Posts Tagged ‘Next Leg Down in Housing’

Setting Up the Next Leg Down in Housing

Setting Up the Next Leg Down in Housing

housing market Courtesy of Charles Hugh Smith of Of Two Minds

Loose lending standards in government-backed mortgages is setting up the next wave of defaults and sharp declines in housing prices.

Beneath the hype that housing has bottomed is an ugly little scenario: lending standards are still loose and the low-down payment, high-risk loans being guaranteed by government agencies are setting up the next giant wave of defaults and foreclosures.

You might have thought that the near-demise of risky-mortgage mills Fannie Mae and Freddie Mac would have cooled the supply of highly leveraged government-guaranteed mortgages--but you’d be wrong, for the Feds have compensated for the implosion of the Fannie/Freddie housing-bubble machines by ramping up their other two mortgage mills: FHA and Ginnie Mae.

These GSEs (government sponsored enterprises) have been around for decades, and have been generally successful due to tightly controlled lending standards.

But the order "save the housing market at all costs!" has been passed down, and the spigots of easy mortgage money have opened. Where FHA only underwrote 3% of the mortgages originated in 2006, now it guarantees about 25%. Between FHA and its VA mortgage sibling, these two GSEs now back fully 40% of all mortgages.

Down payments are as low as 3.5%, and so a first-time buyer making use of his/her $8,000 tax credit could essentially buy a $225,000 house with virtually no money down.

This is moral hazard writ large. Let’s see, the mortgage originator can’t lose because the FHA or Ginnie Mae assumes the risk of default, and the borrower can’t lose more than the few hundred bucks he/she "invested" in closing costs.

In other words, the Federal government has attempted to keep the housing market afloat by ramping up its remaining mortgage mills to fill the easy-money mortgage gap left by the insolvent Freddie and Fannie.

The only problem with this blatant pumping is that a staggering number of these wonderful FHA and Ginnie Mae mortgages are in default and thus doomed to enter the foreclosure pipeline.

Here is a report on the looming FHA fiasco from the Wall Street Journal:

Loan Losses Spark Concern Over FHA:

In the past two years, the number of loans insured by the FHA has soared and its market share reached 23% in the second quarter, up from 2.7% in 2006, according to Inside


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When will there be a coronavirus vaccine? 5 questions answered

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When will there be a coronavirus vaccine? 5 questions answered

A security guard wears a mask as she keeps watch at arriving passengers at Manila’s international airport in the Philippines on Jan. 23, 2020, as part of efforts to contain the coronavirus. Aaron Favila/AP Photo

Courtesy of Aubree Gordon, University of Michigan and Florian Krammer, ...



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Biotech

When will there be a coronavirus vaccine? 5 questions answered

Reminder: We are available to chat with Members, comments are found below each post.

 

When will there be a coronavirus vaccine? 5 questions answered

A security guard wears a mask as she keeps watch at arriving passengers at Manila’s international airport in the Philippines on Jan. 23, 2020, as part of efforts to contain the coronavirus. Aaron Favila/AP Photo

Courtesy of Aubree Gordon, University of Michigan and Florian Krammer, ...



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Zero Hedge

Stocks Soar To Best Day In 4 Months As "Devil"-Virus Death-Count Spikes

Courtesy of ZeroHedge View original post here.

The death toll in China has soared past 100 while the number of confirmed cases doubled overnight. Health officials around the world have confirmed more than 4,500 cases, more than triple the number from Friday.

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Insider Scoop

JPMorgan Downgrades Beyond Meat On Valuation

Courtesy of Benzinga

One of Beyond Meat Inc's (NASDAQ: BYND) earliest bull analysts downgraded the stock on Tuesday.

The Analyst

Ken Goldman downgraded the plant-based food maker's stock from Overweight to Neutral with a price target lowered from $138 to $134.

The Thesis

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Chart School

Top Patterns for Retail Investors

Courtesy of Read the Ticker

Retail investors are last in line for market leading research, no matter, the retail investor can profit from these secret sauce patterns..

Well not so secret now, the main point is you do not have to climb Mount Everest to be called a mountain climber, there are many other hills to climb to make your mark. Just like stocks.

You do not have to battle with the high frequency traders to win in the markets, there are long and slow methods to do just as well.  

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The Technical Traders

The Wuhan Wipeout - Could It Happen?

Courtesy of Technical Traders

News is traveling fast about the Corona Virus that originated in Wuhan, China. Two new confirmed cases in the US, one in Europe and hundreds in China. As we learn more about thispotential pandemic outbreak, we are learning that China did very little to contain this problem from the start. Now, quarantining two cities and trying to control the potential
outbreak, may become a futile effort.

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Kimble Charting Solutions

Bad News For Crude Oil Should Come From This Pattern, Says Joe Friday

Courtesy of Chris Kimble

It’s a good idea for investors to be aware of key indicators and inter-market relationships.

Perhaps it’s watching the US Dollar as an indicator for precious metals or emerging markets. Or watching interest rates for the economy. Experience, history, and relationships matter. And it’s good to simply add these to our tool-kit.

Today, we look at another relationship that has signaled numerous stock market tops and bottoms over the years, and especially the past several months, Crude Oil.

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Members' Corner

The War on All Fact People

 

David Brin shares an excerpt from his new book on the relentless war against democracy and how we can fight back. You can also read the first, second and final chapters of Polemical Judo at David's blog Contrary Brin.

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Lee's Free Thinking

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

 

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

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The repo market problem isn’t the problem. It’s a sideshow, a diversion, and a joke. It’s a symptom of the problem.

Today, I got a note from Liquidity Trader subscriber David, a professional investor, and it got me to thinking. Here’s what David wrote:

Lee,

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Digital Currencies

Cryptos Have Surged Since Soleimani Death, Bitcoin Tops $8,000

Courtesy of ZeroHedge View original post here.

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How IPOs Are Priced

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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

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Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

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Some other great content in this free eBook includes:

 

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