housing market to fall again, IMHO. They've had over two years to work on this, and I believe they are near the end of their "risk-transfer" program.

This was never about saving Joe Sixpack. It was always about saving the banks.

Not sure why anyone would have ever questioned the existence of the "shadow inventory." Where there's smoke, there's fire; and there was plenty of smoke.

Submitted by Nor-LA-SD-guy on April 6, 2010 - 6:57am.

I am with TG mostly on this,

Seems like the ball is rolling and recovery starting to gain traction, But on the other hand (I should be an economist) while the lower tier areas have been taken out and shot (no blind fold or cigarette offered), the mid to high end area's have been hardly touched in comparison.

If the Wave does come I think there is little more damage it can do to the area's it already obliterated but it may move up to the higher ground so to speak.

Submitted by Effective Demand on April 6, 2010 - 9:14am.

I actually see the banks liquidating as a point of strength not weakness. They are finally strong enough to take the losses. And the politicians & regulators realize that the decks will have to be cleared at some point.

It isn't 100% sure the liquidation wave has arrived, there is some strong circumstantial evidence that the leading wave is hitting but it needs to be followed up by several months of stronger trustee sales before I say it has arrived. I think April is a possible inflection point for realization, when people point back to their charts they will be pointing to April.

That said I think the reality of some of the undealt with issues we are facing will hit sometime in 2011 or late 2010 (post-election) as the market is only looking at the recovery and not all the things that aren't "normal" that need to go on to make it happen.

I think the Fed saw the freefall and it hit the emergency brake. Now that things basically are at a standstill, they will ease off the brake and let reality..... slowly... take effect.

For some reason the site doesnt like this link, trying again:
http://effectivedemand.blogspot.com/2010...

Submitted by sdcellar on April 6, 2010 - 9:49am.

temeculaguy wrote:
2. Home price declines have either stopped or bounced off bottom, traditional affordibility metrics have returned to 90% of the market, maybe not the one's the more active posters are looking at, but sanity has retrned to most of the country.
Say, is this a reference to me?!!? I am not an active poster. I may repeat myself quite a bit, which might provide the illusion of activity, but I assure you it is not!

If you weren't referring to me, then it's just me being self-centered, which is absolutely squarely in the middle of the realm of possibility.

...and good luck with the hookup.

Submitted by briansd1 on April 6, 2010 - 10:06am.

CA renter wrote:
Part of my prediction for 2010 on the HBB:

The GSEs will become the ultra-super-SIV, and principal reductions will become the norm on GSE loans. IMHO, one of the reasons inventory has been kept off the market is because the PTB wanted housing prices high enough that borrowers can refi into GSE loans. I believe a good portion of the toxic loans now belongs to the GSEs, and they can now do what they’ve wanted to do, without the complications of multiple layers of investors in the private, securitized market.

http://www.thehousingbubbleblog.com/?p=5...
------------------

IMHO, the PTB are not stupid. They know we cannot prop up the housing market forever; and forcing U.S. workers to continually overpay for housing will prevent us from competing with other countries with lower wages.

We need to allow for lower wages, and we cannot do that until we let housing prices fall to afordable levels (at these reduced wages).

IMHO, all the moratoriums, govt programs, inventory suppression, etc. were required to get as many private bank loans refinanced into publicly guaranteed or held loans (FHA or GSEs). They had to keep prices artificially inflated for political reasons -- the prices had to drop AFTER the risks were already transferred, or the public would have been up in arms about making Goldman Sachs (or the public pensions) whole on the taxpayers' dime. They needed to refi a $500K loan (from the private lenders) into a $500K (or $450K) loan (to the public lender), or else there would have been a public outcry.

Once they've done everything they can to save the banks, they will allow the housing market to fall again, IMHO. They've had over two years to work on this, and I believe they are near the end of their "risk-transfer" program.

This was never about saving Joe Sixpack. It was always about saving the banks.

Not sure why anyone would have ever questioned the existence of the "shadow inventory." Where there's smoke, there's fire; and there was plenty of smoke.

I agree very much with the transfer of risk to FHA and the GSEs.

It's about letting deflating the bubble slowly.

And, of course, as with any intervention, there are unintended consequences and collateral damage. As long as the mission is accomplished, the collateral damage will be forgotten soon enough.

Submitted by mercedes7 on April 6, 2010 - 10:37am.

Day off today and have been listening to CNBC off and on. Diana Olick keeps talking about a new wave of forclosures coming now???? Very interesting change indeed. TG please pursue that romantic interlude and report back the pillow talk. Curious to know what Diana knows...

Submitted by Aecetia on April 6, 2010 - 10:53am.

TG-

I think you are being asked to take one for the Pigg Team...

Submitted by mercedes7 on April 6, 2010 - 11:02am.

LOL...TG seemed pretty willing and able (viagra supplemented).

Submitted by SD Realtor on April 6, 2010 - 12:18pm.

CAR the FHA and GSEs? Whew... good thing there is no taxpayer money at stake. I was worried for a moment!

Submitted by Arraya on April 6, 2010 - 2:05pm.

CA renter wrote:

Not sure why anyone would have ever questioned the existence of the "shadow inventory." Where there's smoke, there's fire; and there was plenty of smoke.

10 percent of SD mortgages are 60 days or more delinquent as of Feb. That is close to 60,000 homes. 60 day late or more is the point where default is well over 90% certain, normally.

60,000

Submitted by Huckleberry on April 6, 2010 - 4:06pm.

It appears Diana is backing up yesterdays article with another one today...

http://www.cnbc.com/id/36195838

She must be tapping into new sources of insider banking info. It sounds like she is fairly confident in her new predictions.

Submitted by CA renter on April 6, 2010 - 4:16pm.

SD Realtor wrote:
CAR the FHA and GSEs? Whew... good thing there is no taxpayer money at stake. I was worried for a moment!

Right. Unfortunately, I think we will be paying for this (loss of purchasing power, higher taxes, fewer services, lower quality of life, etc.) for decades/generations to come. I'm really ticked off about it, quite frankly, because it was done solely to enrich those who caused the crisis -- at the expense of everyone else.

Submitted by temeculaguy on April 6, 2010 - 7:06pm.

Huckleberry wrote:
It appears Diana is backing up yesterdays article with another one today...

http://www.cnbc.com/id/36195838

She must be tapping into new sources of insider banking info. It sounds like she is fairly confident in her new predictions.

She's got a number of inside sources and based on her comments and confidence, something is about to happen. I personally think that they are going to make an effort to clear the backlog this year, while inventories and interest rates are low. The guy she interviewed did pretty well, even with the pressure she was putting on him. She looked confident. Not her best look, she looks better when she's outside and the hair is not so poofy but that confidence is just plain sexy. GGGrrrrr!

Submitted by LesBaer45 on April 7, 2010 - 8:04am.

Ok, so let's assume the "wave" does hit. What does it do to the economy?

Everyone is currently focused on the 'recovery' and the current feel good trend both with stocks and the manipulated job numbers. The housing numbers are being pumped as well, see the charts. ;-)

Once the euphoria of 'inventory' is done then what? Ever increasing sales? Higher prices?

What if the multitude of news programs/sources reporting the huge increase in "foreclosures/short sales" has the opposite effect? The average consumer becomes fearful of all the foreclosures happening and refuses to spend dime one except for here and now essentials?

Is this coming deck clearing for the shadow inventory a good thing or fraught with un-intended consequences?

P.S. TG, while you're taking (or giving) one for the team, could you ask during the cigarette break when I should bail from the market? I'm past my LTCG date and am currently sitting on a fair gain from 3/2009. I need to know when to bail. The youngest needs a new car. Thanks man, oh and I can't help with the viagra, but do have access to Cialis if you want to switch up.

Submitted by SD Realtor on April 6, 2010 - 7:46pm.

CAR you and I are so much on the same page on that issue.

Submitted by jpinpb on April 6, 2010 - 9:02pm.

CAR - Thanks for posting all that. That really explains a lot and makes sense. I was trying to figure out WTH was going on w/ TPTB.

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