We’re still in a strong downtrend that looks like it will hit 10k before it’s over. 8k looks like a real possibility, and would wipe out all the market gains since 2003 if it happens. Looking at a quarterly chart, this downturn is harder and sharper than what the market saw when the dot.com bubble burst.

S&P would probably be a better index to look at than the Dow, but the big picture is similar.

The interviewer tried to tease something out of him about housing prices, the need once again to prove ability to pay, etc. Of course he dodged this, but managed to say that “buyers are coming back.” “What about people who are upside down on their current mortgages?” “It’s easy to refinance now because jumbo limits are up and Freddie and Fannie are making loans.” I wish he were asked about that typical Alt-A borrower who makes $20,000 a year trying to refinance his $750,000 three bedroom house with a qualifying loan.

A disappointing interview, to say the least. But what would one expect from a Realtor trade association?

Your wrote “GSE loan and MBS purchases are correct and there is not a third party involved I’d like to know how both FNM and the banks with the worst MBS portfolios can both be soaring on the stock market. FNM up another 12% today, Wamu up almost 20%, National City up over 16%, Countrywide 13%. Obviously investors in these banks believe that FNM will be taking the impaired loans off the banks balance sheets and that the Feds will not let FNM take a loss on them.”

(1) Because now that they have seen Bear Sterns rescued, they could be assuming that the Fed will not let those companies fail either. They now know that Bernake is frantic to keep large blocks of motgage securities from having to be sold off (thus establishing the real value) and will do what ever it takes to hold those mortgage securities out of a bankruptcy fire sale.

(2) The access to the discount window for investment banks is a huge support. Withing 48 hours Lehamn and Goldman had both been to the window (while all the while doing the innocent virgin act of ‘oh we just wanted to set an example’…uh huh.) Now they have been using it for a couple days and the sky hasn’t fallen on their stock because of the appearance that they are endangered and have no recourse BUT to use the Fed. (Sort of hard to give a bad appearance when everyone knows it is a fact, not an appearance.)

(3) Bill going to hearing April 9 in the House Finance Committee could help to deal with a number (not all and not even a majority) of the toxic loans. It is rather elaborate - the key is short refinances involving a special loan through FHA, defined losses to the lenders, soft seconds, and, still and always, DTI limits on eligibility for the program and for the final mortgage. Paulson and Bernake are throwing their weight behind it while my-cousin-George (yep, we are both Mayflower Winthrops) whines and complains about the idea. (And don’t panic over the bill propping up house prices.- it will force prices down hard and fast.) Biggest problem in the financial services indusrty is that no one KNOWS how much the mortgage securities are worth or who has how many of them in their desk draw. If the value of these mortgage securities can be stabilized, the financial markets will calm down. (Stabilizing the value of the securities is NOT the same thing as stabilizing house prices.) The only real way to value all those mortgage securities is to sit down and literally check the underwriting or do the underwriting - a massive job that is probably not feasible even with an army of auditors in less than a year or 2. The other alternative to establish a way to value them through a process that would act like a statistical sampling by setting a value on “a loan” by setting a value on the underlying asset - and that is what a short refi does.

(4) Like I said, all those endangered lenders and SIVs and investment banks, can now sell their good mortgages (the ones worth more on the market) and increase their capital reserves. Does this put them in a much better financial position? Yes. Would it get all those mass-psychology, more-nervous-than-a-cat-on-a-hot-tin-roof, taking-a-guess-and-going-on-a-hope investors to feel better about those companies? Yes. Are investors and stock market gamblers always logical, rational and only acting with full information? NO! One day a stock will be up, next day it will be down and nothing has changed at the company.
(Personally I think it would be a lot less stressful on everyone else if all Wall St sorts were placed on some nice psychtropic drugs to deal with their panic attacks.)

(5) Still do not see Freddie/Fannie buying up the NINJA 100LTV (and now the lost value makes it 120% LTV) loans with a 50,60 or more DTI. They are closely regulated. Barney Frank is threatening to slap the investment banks and shadow financial institutions under regulation. Congress will certainly not agree to turning Freddie/Fannie - which are quasi-private/public entities - into a dumping ground for toxic waste.

In the case of Prop. 60, the law covers property within the same county. In the case of Prop. 90, although the law in theory allows homeowners to transfer their existing tax base to another California county, since each county gets to choose if they want to participate, only a few actually do so (including several in Southern California).

But for those who want to use this law to move to the counties of Riverside (i.e., Palm Springs) or San Bernardino (i.e., the High Desert) or most of the Bay Area and Central California, they’re out of luck. Consequently, I’m looking for people who would consider moving to these areas but haven’t because they don’t want their property taxes to rise exponentially.

Finally, Prop. 110 is similar to Prop. 60 but allows severely disabled people of any age to use this one-time opportunity to transfer their existing tax base within the same county, and I’ll also be including that in the story.

If you’d like to get an idea of my writing style and how I cover subjects, click here for a story I wrote on reverse mortgages last month.

Please send any potential interview subjects to me directly at psduffy@sbcglobal.net.