Comments on: Global Housing Bubble: International House of Subprime Lending.

By: Steve

Steve — Sun, 12 Aug 2007 13:54:00 +0000

@ Peppermint Hippo

Credit cards are the ultimate no-doc loan. Basically any balance on a credit (even when you are "locked in" to a rate for "life") is a 2 week quicky no-doc loan.

I'm not sure how often they check your credit worthiness, but they have the legal right to change the term of your loan every 15 days and most people are clueless to this fact. Being late by 5 days on your water bill can trigger them to reduce your credit worthiness.

So basically if I go buy a TV on 36 months at zero %, I better be able to pay it off at any time because during that loan period they have 72 opportunities to change the terms from 0% to 29.99% or higher.

Very scary that people live off these things. Once I learned how crazy this is, I stopped carrying a balance for more than 2 weeks. So now I'm a "deadbeat" in credit card company terms because all they make off of me is a transaction fee.

By: Andy

Andy — Sun, 12 Aug 2007 10:36:00 +0000

A great article, Doc HB, but I think you exaggerated a bit in this example:
“He started buying a few years ago and now has a few properties that are negative cash flowing but they’ll go “up like crazy” according to his market analysis. Many of his homes are now back down to 2005 and in some cases 2004 prices therefore giving him zero equity even with the ridiculous appreciation.”

Hmm, as long as he purchased the estates with his own money and not a credit, he still has a positive cash flow, right? It may not be a great ROE, but as long as he hasn’t to pay interest to a bank, it’s still positive. Same with the equity: He may have lost a lot, but there is still equity left, as long as he doens’t have mortgages on the home. Or am I missing something here?

By: Chris

Chris — Sun, 12 Aug 2007 04:31:00 +0000

As the Market goes, I honestly don’t care . I have been trading options for about three years now and I’ve learned how to make money going short or long on my select companies.

I think ForEx trading will be really interesting since so many countries seem to be dumping cash in to the economy and selling gold to prop up the greenback.

I can only speak about the DFW housing market since it is all I know. I don’t see a lot of fallout here as it is hasn’t been a hot appreciating market. I guess lending will keep tightening up here as well.

As far as investing in RE, I do see it a being a little less difficult since a lot of the pretenders will be scared out of the market.

As someone who has been negotiating short sales with banks for the last 2 years I am getting pretty excited. It looks like we are on the verge of a transfer of wealth. I just hope people are ready for it.

By: Lost Cause

Lost Cause — Sat, 11 Aug 2007 22:25:00 +0000

I don’t think all of the added liquidity will do anything. People will not buy something that is worthless, especially investors. If nobody is buying your nice pretty little finacial product, it is worth exactly zero. Nothing will change that. I wouldn’t call it a panic either. Panic implies activity.

By: speedingpullet

speedingpullet — Sat, 11 Aug 2007 18:26:00 +0000

Dr HBB – I know its OT, but I haven’t seen a Real Home of Genius for a while, and though you might like to take a gander at this little beauty:

http://tinyurl.com/3yudz5

MLS# P593620

It’s an REO in Encino – North of Ventura Blvd, South of the 101. 1,065 sq ft, 2b 1bth – in apalling condition.
Priced competively at $678,5000 – zillow say $904K (wtf?)
Bought in 2004 for $725K….

Anyway, all 4 ziprealty photos show a place that’s been neglected for months – the worst bit is the scummy half-filled pool in the back yard (at least they had the decency not to call it ’sparkling’), which by now must be harbouring mosquitos up the wazoo.

Anyway, thought you might enjoy it!