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Samantha Fuller · 09-06-2008, 11:55 PM

The foreclosure market is getting wild in Lake Elsinore: "Taking advantage of a slump in local real estate, a family of bobcats has moved into a foreclosed Lake Elsinore home, lolling about on fences and walls and riveting an entire neighborhood."

This is a perfect metaphor for the housing crises. The LOLcat potential of this story is strong, some of the comments on this story are hilarious and will get you started. Also this story contains a link to a similar story Foreclosure victim: Princess Chunk, a fat cat.

Surreal Farber · 09-07-2008, 11:02 AM

that's awesome

CoyoteMomiji · 09-07-2008, 11:27 AM

I lived in Lake Elsinore for a couple months. I would have preferred bobcats to the human neighbors.

Isablan Neva · 09-07-2008, 11:43 AM

Quote:

Originally Posted by CoyoteMomiji

I lived in Lake Elsinore for a couple months. I would have preferred bobcats to the human neighbors.

Yeah, I have this sick feeling in my stomach that some Inland Empire redneck in a pickup truck is going to start doing target practice at them. State Fish & Game should probably remove them for their own safety.

CoyoteMomiji · 09-07-2008, 12:12 PM

Yeah. The idea leaves me sick.

Arilynn · 09-09-2008, 06:30 PM

I'm surprised that the fed takeover of Freddie Mac and Fannie Mae hasn't been gnawed over on this thread or elsewhere. It's occurrance and the events leading up to it will have a huge effect on the US for years to come. It will be interesting to see how long this arrangement lasts and what replaces it. But I have been force-fed finance and financial news since I was a teen, so maybe "interesting" is not universally applicable. It is still humongous news, however.

Trout Recreant · 09-09-2008, 07:13 PM

It is humongous news. But the predictions are all over the place. I'm heavily involved in real estate as part of my job, although I only do commercial projects, but I can't, for the life of me, figure out what the long term impact of the takeover will be. It's a HUGE cluster. Think of a tangled mass of fishing line the size of a cantaloupe. It's your job to unravel it. That's what's going on at the federal level now while they work on the Fannie Mae/Freddie Mac fiasco. My gut tells me this will turn out to be a good thing, and I'm usually a pessimist and a cynic, so when my gut instinct is positive, I trust it. But I have no evidence or facts to back that up at all.

Trout Recreant · 09-09-2008, 07:14 PM

Oh - and I agree on the bobcats. Someone needs to come pick them up and relocate them before some local moron with a rifle acquires a new bobcat-fur coat. I'd really be worried about their safety.

Arilynn · 09-09-2008, 07:46 PM

Quote:

Originally Posted by Trout Recreant

It is humongous news. But the predictions are all over the place. I'm heavily involved in real estate as part of my job, although I only do commercial projects, but I can't, for the life of me, figure out what the long term impact of the takeover will be. It's a HUGE cluster. Think of a tangled mass of fishing line the size of a cantaloupe. It's your job to unravel it. That's what's going on at the federal level now while they work on the Fannie Mae/Freddie Mac fiasco. My gut tells me this will turn out to be a good thing, and I'm usually a pessimist and a cynic, so when my gut instinct is positive, I trust it. But I have no evidence or facts to back that up at all.

Knowing about this much about the whole thing |<-->|, it seems to me that, given the current situation of both, the government could not let them fail without watching the national economy grind to a halt, which would also negatively affect the global economy. So relative to that, I see it as a good thing. I do wish a very long time ago the Fed has stepped in as the overseers of the mortgage market and prevented some of this disaster. As for the long term, I wonder how long this whole situation will negatively affect the US's international standing, regardless of what happens to Freddie Mac and Fannie Mae. And I have to think that it will end well for them also - the alternative is too bleak.

Isablan Neva · 09-09-2008, 07:55 PM

Quote:

Originally Posted by Trout Recreant

It is humongous news. But the predictions are all over the place. I'm heavily involved in real estate as part of my job, although I only do commercial projects, but I can't, for the life of me, figure out what the long term impact of the takeover will be.

So far, I'm with the bears and I think negative. All this does is push the ball a few more yards down the field as they try to hold off on the meltdown until after the election. The likely trigger to the Fannie/Freddie action was the Russians reducing their exposure to GSE debt.

stealing a quote from Black Swan on Mish's comment section on Saturday, Sept 6:

Quote:

China, which holds 33% of all GSE debt, and other major debt holders, have stopped buying GSE paper. The Russians, who have recently reduced their $100 billion GSE exposure by 40%, announced, yesterday, that they were reducing their exposure even further. If one more major GSE debt holder had engaged in a massive sell-off, the GSEs could have "officially" gone under. The Federal Government had to do something and had to do it quickly.

So, Russia move on Friday, Freddie/Fannie bailout announced Friday night.

Stealing some more:

Quote:

"Aug. 22 (Bloomberg) -- A failure of U.S. mortgage finance companies Fannie Mae and Freddie Mac could be a catastrophe for the global financial system, said Yu Yongding, a former adviser to China's central bank.

``If the U.S. government allows Fannie and Freddie to fail and international investors are not compensated adequately, the consequences will be catastrophic,'' Yu said in e-mailed answers to questions yesterday. ``If it is not the end of the world, it is the end of the current international financial system.''

Here is what came out of Russia Yesterday:

"Russia says further cuts Freddie, Fannie holding"

"SOCHI, Russia, Sept 5 (Reuters) - Russia has slightly further reduced its holdings of U.S. mortgage agencies Freddie Mac (FRE.N: Quote, Profile, Research) and Fannie Mae (FNM.N: Quote, Profile, Research), central bank's first deputy chairman Alexei Ulyukayev said on Friday.

At the start of the year Russia held $100 billion -- or over one sixth of its gold and forex reserves -- in Fannie Mae,
Freddie Mac and Federal Home Loan Banks.
In the summer, officials said that the holdings had been reduced by around 40 percent through not replacing maturing paper."

CRE (commercial real estate) falling apart is what is killing all the small regional banks that are going under at rate of one per week. Last week it was Silver Star Bank, where John McCain's son had been a board member until July of this year.

A major financial institution is going to go down soon - toss up at this point whether it is Lehman or WaMu. The entire system is insolvent and Alt-A has begun to implode ahead of schedule, it wasn't expect to start to crumble until mid 2009 and it's already running at a 30% default rate.
Mish's Global Economic Trend Analysis: Option ARM Time Bomb About To Explode

People don't realize just how bad this is and we are only in Act I.

Isablan Neva · 09-10-2008, 11:48 AM

Here's some more negative reaction to the Fannie/Freddie takeover from Minyanville:

Quote:

As the world celebrates the US government's takeover of Fannie Mae (FNM) and Freddie Mac (FRE), a few thoughts from someone who told you 2 years ago that this would happen. For those few who dare to see past the market's immediate positive reactions, this is all a very long-term negative for the U.S. and the world in general.

The following 3 bullet points were written by Alex Barron of Agency Trading Group:

"1. From a philosophical economic standpoint, what the government has done is the biggest move yet in the direction of socialism, and has prevented the free market from working itself out.

What was needed was not a conservatorship, but a restructuring. This means allowing investors who took the risk of investing in Fannie and Freddie in exchange for a potential reward to absorb the losses - not the taxpayers.

This would basically consist of allowing the equity and preferred equity to get wiped out and convert every $1,000 of debt to some conservative combination of debt and equity such as $500 of debt and $500 of new equity. This would effectively allow Fannie and Freddie to become “well-capitalized,” and would also allow the previous debt-holders to absorb future losses in their new equity.

2. From a financial standpoint, what was needed was to completely privatize the economic functions of Fannie and Freddie, not have the government stepping in to buy securities in the open market and helping the GSEs provide more un-economic mortgages.

In order to get out of a hole, you first need to stop digging. So, to get Fannie and Freddie out, the first thing they need to do is to stop buying more un-economic mortgages. As long as home prices are dropping -- and they will continue to drop as long as REO (bank -owned) inventories are growing -- the risk of losing money by lending to someone buying a home exists.

The only way to minimize that risk is by demanding a higher down payment, higher interest, and lending only to highly qualified borrowers. A private entity would eventually do this, or else it would go bust. A public mortgage lender will simply continue to lend money at low rates in order to provide “affordable housing” and “expand homeownership” - and have the taxpayer absorb the losses down the road.

3. From a moral hazard standpoint, this sends the strong signal that the government won't require anyone deemed “too big to fail” to pay the piper. Instead, the government will bail them out by simply printing money. This will cause a long line of people to “position themselves,” as Pimco euphemistically put it this morning, for a handout. The amount of inflation that will follow shouldn't surprise anyone.

Arilynn · 09-10-2008, 12:45 PM

Isablan, thanks for the info.

With regard to the moral hazard argument (which I'm always ambivalent on), what do you think would happen had Fannie and Freddie failed? Do you think it would have killed credit availability, starting from banks and moving outward? It seems to my limited knowledge that the "too big to fail" premise does apply to them given the unique nature of their vast influence.

Eboni Khan · 09-10-2008, 01:09 PM

Fannie Mae and Freddie Mac were already heavily government subsidized. They have been government entities for quite sometime, but not in their entirety, now they are. God help us all.

Arilynn · 09-10-2008, 01:23 PM

Quote:

Originally Posted by Eboni Khan

Fannie Mae and Freddie Mac were already heavily government subsidized. They have been government entities for quite sometime, but not in their entirety, now they are. God help us all.

They were created by Congress and were federally-sponsored, but they have been publicly traded companies for a long time. I don't think "subsidized" is the correct term. The current government takeover represents a huge change.

Isablan Neva · 09-10-2008, 01:35 PM

Arilynn, I don't think anybody really knows. There are lots of projections and it certainly would have imploded the world financial system - but there is some argument that this might not be such a bad thing. There is little doubt that the whole thing is going down - one school of thought is that it would be better to just rip the bandaid off quickly and be able to start rebuilding. The other school of thought is to drag it out as long as possible - this is the road Japan went down and turned into a 10 year "lost decade" for the Japanese economy. That's where we are right now.
Japanese asset price bubble - Wikipedia, the free encyclopedia

The USA is financially insolvent. We owe more debt than we can reasonably repay. I'm with Mish that what cannot be repaid will be defaulted on. At some point, the US is going to default on the enormous amount of debt we've sold off internationally -- all actions at this point are an attempt to keep kicking the can down the road.

There is no solution to the fact every home sold between 2004 and 2007 was overpriced by at least 50% or more, that excess is debt that will not be repaid. This is no different than the Tech Bubble where people bought in at insane prices and lost everything when the market corrected. Greenspan, in order to hide the aftereffects of the Tech Bubble, kept lowering rates which opened the credit spigot at full throttle. So, we moved from one bubble to the next.

Credit availability is already dead because the banks have no money to loan. Almost every Home Equity Line of Credit has been pulled, credit card companies have actually been reducing lines of credit, and the only people able to get mortgages right now are those with impeccable credit scores and large down payments.

So, you take a whole bunch of people who stretched way beyond their means by purchasing houses they couldn't afford, new cars, boats, RV's, various assorted toys, etc.. and toss in a jobs market that is contracting heavily, gas prices, food prices doubling and mix that all together. The result is people carrying debt that they will never be able to repay because they acquired that debt on the assumption that housing prices would continue to rise and they would be able to tap equity to use the home like an ATM. All those people are going to default.

Arilynn · 09-10-2008, 02:16 PM

Thanks, Isablan. I was thinking that if they failed the flow of credit - which went from Niagra Falls to a small river - would dry up much more severely as bank bondholders would be really limited in their ability to loan money, and this would truly wreck credit availability across the board. So from "dead" to "deader", I guess.

But I agree with pretty much all of your post.

09-06-2008, 11:55 PM	#1 (permalink)
Samantha Fuller Senior Member Mostly quiet Lurker Join Date: Jun 2007 Posts: 157 My Mood:	I can haz foreclosure The foreclosure market is getting wild in Lake Elsinore: "Taking advantage of a slump in local real estate, a family of bobcats has moved into a foreclosed Lake Elsinore home, lolling about on fences and walls and riveting an entire neighborhood." This is a perfect metaphor for the housing crises. The LOLcat potential of this story is strong, some of the comments on this story are hilarious and will get you started. Also this story contains a link to a similar story Foreclosure victim: Princess Chunk, a fat cat. Last edited by Samantha Fuller; 09-07-2008 at 12:20 AM..

09-07-2008, 11:27 AM	#3 (permalink)
CoyoteMomiji is oh-so-Slick I stopped the signal. Join Date: Sep 2007 Posts: 1,649 SL Join Date: 01/26/06 Business: Slick SLShopper Ads: 16 My Mood:	I lived in Lake Elsinore for a couple months. I would have preferred bobcats to the human neighbors. __________________ Slick in Mikianna Slick Blog

09-10-2008, 01:09 PM	#13 (permalink)
Eboni Khan Senior Member Join Date: Nov 2007 Posts: 2,506	Fannie Mae and Freddie Mac were already heavily government subsidized. They have been government entities for quite sometime, but not in their entirety, now they are. God help us all. __________________

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09-07-2008, 11:02 AM	#2 (permalink)
Surreal Farber Treacherous BiSexual Doesn't Suffer Fools Gladly Join Date: Aug 2007 Posts: 4,289 SLShopper Ads: 6 My Mood:	that's awesome

09-07-2008, 12:12 PM	#5 (permalink)
CoyoteMomiji is oh-so-Slick I stopped the signal. Join Date: Sep 2007 Posts: 1,649 SL Join Date: 01/26/06 Business: Slick SLShopper Ads: 16 My Mood:	Yeah. The idea leaves me sick.

09-09-2008, 06:30 PM	#6 (permalink)
Arilynn is chasing her tail Mind limit Join Date: Jul 2008 Posts: 2,146 SL Join Date: Too lazy to look up - July, 2008? Business: Wandering about in a daze. Tabbing out. Blog Entries: 3 My Mood: Awards: 1	I'm surprised that the fed takeover of Freddie Mac and Fannie Mae hasn't been gnawed over on this thread or elsewhere. It's occurrance and the events leading up to it will have a huge effect on the US for years to come. It will be interesting to see how long this arrangement lasts and what replaces it. But I have been force-fed finance and financial news since I was a teen, so maybe "interesting" is not universally applicable. It is still humongous news, however.

09-09-2008, 07:13 PM	#7 (permalink)
Trout Recreant Senior Member Caution - makes wide turns Join Date: Mar 2008 Location: West Coast, USA Posts: 2,289 My Mood:	It is humongous news. But the predictions are all over the place. I'm heavily involved in real estate as part of my job, although I only do commercial projects, but I can't, for the life of me, figure out what the long term impact of the takeover will be. It's a HUGE cluster. Think of a tangled mass of fishing line the size of a cantaloupe. It's your job to unravel it. That's what's going on at the federal level now while they work on the Fannie Mae/Freddie Mac fiasco. My gut tells me this will turn out to be a good thing, and I'm usually a pessimist and a cynic, so when my gut instinct is positive, I trust it. But I have no evidence or facts to back that up at all.

09-09-2008, 07:14 PM	#8 (permalink)
Trout Recreant Senior Member Caution - makes wide turns Join Date: Mar 2008 Location: West Coast, USA Posts: 2,289 My Mood:	Oh - and I agree on the bobcats. Someone needs to come pick them up and relocate them before some local moron with a rifle acquires a new bobcat-fur coat. I'd really be worried about their safety.

09-10-2008, 12:45 PM	#12 (permalink)
Arilynn is chasing her tail Mind limit Join Date: Jul 2008 Posts: 2,146 SL Join Date: Too lazy to look up - July, 2008? Business: Wandering about in a daze. Tabbing out. Blog Entries: 3 My Mood: Awards: 1	Isablan, thanks for the info. With regard to the moral hazard argument (which I'm always ambivalent on), what do you think would happen had Fannie and Freddie failed? Do you think it would have killed credit availability, starting from banks and moving outward? It seems to my limited knowledge that the "too big to fail" premise does apply to them given the unique nature of their vast influence.

09-10-2008, 01:35 PM	#15 (permalink)
Isablan Neva Hippie Chick Making SL less marginal Join Date: Jun 2007 Location: California: we do disasters right! Posts: 1,035 SL Join Date: November, 2004 Business: Sky Dreams, Tenth Muse Furniture SLShopper Ads: 2 My Mood:	Arilynn, I don't think anybody really knows. There are lots of projections and it certainly would have imploded the world financial system - but there is some argument that this might not be such a bad thing. There is little doubt that the whole thing is going down - one school of thought is that it would be better to just rip the bandaid off quickly and be able to start rebuilding. The other school of thought is to drag it out as long as possible - this is the road Japan went down and turned into a 10 year "lost decade" for the Japanese economy. That's where we are right now. Japanese asset price bubble - Wikipedia, the free encyclopedia The USA is financially insolvent. We owe more debt than we can reasonably repay. I'm with Mish that what cannot be repaid will be defaulted on. At some point, the US is going to default on the enormous amount of debt we've sold off internationally -- all actions at this point are an attempt to keep kicking the can down the road. There is no solution to the fact every home sold between 2004 and 2007 was overpriced by at least 50% or more, that excess is debt that will not be repaid. This is no different than the Tech Bubble where people bought in at insane prices and lost everything when the market corrected. Greenspan, in order to hide the aftereffects of the Tech Bubble, kept lowering rates which opened the credit spigot at full throttle. So, we moved from one bubble to the next. Credit availability is already dead because the banks have no money to loan. Almost every Home Equity Line of Credit has been pulled, credit card companies have actually been reducing lines of credit, and the only people able to get mortgages right now are those with impeccable credit scores and large down payments. So, you take a whole bunch of people who stretched way beyond their means by purchasing houses they couldn't afford, new cars, boats, RV's, various assorted toys, etc.. and toss in a jobs market that is contracting heavily, gas prices, food prices doubling and mix that all together. The result is people carrying debt that they will never be able to repay because they acquired that debt on the assumption that housing prices would continue to rise and they would be able to tap equity to use the home like an ATM. All those people are going to default.

09-10-2008, 02:16 PM	#16 (permalink)
Arilynn is chasing her tail Mind limit Join Date: Jul 2008 Posts: 2,146 SL Join Date: Too lazy to look up - July, 2008? Business: Wandering about in a daze. Tabbing out. Blog Entries: 3 My Mood: Awards: 1	Thanks, Isablan. I was thinking that if they failed the flow of credit - which went from Niagra Falls to a small river - would dry up much more severely as bank bondholders would be really limited in their ability to loan money, and this would truly wreck credit availability across the board. So from "dead" to "deader", I guess. But I agree with pretty much all of your post.