California twofer

Mortgage fraud ground zero

Now, this is desperate…

10 comments ↓

#1 Cam on 06.02.08 at 9:22 pm

And the picture keeps getting worse…
but it’s different in Canada right?

Latest GVRD numbers, sales off 29% for May, and listing are through the rough almost 18,000 vs. just over 12,000 last year in may.

Check it out:
http://langley-financial-planning.blogspot.com/

#2 zloy on 06.02.08 at 9:40 pm

Garth, I was about to email you this sign, but you beat me :)
Anyway, can’t wait to see similar signs in the Toronto Star…

#3 Sphinx on 06.02.08 at 10:19 pm

Still expensive for many…according to the article, Royal View starting at $1.6 million (assume it’s an afluent subdiv) – 400k free house (does it really worth that much if you flip right away ??) and your cost will be $1.2 million, BUT you have to mortgage the total $1.6 million. Well, facing one of the worst credit crunch in the last few decades , how many would qualify to borrow such amount of coin?, besides this offer is definitely not targeting first-time buyers so potential buyers MUST sell their homes first into this ugly market.

Way to go on this cycle…

#4 dobryi on 06.03.08 at 12:27 am

I would buy three then!

#5 Internal Exile on 06.03.08 at 1:40 pm

Wait until someone opens the can of worms that is Vancouver real estate financing. Combine it with organized crime finding real estate an almost flawless way to launder drug money (8 billion a year of profits they need to clean was a the figure I heard), and a long tradition of “creative” accounting (see: Eron Mortgage, the VSE) , a government that has taken a “wink wink” approach to gang activity and grow ops, and we’ll finally get to see what BC really excels at (God knows it’s not any sort of legit industry). The VPD today claimed that gang activity and crime in “The Greatest Place on Earth” is currently on a par with Miami -but I guess the reality out here has a way of “harshing people’s mellow”.

#6 Crikey on 06.03.08 at 4:00 pm

This is an except of an article from Ilargi’s website “The Automatic Earth”- well worth checking out. It’s on Garth’s “Blog Roll”. This is a bit of a mind-blower, actually.

Suppose the cost of a home, in construction wages and materials, is $100,000. Suppose also that it’s well-built and will stand for 100 years. Seems crazy now perhaps, but it’s not. This means that $1000 per year needs to be paid off, or $83.33 per month. If you want to pay it off in 25 years, it’s $333.33. And THEN IT”S PAID OFF!! No bank will ever have any say over it again.

You can give it to your kids, and they can live for free. You can sell it, and the buyer pays you and your kids. NOT THE BANK. No need, everyone can make $300 a month. Yeah, yeah, you may need repairs. $20.000 enough? Remember, it’s well-built. The bill then is $1200 per year, $100 per month, or $400 for 25 years.

See what happens? A developer these days, for a home that costs $100,000, charges $250,000. You need to pay that upfront, so you must get a loan from a bank (and George Bailey’s gone). When you’ve paid the loan in full, after 25-40 years, once interest and other charges are added, you’ve actually paid $1 million.

Then you sell it, say after 30 years. Now the whole thing starts all over again for the bank, with a new client and a new loan. The house, for which they’ve never paid a dime, will make them another $1 million over the next 30 years. And that is without a crazy market appreciation like the one we’ve just seen.

And don’t talk of competition between banks, or I’ll whoop you: Wall Street’s a closed system.

In the end, the $100,000 house may be paid for 20-30-50 times over in a hundred years. This is all money that is taken out of local communities, and concentrated in the hands of bankers and major shareholders, who live elsewhere. The community COULD have built bridges, schools, hospitals and roads, or taken care of its weaker members, or done a million other things to reinforce itself with that money.

That’s what It’s a Wonderful Life is about, and that’s what we see around us today. And yes, come to think of it, homes are very much like tulips.

#7 Chinstrap on 06.03.08 at 5:04 pm

To Crikey,

What about land costs? I don’t think you can build a decent house for $100k in Toronto.

Your argument assumes no interest payment on the $100k (really like $300 to build plus land) to build your home. Does the carpenter and trades take paper from you and let you pay them for 25 years?

This leads us to something I agree with you on. Don’t bother go to banks, etc. Buy something you can afford and pay cash. My house is paid for and we won’t buy anything bigger unless we could afford it.

Warren Buffett still lives in the same house he bought in 1957 for $30k when his net worth was $300k. Now a days people put down $30k downpayment and borrow $300k and work their life to payoff..

#8 Andrew on 06.04.08 at 9:44 am

talk about desperate .. looks like another bear stearns fiasco..

http://dailybriefing.blogs.fortune.cnn.com/2008/06/04/lehman-on-the-block/

Lehman on the block?
Lehman Brothers (LEH) may not be independent for long. The Wall Street Journal reports the investment bank may be forced by its balance sheet woes and the recent plunge of its stock to sell part of even all of itself to another financial firm. Lehman shares sold off Tuesday after the Journal reported Lehman was considering a $4 billion sale of stock. But the newspaper says the selloff in Lehman shares, which knocked 10% off the company’s market value Tuesday, might make a plain stock sale more difficult for shareholders to stomach. And the company may need the cash to forestall another ratings downgrade that could force it to post more collateral on derivatives positions.

Lehman shares were down as much as 15% in trading Tuesday afternoon before the firm publicly denied it had been forced to borrow from the Federal Reserve. The Journal reports Lehman engineered part of its Tuesday afternoon relief rally by buying back its own shares – an unusual move given the worries about the firm’s financial health and the company’s recent efforts to bring down its leverage ratios. Though the buyback could be taken as a sign of management’s confidence that Lehman can weather the storm, others see it as smacking of desperation. Wednesday’s action may go a ways toward determining whether Lehman is able to stay the course or whether it ends up doing a deal with the likes of Citadel or Blackstone (BX).

#9 Crikey on 06.04.08 at 11:12 am

Chinstrap,

I’m not sure the point of the article (not mine, BTW) was the veracity of the math involved, but just how the banks can profit from interest paid on a property again and again, no matter who “owns” it. The banks spend nothing to maintain a property, but profit by millions on each property over the life of the property. That money could surely be put to better use than lining the pockets of bankers, no?

#10 Another Albertan on 06.04.08 at 3:17 pm

http://dealbreaker.com/2008/06/how_to_cut_the_mortgage_crisis.php

Check out the video. Incredible.