Robo crisis

When I sold her the property, she was so juiced I thought she’d hug me. ‘Can’t thank you enough for this,’ she said, pressing my hand, grabbing the key and sprinting for the front door.

But two years and several missed mortgage payments later, she had a different view. I’d been a hero when I took back financing letting her get the building. Now I was Mephistopheles when my lawyer was up her butt demanding payment on the debt.

Ultimately I was forced to initiate power of sale (foreclosure) proceedings, and launch a suit at the same time for the value of the mortgage plus unpaid interest. It cost me a few thousand, took many months and would have sucked up far more money if I hadn’t worked out a capitulation agreement with her. I got my building back, free to sell it on the open market. But what an ordeal.

Now, imagine if I was a big bank, and needed to foreclose on, say, 8,000 people a month. Would I be tempted to try and streamline the process?

You betcha. And that brings us to the robo-signers. Plus a new crisis.

In August alone American banks took back 95,364 houses from people who stopped making mortgage payments and sank into foreclosure proceedings. That was a record – which itself is stunning four years into a real estate collapse. In the same month those lenders issued new foreclosure filings against another 338,836 families. That’s one of every 381 homes in America. Also stunning since the housing meltdown is simply getting worse.

Those foreclosed houses are then put on the open market at a fraction of the price they commanded back in 2006, and sold – typically to first-time buyers, vultures or plundering Canadians. It’s estimated that the houses yet to be seized and sold – called the ‘shadow inventory’ – amount to something north of four million. And everybody knows real estate will not bounce off the bottom until all those homes are gone, because supply will continue to overwhelm demand, allowing prices to slide.

But over the past two weeks the robo-signers have become a major issue. Hired by the banks to blitzkrieg their way through those mountains of legal documents and court-ordered evictions, it’s alleged most of them just pushed the process ahead instead of doing what they were legally required to do – check and verify all information. After all, they’re throwing people out of their houses. Shouldn’t they at least be sure?

You bet, say states attorneys, Washington politicians and a cabal of anti-bank forces. And so on Friday Bank of America stopped doing foreclosures, and is now being followed by the rest.

This might be a stay of execution for thousands of deadbeat homeowners, but it’s a death sentence for USA real estate – at least in the short term. It takes a fragile, barely functioning housing market and destroys it by shattering what buyer confidence remains. It throws into question the ownership of homes already bought through the foreclosure process. It has the potential to rifle up the securitization food chain to the lenders, bankers and rating agencies who pushed bum loans. It also promises to delay by months, perhaps years, the essential bottoming of the property market and that proffers one inevitable conclusion: more price declines.

What does this mean for us?

First, every Canadian should be praying for an American real estate renaissance. Until the housing market in that country staggers back from despair the US economy will continue to sputter and hemorrhage. The loonie will rise, new jobs won’t be created, exports will get creamed and our homes lose value.

As I said, this robo-signing thing may have just bought us another year of recession – on top of the two or three we were already staring at. The worst case is, well, worse. Massive new losses for US banks.

So, second, this is not good news for $1 million SFHs in Vancouver or the entertaining virgins in distant GTA suburbs punting each other out of the way to buy unbuilt homes from a sales trailer. Forgive them. For they know not what they do.

Perhaps my estimations of a 15% national price decline, followed by a multi-year melt are too girly-man. I can foresee this getting uglier, if American home values don’t even hit bottom until, say, 2013 – about a year before all our cheapo emergency mortgages start resetting at higher levels.

Third, I’d now say there’s no rush to get yourself down to Miami or Phoenix to feast on carrion. Especially if, as economists swear, the Canadian dollar is going to $1.10 or so in 2011. Imagine that: crashing prices and a swelling currency. Throw in a Vette and a couple of those cheerleaders, and we might consider saving your real estate thingy, Yanks.

Damn. That felt good.

I guess it all means what I’ve been saying here for the last eternity is true. If you’ve been mulling selling, do it. If you dream of buying, forget it. If your house is your fortune, panic.

149 comments ↓

#1 Gord In Vancouver on 10.10.10 at 8:39 pm

Still More Proof That Garth Was Right

Canadian cases of elder financial abuse rising: police

The centre has noticed a rising number of incidents where relatives with joint accounts or access to debit cards steal from the elderly, and Watts believes the problem is about to become much worse because of the debt load of baby boomers.

“You have an asset-rich older generation. You’ve got a debt-ridden, poorer population having a difficult time in the markets,” said Watts.

http://www.ctvbc.ctv.ca/servlet/an/local/CTVNews/20101010/canada-elder-abuse-101010/20101010?hub=BritishColumbiaHome

#2 PR on 10.10.10 at 8:53 pm

Third, I’d now say there’s no rush to get yourself down to Miami or Phoenix …

Bravo! To mutch things going on out there and all over the world in real estate. So renting is now ‘en vogue’ * Branché* *IN * *Treandy* * *Verry smart*.

#3 T.O. Bubble Boy on 10.10.10 at 9:01 pm

So, it’s called “innovation” when robo-trading programs dominate the stock market, but “fraud” when robo-signing programs are used for foreclosure processing.

What are the odds that the stock markets and/or major financial institutions get sued over robo-trading glitches in the future?

#4 timbo on 10.10.10 at 9:03 pm

two sites out of many that are showing the updated video that has become a staple of the housing bubble and crash.

Great blog to add after you finish with Garth’s page.

http://whispersfromtheedgeoftherainforest.blogspot.com/2010/10/sunday-afternoon-update.html

A view from Calgary.

http://albertabubbleblog.blogspot.com/2010/10/edmonton-housing-crash-in-full-swing.html

This robo-fraud is taking off like wildfire and it cannot be hidden. Man are the markets going to have fun with this developing story.

#5 Just a Tech on 10.10.10 at 9:05 pm

Yeah that shadow inventory was with held from the market in order to create a false bottom while the fed padded the banks’ balance sheets.

The interesting part is that through all these Mortgage backed securities and other derivatives that were flying around, these mortgages were sliced and diced and packaged off. Now in many cases, the banks no longer have the deed and have no idea who actually holds the mortgage lol. That is why they were expediting the foreclosure process, to rubber it all off and hope no one was the wiser. Maybe some people will be getting a free house?

#6 Northern_dirt on 10.10.10 at 9:16 pm

What a bunch of entitled, ungrateful bastards my generation is.

#7 T.O. Bubble Boy on 10.10.10 at 9:20 pm

Hey – whadda ya know… even 60 Minutes had a segment on robo-trading tonight.

http://www.cbsnews.com/stories/2010/10/07/60minutes/main6936075.shtml

#8 S.B. on 10.10.10 at 9:28 pm

Will laid-off Boomners have to sell the house in order to raise cash?

http://www.npr.org/templates/story/story.php?storyId=130454350

October 9, 2010
Jobless After 50? You May Be Out Of Luck
by NPR Staff

The economy officially crept out of recession in June of 2009, but for many Americans, the economic markers that really count are the ones that come out each month from the Department of Labor: unemployment statistics.

And the numbers released this week continue to look grim, with almost 15 million Americans out of work and few private sector jobs available.

The typical unemployed worker spends about eight months out of a job, but for people over 50, finding a new job can take a lot longer — if it happens at all.

#9 Basil Fawlty on 10.10.10 at 9:35 pm

Good article Garth. Interestingly, I just watched a documentary at the Vancouver Film Festival called “Inside Job” that is about the whole sub-prime real estate crisis in the US.
The current “robo” problem is compounded by the fact that many of the original mortgage documents are missing. That means the collateral for the bundled mortgages, that were sold to pension funds and foreign governments etc, no longer exists. These bundled mortgages also include student loans and other types of debt and are called Collateralised Debt Obligations. To insure themselves, the purchasers of CDO’s also purchased Credit Default Swaps that would pay them out if the CDO’s defaulted.
Now things get really interesting. First, the total value of credit default swaps is $60T. Second, these CDS’s are effectively insurance, but unlike you and only you insuring your house. Anyone, could purchase credit default swaps on any debt obligation, which means one CDO bond can have numerous “insurance policies” on it with no proof of the underlying mortgages. The ultimate question is, do the companies that sold the credit default swaps have the money set aside to pay out CDO defaults?
Now if all this was not bad enough, a small popcorn at the cinema is $6.04!

#10 WINNIPEGER on 10.10.10 at 9:37 pm

Shadow Inventory-

Would the U.S. banks not also keep some “shadow inventory” on the side lines so as to not influence the overall market?

#11 PropertyGuy on 10.10.10 at 9:41 pm

So 5 years ago the lenders were pumping through the paperwork without verifying income and fact checking. How ironic after that lack of due diligence helped create the meltdown in US real estate and now a similar of due diligence is adding fuel to the fire. Obviously they learned nothing the first time.

#12 steve p on 10.10.10 at 9:47 pm

amount to something north of two million

i think it’s twenty million homes

We’re both wrong. Now corrected to four. — Garth

#13 timbo on 10.10.10 at 9:48 pm

#2 PR,

no rush is an understatement.

from what I have read over the last 2 days, If you buy or had bought a property the title might be in doubt as who-ever sold you the title might have gotten the property thru fraud by banks who were trying to speed up the system.

Some see it as no big deal as defaults were going to be foreclosed upon anyway, so what was the harm, but it throws in doubt any evidence that banks brought into court now and in the past.

from what I understand,
If you recently bought a property in the USA and it was a foreclosure that was done illegally your title is now in doubt if contested.

I’m not in law but would love for someone to comment as to my conclusions. This is only my view from reading other blogs and could be wrong. If I am correct this will freeze the housing market.

#14 45north on 10.10.10 at 9:56 pm

link from Timbo: As more people realize that the fake title transfer aspect of foreclosure fraud is just the tip of the iceberg, I believe you will see that the repercussions are severe.

http://whispersfromtheedgeoftherainforest.blogspot.com/2010/10/sunday-afternoon-update.html

Well it’s not good news for the US banks but on the other hand maybe new procedures and more lawyers will smooth things over. How come the American banks are so dumb? Like isn’t it their job to make sure their procedures withstand scrutiny?

#15 Bill Gable on 10.10.10 at 10:11 pm

I wonder how many Americans are living in their underwater claptraps, not paying, as the Bank let’s them stay…because the Bank worries that the copper thieves will trash an empty home…and the “asset” will be totally wiped out?
I also wonder if people that are still paying will finally say, “wait a second…why should I play by the rules, while slough off Charlie is still here on Cherry Hill Lane…”?
This is getting really greasy.

#16 timbo on 10.10.10 at 10:15 pm

#8 Basil,

from what I have read the problem is not that documents are lost but that they have always been there and banks cut corners by forgery and fraud.

“The notes are missing” is a pr stunt to keep the truth from coming out that mistakes were made and not outright fraud. Think about it for a second, a $500,000.00 note is lost? It is in a vault but banks and lawfirms, because of the risk in transport and to cut costs and time, manufactured evidence because the homeowner was in default so what is the harm. If you still cannot believe this then ask yourself how the heck did a bank get foreclosures on the wrong homeowners?

a link to what I have read and if this is true this makes the banks look like pond-scum.

“waroper” carries the conversation you want to look at.

http://www.hoocoodanode.org/node/11183

The internet is great at peeling back the onion and I would love it if we have a couple law degrees out there who could comment.

#17 Moneta on 10.10.10 at 10:30 pm

#211 grouchpeach on 10.10.10 at 8:18 pm
————-
Why do you need examples? The hard facts are your financial needs. If you need to downsize in order to afford your later years, you need to downsize.

Nobody has the right to tell you what you need or want unless they can guarantee your financial future.

#18 Moneta on 10.10.10 at 10:37 pm

Imagine buying a 75K McMansion in Florida and getting it taken away by the same couple that got foreclosed because the bank could not prove it had title.

#19 junius on 10.10.10 at 10:42 pm

A great primer video on this is on Youtube from Congressman Alan Grayson. Well worth the watch:

http://www.youtube.com/watch?v=AqnHLDeedVg

#20 junius on 10.10.10 at 10:45 pm

#10 Winnipeger,

They are not that coordinated.

What they are doing is slowing foreclosures because until they foreclose they can carry the house as an asset at the full value of the mortgage. This is the real reason they are stalling.

#21 Sam on 10.10.10 at 10:46 pm

This was discussed on iTulip, I think it was 2 years ago when a judge refused to allow UBS (or was it Deutche Bank? I forgot the details) to foreclose on a place because the MERS paperwork was faulty.

I talked about this with a Canadian lawyer (in Canada) 2 years ago and he agreed, that house should not be foreclosed.

Everybody knew it was coming.

The banks tried to shove through a law letting them do whatever they wanted.

Obama vetoed it Friday, I think.

#22 junius on 10.10.10 at 10:48 pm

#13 timbo,

You asked, “I’m not in law but would love for someone to comment as to my conclusions. This is only my view from reading other blogs and could be wrong. If I am correct this will freeze the housing market.”

Absolutely this will hurt sales. Huge.

What is so bizarre is that they actually created a mortgage system that ran outside the normal legal system. This was for speed and efficiency.

In most jurisdictions you must file a mortgage as a security instrument in the Property registry. In the US they appear to have created a mortgage system outside the Property registry system. It is bizarre.

#23 BrianT on 10.10.10 at 10:58 pm

Adolf is not too happy with the latest twist http://market-ticker.org/akcs-www?post=168742

#24 mikef on 10.10.10 at 11:05 pm

Ya know Garth it’s still Canada between Oshawa and
New Brunswick.

Any chance of crossing the Styx and coming to
Ottawa/Montreal?

#25 dd on 10.10.10 at 11:16 pm

…First, every Canadian should be praying for an American real estate renaissance…

Ya. Pray and see where that will get you.

News about another simulus package to hit the market for 2011. Government will give underwater home owners (mortgage) with ARM resets more cheap rates. This way the home owner stays and banks do not have to foreclose.

It will just keep getting worse if the government doesn’t allow people and business to fail.

#26 dark sad person on 10.10.10 at 11:18 pm

Inflationist Basil puts his finger on the pulse of the ugliest and most dangerous part of this whole fiasco-
What he points out-is every Bankers nightmare-
The value of the highly leveraged CDO market and the value/worth-of the hedge against its demise-the CDS market-that sits on Bank and Corporate balance sheets all over the World and because of “new” accounting rules-can sit on balance sheets and masquerade as “assets” of full $ value-

The mortgage market valued on house prices-is minuscule in comparison to this Frankenstein-
in fact-the US could have paid off every mortgage in existence-with the amount of money they’ve thrown at this thing-
The reason the money has gone elsewhere-ie-Banks-
FNM (absorbed by taxpayer debt expansion)
FIDC–the (cough) Banks insurance policy-
Is because-they absolutely cannot-have these “Instruments” see the light of day-because-it would prove the “World” Banking system to be totally insolvent-
Now finally in light of what’s recently come to light about this-leaves no doubt-that these derivatives are bogus-from step 1-
There’s nothing there-no measurable collateral value-underpinning hundreds of trillions of $-world wide-
This-is why i believe-a repudiation of debt-lies somewhere ahead of us-
We simply cannot print-tax-or grow our way out-
This is not a bad thing-at least compared to the other alternative-which is to totally debauch the currencies-
The Central Bankers/Fed/Government’s will not take that route-simply because-they would be as hooped and powerless as the rest of us-

G–what if they just gave “Default” a nicer name?

Like dirty Dick did-in 1971-when the US “defaulted” on its Gold payment obligations by International law-of the “World Gold Agreement” which almost collapsed and ended the newly announced–
“USD Reserve Currency” status–and–
Was only saved by Volcker raising rates to 20+%

#27 dd on 10.10.10 at 11:24 pm

…There’s no rush to get yourself down to Miami or Phoenix to feast on carrion….

Couple months ago you were in a rush. You said better buy within a year or so. Funny how the time lines change when the news finally hits the front page of the Globe.

Never said there was any rush, of course. The general principle of sell Canada, buy USA stands. But as I said then, you damn well better know what you’re doing. — Garth

#28 Jeff Smith on 10.10.10 at 11:41 pm

Hyperinflations ? I don’t think so.

http://www.washingtonpost.com/wp-dyn/content/article/2010/10/07/AR2010100706616.html?referrer=patrick.net#article

#29 nonplused on 10.10.10 at 11:49 pm

“I guess it all means what I’ve been saying here for the last eternity is true. If you’ve been mulling selling, do it. If you dream of buying, forget it. If your net worth’s in a house, panic.” – Garth

Sometimes “I told you so” feels so good, especially after all you’ve been through over the last 2 years in ad hominine attacks, distortions, and general jack ass baying. However, we are still probably 2 years away from being able to say that to Canadians, who are stubbornly thick-headed when it comes to economics and also suffers a daily barrage of propaganda designed to make us all feel that “it’s different here” and “we’re so safe and prudent” even when the numbers clearly indicate that if it is true, it’s only true a little bit, was only true yesterday, and looks like it won’t be true tomorrow.

Nevertheless, the Canadian real estate market is currently dominated by a seller’s strike, and prices won’t move down until somebody somewhere has to sell to the highest bidder, instead of periodically relisting every 4 or 5 months.

I think there is a remote chance, say 5%, that the rose colored glasses come off all at once, and real estate makes a 30% down move in the most bubbly markets in one year. (Vancouver, the mother of all bubbles world wide, the US didn’t have any markets that matched this except perhaps New York, and followed by Calgary and Edmonton, with Ottawa having only a tiny bubble that might actually just be inflation, and Toronto somewhere in between. In fact, if you look at the charts, it could be argued that the bubble was mostly in western Canada, which is why Flatulence and Carny-val didn’t see a problem. Canadian central planners plan for Ontario and Quebec, and couldn’t give a rat’s ass what is happening out west, because they don’t have enough seats to form a government. The election is over when the polls close in Ontario.)

Just to reiterate a story about how crazy seller expectations are and how firmly planted they are do to all the free mortgages that were (and still are if there are any takers), the house down the street: Listed over a year ago for $1.4 mil, languished. Relisted. Repriced. Repriced again. Relisted again. Repriced and repriced. It’s now at $975,000 and no takers. But when it finally sells for $800,000 (my guess), the owners will still have netted a 100% profit in 7 years. No need to shed any tears for the poor sellers, that’s a damn fine rate of return compared to anything but gold over the period. But they thought maybe the house was made of gold or something, so very unreasonable pricing. Of course they will probably rent the house out and watch the market value head through $600,000 in a few years time before they sell at $800,000, even though $800,000 represents a huge profit on a depreciating asset, but hey. You can’t reason with people. You can try, but it doesn’t work.

#30 nonplused on 10.11.10 at 12:07 am

PS, these natgas prices suck, and it’s starting to look structural. Actually it looks structural. Short TCPL if you are so inclined, and if you own it get out now! At these netbacks they are not going to be able to just keep raising rates every time their throughput goes down, as they will bankrupt the shippers. Its a camel carrying way to much straw.

And with the US economy destined to languish for some few years yet and shale gas popping up in large quantities under just about every major consumption region, this isn’t going to get better for a while. Canadian production prices are going to shut-in, because the gas has nowhere to go and TCPL changes to much to sell the gas in the US.

We are screwed, here in Western Canada. Except for oil. Oil is still gold.

#31 huh? on 10.11.10 at 12:17 am

I’m not quite following this halt of forclosures. Isn’t this kinda good since it will keep houses off the market thus decreasing the supply of homes for sale?

#32 Nostradamus Le Mad Vlad on 10.11.10 at 12:27 am


Known or not, there are some very strange bedfellows combabulacting here, agreeing with one another but using slightly different terminology including TBL, #5 Just A Tech and Garth.

#204 TheBigLebowski on 10.10.10 at 7:08 pm

“IMF takes on peacekeeping role in global ‘currency war’ [only because the IMF, the UN and various shadow banking sects are also one and the same — the NWO] . . .

“We are about to be moved into a post-democratic society. The most utterly undemocratic self appointed groups of global bankers are about to start calling the shots on the world’s finacances. The IMF and U.N represent an unelected dictatorship with no voter oversight, yet they are being allowed to set the ground rules for the world’s fiancance? Can’t anyone else see the insanity in this? The next step will be a global currency issued and controlled by the same bankers that created this mess.”

#5 Just a Tech — “Yeah that shadow inventory was with held from the market in order to create a false bottom while the fed padded the banks’ balance sheets.”

Garth says: “. . . the housing meltdown is simply getting worse. Hired by the banks to blitzkrieg their way through those mountains of legal documents and court-ordered evictions, it’s alleged most of them just pushed the process ahead instead of doing what they were legally required to do – check and verify all information. . . will not bounce off the bottom until all those homes are gone, because supply will continue to overwhelm demand, allowing prices to slide. . . more price declines. . . it’s a death sentence for USA real estate – at least in the short term.”

With the link yesterday about the possibility of martial law being bought in before, during or after the mid-terms and with the war mongers (neocons) yelling for a nuke attack on Iran, one can visibly see The End Is Nigh (for the Titanic) — this is Their Last Hurrah.

With unemployment steadily increasing in both countries, Garth’s sentence can be slightly altered to “. . . will not bounce off the bottom, probably for generations. It’s not a Great Recession anymore, but another Depression.”

With the WH and US Fed adding US$4.11 bln. every 24 hours to the debt, the housing / banking / legal mess all adding on the mix, what else can it be called?

As no one can foretell the future with any degree of certainty in an unstable world, what happens if this plays out to its end?

With Brazil, Japan, China and Russia all doing quite nicely, none of them are about to head into panic mode when the US starts toppling. They will only be around to share the spoils of war.

In defence of Garth, Obama et al — Blogs Win One

BTW — “If you’ve been mulling selling, do it.”

A couple of years ago, if life had played out the way we would have liked, we would have downsized first, smartened the home inside and out by putting around $20 or $30K in, then sold and downsized to a townhome or something small.

Not now. But at least this is paid for, and the RRSPs are increasing nicely.
*
The Clash Fans of The Clash probably already know they hardly ever wrote their own tunes — it was done for them. The group, who were controlled puppets but were very good musicians, were only a product to be marketed and used.

Keynesian nonsense, along with Cost of War and other goodies.

IMF and Sugar Plum Fairies dance gaily into the night.

Hunting appears to be doing very nicely.

Not quite sure what to make of this. China, Russia and the US all headed down?

Microslop’s Silly Billy Gates speaks on decomputerization. Or depopulation. Take your pick!

#33 Jane on 10.11.10 at 12:33 am

#4 Timbo
Thanks for the rainforest link. Explained the robo-signers well…holy man could RE and the US economy be in any more trouble? It is a new world out there.

Garth, what’s the impactbgoing to be on our banks? And why if we dream of buying, should we forget it?

#34 604genX on 10.11.10 at 12:48 am

“Foreclosure Fraud” 101:

http://rortybomb.wordpress.com/2010/10/08/foreclosure-fraud-for-dummies-1-the-chains-and-the-stakes/

#35 604genX on 10.11.10 at 1:17 am

Surprise, surprise, the clowns who blew out NINJA loans to anyone did a crappy job completing documentation?! The industry went insane with greed and it looks like they screwed up the most simple aspects of loan documentation in the frenzy to make fees.

I disagree with Garth. The delay in fraudulent foreclosures is great news for millions of people. The US needs some breathing room to stabilize and this will slow down the chaos. And if the big banks end up being nailed as a result of these documentation screw-ups then uncork the champagne. They dodged the first bullet in 2008 with a billion/trillion bail-out. I doubt the banks will be able to pull off bail-out 2.0. All those crazy tea baggers will go ballistic and wont allow the banks to get away with it again.

BTW, don’t demonize the victims (borrowers) in this.

#36 Coho on 10.11.10 at 1:26 am

#204 TheBigLebowski,

Re: Article on the IMF and currency wars.

Good catch. Wasn’t such talk ridiculed as tin foil conspiracy theory not too long ago? I’d like to think that most people visiting blogs like this are becoming aware enough to begin connecting the dots. Perhaps they are the silent majority. And then there is the vocal minority…the ones that label, ridicule and name call those speaking out about the bigger picture. The minute they see people starting to pull their heads out of the sand, they attempt to shovel more sand on top.

The words fear and greed, a common trait in us and a powerful driver in our actions, have been written here many times to explain why so many of us are currently in a financial pickle or headed towards one. Take that fear and greed — throw in power and control — and it gives you Joe and Mary six-pack on steroids. In other words, our esteemed leaders in politics and industry are carrying these same shackles to better judgement and deeds. Small wonder things are so messed up.

We know how we perceive those “least” among us. The renters, the spenders, the boomers, the public servants, the union workers, etc. We common folk seem to have a lot of anger, resentment and disrespect for one another. Take that attitude several notches up the power chain and it should give us a pretty good idea of how we’re viewed by some of those occupying the halls of power.

Yep, that’s all we need, consolidation of yet more power that’s beyond reproach — above pseudo-democracy and voter backlash.

#37 ralph on 10.11.10 at 1:44 am

Better read this if you are planning on traveling to France in the near future.

http://www.ericmargolis.com/political_commentaries/france–let-them-eat-less-cake.aspx

#38 oilsand eddy on 10.11.10 at 2:21 am

How many Canadian banks are affected by this through their investments into the U.S.? What ramifications will this have on Canadian interest rates? Frankly this is more than a simple matter to chuckle over by the tin-foil hatters. Will this single decision have a ripple effect for the Canadian rules that apply to mortgages?

#39 Yank on 10.11.10 at 2:22 am

“Throw in a Vette and a couple of those cheerleaders, and we might consider saving your real estate thingy, Yanks.”

Not enough Canuks to save this thing, even if we through in cheerleaders. When the USA f*cks up, we do it big time.

On the other hand, Canadians looking for retirement homes will have a lotta options in the next five-ten years.

#40 Jeff Smith on 10.11.10 at 2:43 am

>#5 Just a Tech on 10.10.10 at 9:05 pm
>Yeah that shadow inventory was with held from the
>market in order to create a false bottom while the fed
>padded the banks’ balance sheets.
>
>The interesting part is that through all these Mortgage
>backed securities and other derivatives that were flying
>around, these mortgages were sliced and diced and
>packaged off. Now in many cases, the banks no longer
>have the deed and have no idea who actually holds the
>mortgage lol. That is why they were expediting the
>foreclosure process, to rubber it all off and hope no one
>was the wiser. Maybe some people will be getting a free
>house?

In fact, every one of them will all get their free house. LOL
Paid for by all those foreign monkeys who bought up those securitized mortgages. LOL. Come to think of it, the american administration is an absolute genius. Too bad Canada can’t pull it off, how the hell are you gonna securitize CMHC? You cant. Its gonna be dumped on the canadian tax payers. Gulp! :(

#41 Jeff Smith on 10.11.10 at 2:50 am

>#14 45north on 10.10.10 at 9:56 pm
>link from Timbo: As more people realize that the fake
>title transfer aspect of foreclosure fraud is just the tip of
>the iceberg, I believe you will see that the
>repercussions are severe.
>http://whispersfromtheedgeoftherainforest.blogspot.com/2010/10/sunday-afternoon-update.html
>Well it’s not good news for the US banks but on the other
>hand maybe new procedures and more lawyers will
>smooth things over. How come the American banks are
>so dumb? Like isn’t it their job to make sure their
>procedures withstand scrutiny?

Actually the American banks are not holding most if any of these mortgages. Remember these mortgages were securitized and sold all of the world, from Scandanavia to Tokyo to Germany, oh yes and Beijing. Those are the true owners of these mortages. teehee. So if the american NINJAs (noincomenojobsnoassets) suddenly can’t pay the mortgage, well the foreign backers of these mortgages will have somehow to forclose on these poor NINJAs. Good luck with that. Like imagine them coming over to the USA of a with a piece of paper with the title to the property and says “Get out of my property! you are forclosed on”. Click! POw! Click! Pow! Remember unlike in Canada, the US citizens have the rights to bear arms.

#42 kitchener1 on 10.11.10 at 3:06 am

Not good news for the US banks.

It means that there balance sheets will be tied up for months to a year.

I really, really hope the dollar does not go to 1.10, but who knows how low the US is willing to let the USDX fall too.

#43 obert on 10.11.10 at 5:14 am

A question:
Yes, CMHC is a government agency, but also functions as a corporation – so if it goes deep in red, can it be simply let go bankrupt? Can it be made explicit that no taxpayer money will be used to rescue or bailout it – can it become a law? If yes maybe starting a petition for such a law to be enacted could be started: That NO TAX money be used to bailout CMHC if it starts loosing money.

The tax money is for defense, public safety, health care, education, roads and infrastructure or similar. But not to prop up one industry: that is Real Estate. I do pay taxes and pay my own bills – why should I bail out lenders who make irresposible loans, and why should I bail out “homeowners” who borrowed in excess.

Using my taxes for bailing out CMHC, banks, and the defaulting debt-lovers should be made illegal.

#44 Brian1 on 10.11.10 at 6:21 am

Garth owns up to the new information every time. That’s why we read his blog.

#45 Numbers. on 10.11.10 at 6:24 am

This is going to sound crazy, but it’s true.

The robo-signing forclosure crisis in the USA has reached a new bottoms. Aparently, the banks were forclosing on homes THAT WERE PAID IN FULL and kicking the owners out.

What was happening is the banks were trading the MBS (Mortgage backed securities) in bundle investment packages to investors, mortgages within these bundles went into forclosure as the package kept trading from one hand to another, and some years old within the package. Now it’s unclear who owns the title of the house and who is in the house, if the house was sold or still for sale, etc.

So you would have new owners who bought a home that was or used to be in forclosure approached by a bank who thinks they own the house (but they don’t own the house title) with the name of the previous owners and kicking out the new owners.

Amazing but true. Could it happen in Canada? It all depends if Canadian Banks during the boom did their paper work like the US banks.

#46 Canada is not USA on 10.11.10 at 7:13 am

Garth
While I will agree Canada will see declines in housing prices, but I disagree we are going the same way as the US in a total collapse.

I have been following your blog for some time I have done some additional reading and now disagree that Canada will suffer the same fate as US

Here are some facts:
Americans needed a quick fix in that their education system was falling behind the world. Fixing the education system would not produce results for decades. Therefore Under Clinton and then Bush the US said every American needs to own a home. (Fault Lines)

And the great loaning of billions of dollars to people who should never have gotten loans began. Governments pushed Fannie and Freddie to support low income lending (not the case in Canada).
Hundreds of Billions every year was loaned to people that should never have received mortgages, we are talking the poorest of Americans.

We have not and I repeat Canada did not push mortgages onto low income persons, it is not our policy.

CHMC only has 46.9 Billion worth of CMB outstanding compared to the 800 billion of Fannie and Freddie
http://www.cmhc.ca/en/corp/about/cahoob/upload/D_chapter_3_EN_2010_links.pdf

In Canada GIC’s are used to fund mortgages unlike the US where they package them up and sell them as bonds.

Another reason that American banks needed bailing out the risks where way to high. In Canada I did not see any bank failures.

Read the CHMC report and read Fault Lines. Be informed read as much as possible.

It just not the same in Canada.
We all need to have opinions as it spurs debate.
Cheers and Happy Thanksgiving.

Nice speech, but a careful reader would note I’ve said consistently we will not simply repeat the US experience. There will be a correction here followed by a multi-year melt, but I do not expect declines on the magnitude of the American model. Still, when you bought with 5% down or less, you’re still screwed. And you can stop with that myth of the too-cautious Canadian bankers. We all know better. — Garth

#47 wellwell on 10.11.10 at 7:17 am

This reminds me of the problems in Eastern Europe after the fall of communism. Families who’d had their houses taken from them when the communists took over in the 1940s appeared out of the woodwork and wanted their properties back. Communist governments had divided the houses into flats and ‘sold’ them to successive generations of party members. It was very complex, but the original owners usually prevailed.

It’s sobering to realize that it took less than a decade for the United States, the heart of democracy and the rule of law, to recreate the mess that Iron Curtain communists took half a century to achieve.

I used to wonder how Ancient Athens, after defeating the Spartans and achieving political and military supremacy, allowed its own empire to disintegrate so quickly. But I’m beginning to understand now – I feel as though I’m watching a modern repeat of events that happened nearly two and a half millenia ago.

#48 jed on 10.11.10 at 7:20 am

Australian lending figures for August out today, stinking it up again

http://tasmanianrealestatetrouble.blogspot.com/2010/10/rotten.html

great day to list your house over 550k in a region where the economy is in the toilet and in a state that hasn’t seen such a consistent set of low lending figures since the year 2000.

#49 miketheengineer on 10.11.10 at 7:38 am

Garth et al:

Thinking about Hamilton the other day. If you want to play the real estate game of “lets fix and flip this shack”, then Hamilton is your city.

160 Vacant buildings, just waiting for your finishing touches. Some even in good areas.

http://www.thespec.com/news/local/article/266149–on-barton-street-east-the-few-survive-amid-vacant-buildings

Hamilton……reminds me of a mini-Detroit?

Time to tear the shacks and vacant properties down….and go green field….re-start with urban forests, etc.

What do you think about the Hammer Garth?

Yes you too can own one of these beauties.

#50 S.B. on 10.11.10 at 7:44 am

I’ve followed a US online investment forum for years now. Two people, one in N.J. the other in Ohio, who live in middle to upper-middle class developments each report several neighbo(u)rs who have ceased to pay mortgage and/or taxes for many months even up to 1 yr.
It’s of epidemic proportions – perhaps 1930’s all over again with people simply walking away from their houses and homesteads?
The US tax base must be hollowing out. Too bad they spend 50% of every tax dollar on war-making. But that’s a whole other blog…

People also report that FOX TV guests lambast the’lazy’ people who are on unemployement or even food stamps, not even mentioning that so many ‘patriotic’ US companies have moved their operations overseas.
Bad, lazy slaves! Get back to work, now.

On the other hand, the US Army (or Walmart) is an employer of last resort. War is a business and business is good. Just think, a standing army full of broke desperate people who will do anything for money. Total loyalty. Lots of orders will be followed, that is for certain…

#51 junius on 10.11.10 at 7:59 am

#43 obert,

You asked, “Yes, CMHC is a government agency, but also functions as a corporation – so if it goes deep in red, can it be simply let go bankrupt.”

No. It is guaranteed by the Federal gov’t and therefore the Canadian tax payer.

Meaning that we will be on the hook for millions of dollars in payouts to the banks over the next decade.

Fun, eh?

#52 David B on 10.11.10 at 8:00 am

And just what do y’all think Washington is going to do about anything when all they do is worry about the next election. Speaking of which a major power shift is about to take place in less than a month then let the real blame games begin. Here in Canada our government is in hiding, nothing but slash and burn via cut backs and no retirement replacements.

#53 junius on 10.11.10 at 8:03 am

#45 Numbers,

You asked, “Could it happen in Canada? It all depends if Canadian Banks during the boom did their paper work like the US banks.”

It could happen but on a much smaller scale and not for the same reasons. Remember that in the US the breakdown is part of the Mortgage backed security system. We didn’t have anything like that.

I expect that in Canada we will see that there were lots of fraudulently acquired loans and other scams going on over the past decade or more. However I don’t see the possibility of anything like this situation.

#54 Bill ( Peterborough) on 10.11.10 at 8:12 am

# 19 junius

Incredible Video. Kangaroo court system. This should tie up the court systems for a while. Can see every bodies insurance going up all well. Need more lawyers.

Q)
What do most lawyers and a sperm cell have in common?

A)
One in a billion chance of becoming a human being.

I personally would not buy anything in the U.S for a long time. You might end up getting shot by an irrate U.S. citizen, who just lost there home to a foriegn investor.

___________________________________________

There will no longer be justice in our courts , in the near future. JUST THE LAW.

The laws are written to protect those who steal from us, for the most part. ( Laws for rich, and laws for poor)

2 tier law system will go great with the 2 tier society in the near future. ( fuedal system)

Food for thought :

The Banking Cabals / Rothchilds invented this game of Monopoly a long time ago. They are always the winners, controlling the money supply. The rest of us end up loosing . Even the ones who sold us out, for worthless fiat currency. Judas, everyone of them.

http://www.youtube.com/watch?v=Wpm-0w2Xehg&p=478B6B7B09366DEC&playnext=1&index=3

http://www.youtube.com/watch?v=BkPRskciqVM&feature=related

#55 grouchpeach on 10.11.10 at 8:13 am

#17 Moneta Thank you for your comment. I am in total agreement with what you said. Of course a large home (even if fully paid for) was not, and is not, the best use of a big chunk of our net worth for the coming years. Aside from freeing up the money when we sold – we are now relieved of the bloated taxes and running costs of the house. It was a logical part of our financial planning regardless of the market and I don’t think anyone in our family or social circles questions our doing so. What I think is difficult for some people is the fact that we did not immediately purchase the downsized home when we sold the house.

I don’t think I was clear enough about what I needed some quick answers for. It is not about the question of downsizing. The current (and somewhat socially contentious I am finding) question for us is about what we will have to pay for that next home if we buy it later as opposed to now. I should also add that a few of my sibs have recently purchased nice homes over the past couple of years so they REALLY do not want to hear that waiting might have been a better use of their resources – or, that their assets might not be worth what they paid for them for a long while. Also a lot of our friends and family are still in their “big houses” so maybe they find our current financial planning uncomfortable to them because it is different than theirs and they do not want to find out that they too would have been wise to have had sold this spring/summer. I think from what I have heard form some of our old neighbours that some are actually begining to think that. There are still houses in our price range on the market from when we listed and price reductions have been taken. At this point the rationalizations are that these houses were overpriced, not as nice etc. but there seems to be a glint of panic in the voices. I can certainly understand this and I will admit that at this stage of our lives after always being homeowners, it is frankly akward to rent and it has been a rather nasty experience for us – I just really believed that it was a sound move because of the future market values. In fact, I have also had to work really hard to convince my husband of the wisdome of all of this too and it has made for a few tense times. As I said, I “know” that prices are going down, I just wish I had some quick sound bite comment that I can give when people say that they read in the newspaper (or saw on the news) that this is not true. It can be a rather a lonely position to take the “greater fool” position.

Hopefully, I will hear some good quotes at the Toronto evening in November. I am dragging my husband along to that too so hopefuly Garth will wow him enough to put him firmly onside.

#56 junius on 10.11.10 at 8:18 am

Here is an excerpt from a piece in the Washington Post on it. Sums it up nicely.

“Millions of U.S. mortgages have been shuttled around the global financial system – sold and resold by firms – without the documents that traditionally prove who legally owns the loans.

Now, as many of these loans have fallen into default and banks have sought to seize homes, judges around the country have increasingly ruled that lenders had no right to foreclose, because they lacked clear title.

These fundamental concerns over ownership extend beyond those that surfaced over the past two weeks amid reports of fraudulent loan documents and corporate “robo-signers.”

At the core of the fights over the legal standing of banks in foreclosure cases is Mortgage Electronic Registration Systems, based in Reston.

The company, known as MERS, was created more than a decade ago by the mortgage industry, including mortgage giants Fannie Mae and Freddie Mac, GMAC, and the Mortgage Bankers Association.

MERS allowed big financial firms to trade mortgages at lightning speed while largely bypassing local property laws throughout the country that required new forms and filing fees each time a loan changed hands, lawyers say.

“Assertions that somehow MERS creates a defect in the mortgage or deed of trust are not supported by the facts,” a company spokeswoman said.

But that’s precisely what lawyers are arguing with more frequency throughout the country. If such an argument gains traction in the wake of recent foreclosure moratoriums, the consequences for banks could be enormous.

Janet Tavakoli, founder and president of Tavakoli Structured Finance, a Chicago-based consulting firm, said that for much of the past decade, when banks were creating mortgage-backed securities as fast as possible, there was little time to check all the documents and make sure the paperwork was in order.

The result: “Banks are vulnerable to lawsuits from investors in the [securitization] trusts,” Tavakoli said.

Referring to the federal government’s $700 billion Troubled Assets Relief Program for banks, she added, “This problem could cost the banks significantly more money, which could mean TARP II.”

#57 Alister on 10.11.10 at 8:19 am

In the 70’s the banks blew up from oil loans, then it was Latin American loans, then it was real estate loans in late 80’s, then the tech stocks, now its realestate again.

Nothing ever changes because greed and leverage is inbred in banking.

#58 BrianT on 10.11.10 at 8:23 am

Great read on the inevitable change of the American culture http://www.zerohedge.com/article/gonzalo-lira-coming-middle-class-anarchy

#59 T.O. Bubble Boy on 10.11.10 at 8:32 am

Don’t worry, Canadian banks have high lending standards! (especially for mortgage applications for self-employed people)

https://www.cibc.com/ca/mortgages/self-employ-rec-mortg.html

Key benefits

Simpler application You don’t need any detailed financial statements or income verification – so that means less paperwork and less hassle for you.”

#60 Got A Watch on 10.11.10 at 8:38 am

‘Foreclosure Gate’ is a ticking time bomb underneath the global financial system, and the count down is on. The blast radius extends far beyond the US real estate market, to “financial institutions” the world over. The rabbit hole runs very very deep on this one.

Most of the world’s largest Banks were involved in the “securitization” of “mortgages”, which it now seems was nothing but the largest systemic fraud and ongoing criminal enterprise in human history, as Janet Takavoli has been pointing out – the Banksters have been running ‘financial meth labs’ and now they have been caught at it.

If the MBS, CDO, CDO^2, CDO^3 “derivatives” etc based on these “mortgages” are nothing but vapor (the underlying real assets weren’t in there as promised), the entire inverted global derivative pyramid will come crashing down, all hundreds of Trillions worth. What is the derivative of zero? Zero, of course.

And every one of those ‘Banks’ and ‘pension Funds’ won’t be able to maintain the lie any longer that they are “solvent”. This is ‘sub-prime crisis’ multiplied by 1,000, and I think it just represents the next leg down in the ‘Great Recession’.

The slimy tentacles of this financial crime reach to probably every Bank and Pension Fund on earth, one way or the other. The sums of potential losses are greater than global GDP by a wide margin. With Central Banksters in disarray over ‘Currency Wars’ there seems little reason to think they will co-operate on resolving much if anything.

I can so no response by Government that will “fix” this problem. Any attempt to intervene to do so will probably only make it worse. Right now most PTB are still in denial about this issue, and the MSM have not connected all the dots. But that does not change any facts.

As I said, history has not ended yet. The future looks bleak for ‘International Banksters’, and it could not happen to a nicer bunch. Banksters should be swinging from ropes on every light pole along Wall St and in The City in London, the epicenters of global financial fraud.

The fallout will be severe for the normal (non-financial) economy, but this is a necessary step on the long road towards putting this crisis behind us by the end of this decade. And one further point, the massive ‘credit destruction’ that has to accompany the resolution of this thorny problem (unless you think all these worthless papers can continue to claim ‘full value’ in the accounting books of all (bag)’holders) – has severely deflationary implications. Global credit and willingness to lend will only shrink, maybe massively in a disorderly fashion, and that is not ‘expansionary’ in any sense.

What a load. There is no global conspiracy of people in banking. Most of the world’s banks were not involved in securitization, and a large number were victims of it. Take your meds and go for a walk. — Garth

#61 junius on 10.11.10 at 8:41 am

Can anyone find the link to the Hitler parody on this matter?

These are classic and hilarious. Here is the original on the housing bubble:

http://www.youtube.com/watch?v=bNmcf4Y3lGM&feature=related

There are here and here. — Garth

#62 Dumfukanuk on 10.11.10 at 9:00 am

Albeit this may not fare well for foreclosures in the U.S., it will without question stimulate the short-sales in the U.S. This will, more than likely, create a balance between foreclosures vs. short sale. Watch and wait…

#63 Dumfukanuk on 10.11.10 at 9:01 am

At #11: PropertyGuy, don’t get too smug… Our Canadian version is well on its way, and I can guarantee you we won’t fare any better than the U.S.

#64 OttawaMike on 10.11.10 at 9:01 am

What a mess! This brings to mind the disputes over land titles that still occur today in central America due to the land reforms and redistributions of the 70’s and 80’s.
Title insurance is worth every penny but are they going to start seeing those insurers collapse under the load of claims?
A mortgage broker pal here recently commented to me that the lenders and lawyers are even getting lazy and not doing things properly due to the “comfort” of title insurance.
In some cases in the US, I could see the lender arguing that the borrower had made principle & interest payments to them prior to defaulting but that would still be a weak case without supporting titles and notes.

Not to worry though, we all know that the US justice system always provides the best judgments money can buy.

#65 Dumfukanuk on 10.11.10 at 9:04 am

At #13: Timbo, in the U.S., they have something called Title Insurance, required on ALL home mortgages (no bank will move forward without it). This protects the buyer should any future issues arise surrounding Title.

#66 Dumfukanuk on 10.11.10 at 9:09 am

At #18: Moneta, in the U.S., they have required Title Insurance, which protects the new buyer. Should there be issues with the title in the future, the new buyer may have to return the home. However, the buyer would be made whole on his/her transaction with the bank through the Title Insurance company.

#67 junius on 10.11.10 at 9:10 am

#46 Canada is not the US,

You said, “It just not the same in Canada.”

No, it is not the same. However it is similar in 5 important ways.

1) End of Cheap Credit. Our economy was fueled for the past few decades on a sea of cheap credit. This is what lead to quickly rising home prices while at the same time putting the consumer at record debt levels.

2) Historically High Home Prices. Home prices are now way out of line with historical price to earning ratios, price to rent ratios and other affordability measures.

3) Slow Economic Recovery. Our economy is not recovering at a normal pace of recovery following a recession. We are looking at a long, slow period of low or even negative growth as we deal with the combination of slowing GDP, higher taxes, eroded affordability and stagnant wages. In fact, it is now clear that we are really in a depression.

4) Affordability. Consumer affordability is eroding for the consumer. Wages are flat and costs are going up. Meanwhile interest rates may stay flat for sometime but eventually they will rise and then do real damage to house values.

5) Demographic. The largest population group in our society is approaching retirement. This means less earnings, higher social costs and higher taxes for those still working.

I can’t speak for everyone on this Blog. However I expect that housing prices will simply return to historical affordability ratios over the next 5-7 years. Perhaps they will even over shoot due to sentiment and affordability problems.

That means prices will return to 3-4 times earnings. You do the math. In most of the country that means at least a 25% decline in prices. In the hottest cities like Vancouver and Toronto it could easily exceed 50% of current values.

A made in Canada crash will be bad enough. We don’t need it to be made in the USA for it to be painful.

#68 Basil Fawlty on 10.11.10 at 9:13 am

Dark Sad One
“This-is why i believe-a repudiation of debt-lies somewhere ahead of us-
We simply cannot print-tax-or grow our way out-”
I think we agree on the ultimate destination, but see different ways of getting there.

#69 S.B. on 10.11.10 at 9:15 am

Is it true that back in the ‘old days’ families would enjoy good meat perhaps only once per week, due to its high cost?

History repeating?

Oct. 11 (Bloomberg) — Meat prices are poised to extend a 14 percent rally this year that drove U.S. retail costs to the highest levels since the 1980s as surging corn futures prevent livestock producers from expanding their herds.

The U.S. cattle herd in July was the smallest since 1973 and the number of breeding hogs last month was near the lowest ever, government data show. Corn futures jumped to a two-year high today and the price of the main feed ingredient is more than 70 percent above the 10-year average.

U.S. per-capita beef supplies next year will be the lowest since 1952 and pork the smallest since 1976, industry researcher CattleFax said. Hog futures will rise 14 percent by July and cattle may gain 3.6 percent by April, according to a Bloomberg survey of analysts. Wendy’s/Arby’s Group Inc., the maker of the 1,360-calorie Baconator Triple burger, and CKE Restaurants Inc., owner of the Hardee’s chain, have warned investors they are contending with higher commodity costs.

#70 junius on 10.11.10 at 9:29 am

#64 OttawaMike,

You said, “In some cases in the US, I could see the lender arguing that the borrower had made principle & interest payments to them prior to defaulting but that would still be a weak case without supporting titles and notes.”

The documentation required for a foreclosure in most jurisdictions is very strict. It should be simple to prove but the documentation must be properly filled at the time the mortage was obtained in the appropriate public records office. It cannot be proven on a “balance of probabilities” test. The documentation must be perfect or “perfected” as the law says.

This is the really interesting part. In their haste to streamline the process they screwed up the documentation. Then they decided to remedy it with fraud. Now they tried to slip through legislation that corrected the problem ALLOWING them to circumvent the normal legal procedure.

Now it is up to Obama right before an election. Could be the gift horse he needs to hold onto Congress.

You couldn’t make this stuff up.

#71 Pete on 10.11.10 at 9:33 am

The stupid US government which hates the free markets created a monster worse then if they allowed the free markets to work in the first place. First they tried to help only those in trouble paying their mortgage and so those who were making payment said WTF why not me too? So they started not paying their mortgage in order to qualify for the lower payment scam created by the government . Well the snowball got to big and the government tried to manipulate the market even more until we come to todays problem of people living in their homes and paying NOTHING. Some haven’t paid for two years and have yet to be kicked out. hese people are now spending it in the bankrupt US economy which would be worse and going to be worse with time.The Canadian government should learn to allow the free markets to do it’s thing or face a US style crash.

#72 Moneta on 10.11.10 at 9:33 am

Grouchpeach:

I don’t think we are in the same generation but I’ve had a taste of your medicine. While our friends have been living the big life and spending like there is no tomorrow, we have made the conscious decision of being frugal.

We’re not saints. For a few years we spent a lot but did not like where it was leading us. We just felt empty and no matter how much we spent, it was never enough, we always needed an upgrade.

But it’s not easy to swim against the tide and once in a while my husband will ask me whether we are the suckers. And I tell him that financially, we could very well be as history is full of cases where the frugal got robbed.

But it all comes down to our view of the world, our tolerance for risk and our temperament. While I like nice things, I just can’t live the big life. It’s not me. And when I compare our Canadian way of life to that of the rest of the world, I can’t help but think we are unsatiable sloths.

Obviously, not many share my views. Like you said, we make others feel uncomfortable and in that light have been ridiculed and misunderstood. People around us can’t understand why a well-to-do couple would choose an average lifestyle. Just this weekend, the in-laws told us that, had we not been so cheap and bought a more expensive house with nothing to do in it, we could have had the money to buy a second car instead of spending it on windows and a furnace. The reality is that when we were shopping for a house, we did raise the bar but did not like what we saw. More expensive gave us the same level of maintenance/renos with more square footage. To get nothing to do, we would have had to fork out 100-200K in excess of what we were willing to pay.

But that’s not even the issue. We could have gotten the big house and the second car a long time ago. We did not because for the lat 2 years we have been having fun going against the norm. When we moved to Ottawa 2 years ago, we wanted to see how low a 4 person household could go to maintain a good quality of life. It was our little game. It has been a test in self-control and a reason for my husband to get back into shape by riding his bike to work. Now that my husband is back to being fit and slender, he’s not asking me if we are suckers nearly as much. On top of that, couples around us are splitting and he’s noticing that some of his friends are showing signs of debt indigestion. It took a decade, but it’s here.

One thing I have learned in the last decade is that people will think what they want about you no matter what you do. You can argue until you are blue in the face but you will never convince them until they live their own moment of truth.

Maybe you can do something special with your husband that you could have never done had you bought right away. Like giving yourselves more time to dream about what that money could do for you.

Only you know the answer.

#73 Dumfukanuk on 10.11.10 at 9:54 am

At #35: 604genX, WELL SAID! I agree completely.

At #40: Jeff Smith, You’re right too!

At #42: The U.S. is willing to let their dollar go LOW, until China stops artificially compressing its currency. The U.S. WANTS a low-valued dollar right now.

As for the Banks all starting at the EXACT SAME TIME with this moratorium (what a crock of b.s.), I find the timing of it all precisely coordinated amongst themselves. This comes JUST IN TIME as the mid-term elections come into play, and it is VERY CLEAR the Obama administration does NOT want a moratorium on the foreclosure processes, and the administration has been very vocal about this matter. Hmmmm, does anyone else find the timing of all this to be too funny? Banks CLEARLY are anti-Obama, and any way they can screw over the upcoming elections, they’re definitely going to do.

At #45: Numbers, I think it is becoming more clear by each passing day the Canadian banks were indeed operating JUST LIKE the U.S. banks. So, I have no doubt our banks “streamlined” the paperwork when pushing its cheap credit on every man and woman in Canada (hey, they’re banks, so they’re going to streamline as much as possible to create efficiency and increase ROI). Banks here acted no differently with subprime lending (we only called it something different), and therefore they’ve probably done the same thing the U.S. banks did with respect to title. Make no mistake this is the case.

At #46: Canada is not USA, Say what?!?! Where do you get your information? That’s pretty funny stuff you wrote there. Actually Canada acted EXACTLY the same way the USA did, pushing its cheap money on everyone, including the “poor.” How else do you explain Canadian banks lending at standards of minimal paper work and documentation, 0% down, 2% money for 5 years to be insure by the CMHC and not the lender? LOL That was a foul attempt of trying to call a pig a chicken.

At #51: Junius, I do not disagree with you, except we will be on the hook for BILLIONS – not millions.

#74 Moneta on 10.11.10 at 9:58 am

At #18: Moneta, in the U.S., they have required Title Insurance, which protects the new buyer. Should there be issues with the title in the future, the new buyer may have to return the home. However, the buyer would be made whole on his/her transaction with the bank through the Title Insurance company.
————-
It’s still disruptive. An experience you don’t want to go through.

#75 Publius Enigma on 10.11.10 at 9:58 am

Clarity.

Barry Ritholtz: America Needs an Intervention

And he’s correct, of course. But America has always been about the quick, easy fix. They will keep searching for one.

The markets have already priced QE2 into their equation, but they haven’t priced in “high-frequency signing”.

The equity markets are a much more dangerous place to be today than they were one short week ago.

#76 dark sad person on 10.11.10 at 10:01 am

#68 Basil Fawlty on 10.11.10 at 9:13 am

I think we agree on the ultimate destination, but see different ways of getting there.

**************

Agree where we’re gonna end up-but-Deflationary collapse/default first-
Then–after that-the sky’s the limit on the next stage-which could entail your game-no disagreement about that-

#77 breezer1 on 10.11.10 at 10:01 am

bill says it best…
http://williambanzai7.blogspot.com/2010/10/end-game.html

#78 Joe Realtor on 10.11.10 at 10:03 am

#29 nonplused…

Great post with mentions of “sellers strike” and not being able to reason with people.

I know of someone who has been trying to sell their overpriced home for months. Refused to reduce the price. Wouldn’t listen to their agent.

On the side, because they “know better”, they’ve gone and signed a deal with an assisted living residence.

Finally got an offer on the home. The only offer so far in several months. 50K less than existing list price. They’d still be “making” big bucks on the place as they probably only paid 100k for it.

They turned it down.

*and* they’re also on the hook for about 50 grand a year for the assisted living place.

They now plan on renting it out.

Yeah. Things are going to turn out well there.

#79 dd on 10.11.10 at 10:10 am

#30 nonplused

… PS, these natgas prices suck, and it’s starting to look structural….

Thank God we do have a lot of ngas. Peak oil is still alive and well. In the not to distant when oil heads back up to $150 per barrel ngas might bridge the gap. It will be back in fashion one day.

#80 junius on 10.11.10 at 10:16 am

#73 dumfuncanuck,

You said, “At #51: Junius, I do not disagree with you, except we will be on the hook for BILLIONS – not millions.”

I agree. I thought I would go easy on Thanksgiving.

#81 nestor on 10.11.10 at 10:23 am

if people don’t realize the global monetary system is broken, there is no hope in fixing it. the headlines below are an example of what is happening. the US fed is going to print as many trillions as it needs. anyone that thinks this is normal behaviour for a central bank is out of their minds. the US is in such a mess, they will never get out without some world wide coordinated response.

Dollar continues plunge as ‘currency war’ concerns linger…
Putin Selling First EURO Bonds…
China Reserves May Hit $2.5 Trillion…
Regulators planning worldwide rules for large firms…
420 banks demand 1-world currency…
Fed Expected to Resume Buying Assets…
MORE Money Printing…

#82 Randman on 10.11.10 at 10:34 am

#56 Junius

Tarp II ????

Wait till Tarp 8/Tarp 27/ and possibly Tarp 84!!!!

#83 junius on 10.11.10 at 10:55 am

#82 Randman,

My hope is that if they have another Tarp or any help for the financial institutions it is tied to better bank and credit regulations. This time he needs to put a gun to their head.

#84 Timing is Everything on 10.11.10 at 11:22 am

‘The loonie will rise’
Good.

‘new jobs won’t be created’
More of the same ‘old’ jobs won’t be created. Good.
Time to to upgrade your skills Canada. We are lazy.

‘exports will get creamed’
So what, we damn near give our resources it away anyway. We may actually have to learn how to make something useful out of our resources.

‘our homes lose value.’
Compared to what? I bought a home, not an investment per se.

————————————————————
Things Canada should do…

Get out of NAFTA (6 months and it’s gone)

It’s a profound relief you’re not running anything. — Garth

#85 BrianT on 10.11.10 at 11:30 am

$83-LOL-when is the last time you put a gun to your bosses heads?

#86 Got A Watch on 10.11.10 at 11:38 am

“There is no global conspiracy of people in banking.”

geez Garth, I did not say that, you mistake my meaning. Of course most Bank employees knew nothing about it. I’m not blaming the mail clerks or tellers here, or anyone below VP. It’s the Board and the top management who signed off on creating these things the way they were done.

“Most of the world’s banks were not involved in securitization, and a large number were victims of it.”

Exactly. Victim is the key word there. They were sold a bill of goods. But that gives them a big problem too when that “asset” turns out to be worthless. Not like they don’t have enough problems with “assets” right now. Basel III, cough.

Most of the big US Banks were involved in creating and selling the securities. They were sold to other Banks, Pension Funds etc, from everywhere. They were bought because they were ‘AAA’ and carried a higher interest rate.

But obviously not high enough to cover the real risk. That’s where the tentacles of risk go – everywhere, including (to a small extent, probably) Canadian Banks and pension Funds etc who own them directly or are involved with firms who did. But Big Banks in other places are directly in the crosshairs.

I have read estimates of the global market in US backed MBS and similar instruments to be in the multi-Trillions of $, and there are derivatives based on other derivatives (CDO^2 +) out there between private parties. If they are found to have little actual legal attachment to the “mortgages” and “real estate” that “backed” these things, they are worth, zero. With a capital Z. If you don’t own it, how can you collect the mortgage payments or foreclose upon it?

That is the rub here, the MBS or whatever is either worth something, or it’s not, there is not a lot of middle ground when the legal standing and ability to enforce the contract is in question. The farther away they are in legal standing, the less their claim.

If you think I am making all this stuff up, here: The Next Step in the Foreclosure Investigations who put what I said much more politely, but say about the same thing.

It happened because of greed – securitization was the road to big easy profits, the golden prize. But they did not set up the paperwork properly, in their haste to cash the bonus checks.

It wasn’t my idea. I just report what I read. I wish the whole thing had not happened, it’s just one more crisis issue we have to deal with, one way or the other. Bailing out the Banksters yet again seems unappealing to me, I don’t know about you guys. I don’t know the outcome.

Too early in the day for meds, after lunch. But I will go for a bike ride later.

Happy Thanksgiving to all.

#87 grouchpeach on 10.11.10 at 11:54 am

Moneta @ #72 – Yes, I am a lateish boomer – but a boomer nonetheless – and my husband is a little older so we are likely a generation older than you. You seem pretty wise for someone of your relatively tender years. I really enjoyed your email. Thank you for taking the time to write it. Happy Thanksgiving!

#88 Dodged-A-Bullit-in Alberta on 10.11.10 at 12:14 pm

Greetings: I notice that in Hungary, charges are being laid over the toxic sludge release and the deaths that followed. Eleven workers died in the GOM and nothing, dick squat!!! Massive fraud carried out in the American banking/ financial system and what happens, zilch. Not surprising individuals are leery of where to place financial investments. The whole system is corrupt!!!

#89 BrianT on 10.11.10 at 12:22 pm

#86Got-because the ave US pension fund is so damaged, Democrat politicians are floating the idea of “loss sharing” (my term) between 401Ks (basically US RSPs) and employee pension plans. The reasoning is that it is not fair for employees who have contributed faithfully to employer pension plans to be cheated (i.e. Nortel) while individual pension plan holders are not cheated, so the pain has to shared in the spirit of fairness.

#90 dale in van on 10.11.10 at 12:22 pm

gold 1354/oz today. STILL shooting upward. is there a message here?
http://www.kitco.com/

#91 Keith in Calgary on 10.11.10 at 12:28 pm

Studies are stating that the US will need a decade before unemployment starts to recede……..

And until it does, their real estate market will not start to recover, and RE market rebounds from the bottom take a decade or so……..

My prediction, the next RE boom will be in 2030 +……..

#92 skip on 10.11.10 at 12:36 pm

I love these Conservative guys and their out look on economics, eventually they reveal their true nature and feelings about other people.

Ya, it’s deadbeat homeowners that are the problem and not the economic system they work under? Get a grip Garth.

I do like what he says about the direction for house pricing.

But really? The problem with the worlds economy is the buying and selling of realty?

Not really, it’s the economic system used, that is the problem. Lets face it, capitalism screws the working class over, time and time again. Just ask all those people that can’t find a home?

Nobody has a right to a house. Grow up. — Garth

#93 TheBigLebowski on 10.11.10 at 12:50 pm

What a load. There is no global conspiracy of people in banking. Most of the world’s banks were not involved in securitization, and a large number were victims of it. Take your meds and go for a walk. — Garth

In a sense you are correct. Most banks are not part of a global conspiracy. Just the 12 insider banks that are shareholders of the Fed, Goldman Sachs, JP Morgan, CITI Group etc. They banks were given 90% of the trillions of dollars of bailout money to re liquefy their balance sheets. The non inside banks were left to deal with writedowns and losses, causing bank closures .Buyouts for pennies on the dollar by “liquefied”inside banks were possible causing a ongoing centralization of the banking system. The end result will be 10-20 mega banks in the U.S, down from about 5,000. These mega banks will own and control the Federal Reserve, dictating policy, and having complete reign over the direction of the U.S financial system. The small, local banks will simply be absorbed into this new corporatist/fascist model state run by big banks and business insiders. Say hello to the new Oligarchy.

#94 Timing is Everything on 10.11.10 at 12:54 pm

It’s a profound relief you’re not running anything. — Garth

I guess so…I was never the political-type. The only thing I run is my life and and our families home. And yes, that is a profound relief.

BTW, the same ol’ political thinking, will ruin this country…slowly, eventually, surely. Lib or Con….It matters not which.

It’s never too late to make a better decision.

Yes, on NAFTA too.

#95 dark sad person on 10.11.10 at 12:55 pm

#86 Got A Watch on 10.11.10 at 11:38 am

Most of the big US Banks were involved in creating and selling the securities. They were sold to other Banks, Pension Funds etc, from everywhere.

***************

Yes-and not only that-but some of these foreign Banks bought/re-bundled and leveraged them up even more and resold-

*************

SEC could look at Deutsche Bank’s role in financial crisis fraud

NEW YORK — Goldman Sachs stepped up its defense against civil fraud charges Monday, telling clients it did not withhold information in a complex transaction involving risky mortgage securities. But a big question was: Will other big investment banks face similar charges?

At the height of the housing boom, several big banks were busy packaging and selling investments tied to mortgage securities to meet investor demand. Such securities, called synthetic collateralized debt obligations, or CDOs, reaped huge fees for banks but later were blamed for creating the credit crisis and worsening the recession.

Among the biggest sellers of CDOs were Merrill Lynch & Co., now part of Bank of America Corp.; Citigroup Inc.; Swiss banking giant UBS; and German bank Deutsche Bank, according to a banking industry official with knowledge of the transactions. He spoke on condition of anonymity because he wasn’t authorized to publicly discuss the banks’ dealings.

http://birdflu666.wordpress.com/2010/04/21/sec-could-look-at-deutsche-banks-role-in-financial-crisis-fraud/

#96 joseph on 10.11.10 at 12:59 pm

#31 huh?…

Is this your first time following this blog???

There is NO piece of news that is not BAD for real estate in Garth’s mind..

*Houses being foreclosed, bad as there will be oversupply

*Houses not being foreclosed, bad as market will not bottom

Do you not get it? No data point, no policy, no ecnomic scenario will alter Garth’s view of the impending collapse of RE in Canada.

#97 TheBigLebowski on 10.11.10 at 1:08 pm

#90 dale in van-gold 1354/oz today. STILL shooting upward. is there a message here?

No agreement over the weekend by the G-20 dictators on currency values. The devaluation continues.

#98 Devil's Advocate on 10.11.10 at 1:23 pm

Never said there was any rush, of course. The general principle of sell Canada, buy USA stands. But as I said then, you damn well better know what you’re doing.— Garth

– – – – – – – – – – – – – –

Nice speech, but a careful reader would note I’ve said consistently we will not simply repeat the US experience. There will be a correction here followed by a multi-year melt, but I do not expect declines on the magnitude of the American model. Still, when you bought with 5% down or less, you’re still screwed. And you can stop with that myth of the too-cautious Canadian bankers. We all know better. — Garth

– – – – – – – – – – – – – –

Nobody has a right to a house. Grow up. — Garth

Am I sensing a return of the old Garth?… Right On! Welcome back buddy.

#99 Timing is Everything on 10.11.10 at 1:24 pm

#93 TheBigLebowski

Kinda like Canada’s Big 5.

#100 obert on 10.11.10 at 1:29 pm

Thank you Junius #55
So we are all on the hook…
But in billions not milllions, more like 500 billions.
But comparing to US it is like their 5 trillions! (500 x 10times bigger population)
Should the CMHC have a 20% reserve, to cover potential losses? Or maybe they already have?

#101 Devore on 10.11.10 at 1:30 pm

#55 grouchpeach

There are still houses in our price range on the market from when we listed and price reductions have been taken. At this point the rationalizations are that these houses were overpriced, not as nice etc. but there seems to be a glint of panic in the voices.

Of course, that is the same thing that is being trolled on the “bear blogs”.

But that’s plainly BS.

The houses for sale today are priced by the same people who priced the houses that sold yesterday. They know what they’re doing. They know what houses sell for.

The houses ARE overpriced, yes, but that is because prices are down across the board, not because the sellers were unrealistic. In fact, houses are still selling, but mostly only the best of the best, in best locations. They cost more than your average house, so average prices are up, but they are also selling for less than they used to, so price psf is down.

Time to hunker down and keep an eye on the developments, there are still many twists and turns ahead.

#102 Robo-Clowns on 10.11.10 at 1:44 pm

[…] it seems Mr. Robot has gotten a little out of control as of late — from the Robo-signing fiasco to Robo-traders wreaking havoc on the stock […]

#103 Grandpa Grinch on 10.11.10 at 1:56 pm

Might want to call 60 minutes & tell then HFT is a myth like you’ve stated here brfore Garth.

http://www.zerohedge.com/article/60-minutes-brings-hft-mainstream-cftc-refutes-hft-liquidity-provisioning-argument

#104 Devore on 10.11.10 at 1:58 pm

#68 Basil Fawlty

I think we agree on the ultimate destination, but see different ways of getting there.

While there is only one outcome to compounding debt without matching economic growth, I wouldn’t plan my life around it. There’s still plenty of legs left in this system.

#105 Jeff Smith on 10.11.10 at 2:02 pm

>#9 Basil Fawlty on 10.10.10 at 9:35 pm
>…with no proof of the underlying mortgages. The
>ultimate question is, do the companies that sold the
>credit default swaps have the money set aside to pay
>out CDO defaults?

Of course they have the money. The fed will just wave the QE wand and create the 60T dollars. LOL. The privilege of having a reserve currency printing machine.

#106 Jeff Smith on 10.11.10 at 2:06 pm

>#30 nonplused on 10.11.10 at 12:07 am
>PS, these natgas prices suck, and it’s starting to look
>structural. Actually it looks structural. Short TCPL if you
>are so inclined, and if you own it get out now! At these

What is the symbol for TCPL? Is it a listed stock? How come I can’t find it on google finance?

#107 Devore on 10.11.10 at 2:07 pm

#89 BrianT

As the defined benefits scam… err… pension situation continues to deteriorate around the world, it will visit Canada soon enough, and I would not be surprised to see similar grabs here for things like RRSPs. After all, only the rich have enough money left over to contribute to an RRSP, and no one ever got fired for taxing the rich a little more, did they?

#108 RickOShea on 10.11.10 at 2:22 pm

two things – first, this brings to mind the old adage, “to error is human, but to really screw up, you need a computer…”

second, i was reading a really interesting article a while back by an economist who was saying that american consumers were not ‘deleveraging’ (borrowing less, paying down debt) as is the current assumption — he believes many borrowers have stopped paying on their mortgages and are essentially ‘living the life of Riley’ with the ‘liberated’ money.

This would have implications for the economy in the USA – one being, consumer spending is artificially high right now as a result….

Potentially more bad news to digest going forward.

#109 Moneta on 10.11.10 at 2:31 pm

grouchpeach:

Come to think of it, I do have a perfect example.

My in-laws downsized 2 years ago. They refused to rent because they did not want to have to cope with 2 moves. As they put it, they’re not getting any younger.

For the last 2 years, they’ve gone to hell and back. The seller lied about the condition of the house and they’ve been dealing with disaster after disaster since they moved in. Thus, for the last 2 years, they’ve been in renos and dealing with lawyers. They’ll probably have to sell again because real estate is now, once again, a greater percentage of their net worth than what they wanted. I guess it all depends on what they’ll win back in court. So much for peaceful golden years and a downsize.

The moral of the story is that owning is not necessarily better than renting. Bad luck can happen under all circumstances. And in bubble times, bad luck has a higher chance of occuring because more people are forced to cut corners or cheat.

On those words,

Happy thanskgiving!

#110 VICTORIA TEA PARTY on 10.11.10 at 2:46 pm

NOTHING’S CHANGED! NOW, ANOTHER DISCONTENTED WINTER APPROACHETH

This winter, economic and otherwise that now descends, WILL be one for the books.

How about a major currency crisis; even more money printing by central banks everywhere; a further US real estate price melt, and because of that; a run on the US banks, both deposits and stocks?

That, and possibly, more are all in the cards judging from events of the past few days.

But first a brief detour into Canadian real estate fantasy land. I always thought Garth was being a little too (hopefully?) sanguine about the future of Canadian real estate. I believe he’s right about a quicker melt. It is agreed, therefore, that the fastasy real estate “park” has just closed its gates. Property virgins will be looking like shorn sheep if they still insist on climbing over that fence!

Meanwhile back at the real world, I’ve been reading Karl Denninger’s Market Ticker blog, and he’s been ahead of the pack on this US real estate forclosure disaster as it affects America’s banking system and the many victims.

He’s used the word “fraud”, and more, to describe what he says is a nightmare of behind-the-scenes incompetence and genuine lack of judgment by all of the players there.

NOW, for the Bank of America to decide to suspend indefinitely its share of the RE foreclosure business (!) in all 50 states could see this:

–BoA shares will eventually be destroyed by investors as the real value of its RE holdings become evident (they’ll be worthless);

–and, the “American Imperial Banking system”, so-called of which BoA is one its “banks of record”, will be one among others that will HAVE to be bailed out, again, using fresh money printed up by the US Fed.

This debacle will simply ADD MORE FUEL to the latest emerging catastrophe, the race-to-the-bottom world currency crisis, featuring the US dollar front and centre, because of its world “reserve” currency status.

I’ve been reading and watching TV reports about the weekend’s futile IMF meeting in Washington. These members resorted to blaming one another (there was a separate gang-up on China) for not providing a more “accommodative” currency trading proposal for the greater good.

So, don’t look for answers soon, because this is a collection of greater fools, whose immediate sovereign self-interest will propel all of us toward trade protectionism that will severely whack Canadian real estate and our economy at large never mind the rest of the world.

(BTW, currency trades around the world amount to about $4-trillion US during each trading day. That is many times the amount of money traded in the bond, stock and commodities markets.)

The bottom line here is historic: a likely “chain of fools” of bad US real estate, linked to incompetent banking practices, coupled with an international trade-based currency crisis, leading to further US dollar degradation, all fed by limitless amounts of money printing by many countries, including the US, leading the rest of us to who knows what destination.

If the Dow Jones, the last gasp of hope for tattered US investors, crumbles thanks to collapsing US banking stocks, then hang on. It will be a winter for the books. Definitely.

At that point, this blog will become more than a discussion forum; it will be a great source of info for many people who’ll be just trying to get by. Keep this discusison going, folks. We all need this blog, big time.

#111 Patz on 10.11.10 at 3:54 pm

Years ago (you can roughly figure how many) my wife and I put an offer on a small 20 acre farm in the 905 for $64,000. No I did not leave off a zero. Nice old but substantial 5 bdm farmhouse, barn and a pretty good tractor. Our offer was accepted and we dreamed of our own pumpkin patch. It was not to be—there was a cloud on the title. As a result we could not get title insurance and we walked sadly away.

The crimp this massive mortgage fraud puts into the existing housing market is huge. Who will buy if they can’t insure title? Who will insure titles in this clusterf*k?

(Could this result in a small uptick in new home construction as there would be no problems of clear title? Stay tuned.)

This is a Gordian knot with no swords in sight.

Perhaps this is our “October Surprise” for this year. It has a nice ring don’t you think? 10/10, 9/11, any others?

#112 Patz on 10.11.10 at 4:03 pm

Or as James Kunstler says in his blog today:

“I’m sorry, but I don’t see anyway out of this. With fraud absolutely everywhere in our banking system, like some advanced metastatic cancer, financial metabolism comes to a sickening stop. Nobody can buy or sell property. Nobody can trust any American financial institution. Money can’t circulate. Nobody will be able to get any money. It won’t be long before that translates into nobody getting any food. We may be a nation of clowns, but as Lon Chaney famously observed a while ago – when explaining his technique of horror movie-making – “…there’s nothing funny about a clown in the moonlight….'”

http://kunstler.com/blog/2010/10/bank-shot.html

#113 avenirv on 10.11.10 at 4:10 pm

just a question. i see here people saying these mortgages were given to the poorest of the americans. but the leading states in foreclosers are the “sand” states: california, arizona, florida. in these states the foreclosures are on the investment properties in majority.
so were the poorest americans buying investment houses ?

#114 Jeff Smith on 10.11.10 at 4:16 pm

>#51 junius on 10.11.10 at 7:59 am
>#43 obert,
>You asked, “Yes, CMHC is a government agency, but
>also functions as a corporation – so if it goes deep in
>red, can it be simply let go bankrupt.”
>No. It is guaranteed by the Federal gov’t and therefore
>the Canadian tax payer.
>Meaning that we will be on the hook for millions of
>dollars in payouts to the banks over the next decade.
>Fun, eh?

Unless, we can somehow securitize the damn thing and then sell the little pieces to the Swedish/Iceland/England/Germany/China/the rest of the world, like the yankees did. Yankee=total genius!

Maybe the greaterfool think tank (GTT) can come up with something. Garth are you in on this? Since everybody over the world can see CMHC for the ugly duckling it is. How about we create a new corporation entity (say call it DNID), then sell the asset/liability of CMHC to the new entity. Quietly of course (shush). Then we securitize DNID, the new entity. Then have some grading company like Standard & Poor to give it AAAA+ rating. Voila! All the world’s investors will just buy it off.

What is DNID by the way. It’s spun from CHMC. With the letter C, you add one letter, it’s D.
C+1 = D
M+1 = N
H+1 = I
C+1= D
^

If we can pull this off, we as canadian tax payer will be off the hook :) hehehe I think I have too much time on my hand today.

#115 Milhous Plumbers on 10.11.10 at 4:36 pm

Not Phoenix or LA – they don’t have their own water supply.

#116 Another Albertan on 10.11.10 at 4:43 pm

#106:

Seriously? In 2010 you can’t find something on Google?

TSE:TRP

#117 Vancouver Realtor on 10.11.10 at 4:44 pm

Definitely don’t rush out to buy a desert home in the US. I think they will get cheaper, and with global warming, how is the water situation going to be? No wonder all the sandy states seem to be hurting a little more than the rest. It’s great that prices have and will continue to come down. I really hope the Canadian dollar rises compared to the US dollar a little more, then Canadians are gonna start buying up their Ferrari’s and Lamborghini’s too!!

#118 Sam on 10.11.10 at 4:48 pm

#65 Dumfukanuk on 10.11.10 at 9:04 am

At #13: Timbo, in the U.S., they have something called Title Insurance, required on ALL home mortgages (no bank will move forward without it). This protects the buyer should any future issues arise surrounding Title.

____________________

If the insurance companies that underwrote that insurance are strong this may be a good thing.

If they’re not strong then having several hundered times the normal claims filed in a short period will bankrupt them and only the 1st few people in the door will actually have any insurance.

The rest are SOL

#119 Sam on 10.11.10 at 4:49 pm

#41 Jeff Smith on 10.11.10 at 2:50 am

>#14 45north on 10.10.10 at 9:56 pm
>link from Timbo: As more people realize that the fake
>title transfer aspect of foreclosure fraud is just the tip of
>the iceberg, I believe you will see that the
>repercussions are severe.
>http://whispersfromtheedgeoftherainforest.blogspot.com/2010/10/sunday-afternoon-update.html
>Well it’s not good news for the US banks but on the other
>hand maybe new procedures and more lawyers will
>smooth things over. How come the American banks are
>so dumb? Like isn’t it their job to make sure their
>procedures withstand scrutiny?

Actually the American banks are not holding most if any of these mortgages. Remember these mortgages were securitized and sold all of the world, from Scandanavia to Tokyo to Germany, oh yes and Beijing.
______________________
This may be true technically, but since the banks have now committed fraud in relation to these mortgages, they can be forced to buy them back.

Find the AEI talk floating around and listen to the Chris Whalen part, about an hour into it – the US banks are increasing the accounting accounts that will be needed to buy back from the defrauded.

I don’t know what else is on these sites, I just searched for the AEI video

http://www.thetreeofliberty.com/vb/showthread.php?t=119969
http://www.roubini.com/roubini-monitor/198567/subprime_meltdown_debate_at_the_aei

#120 dd on 10.11.10 at 4:49 pm

#97 TheBigLebowski

…No agreement over the weekend by the G-20 dictators on currency values. The devaluation continues…

Devalution is the only way to deal with the up coming debt crisis (as you know). Really, what else could they offer?

#121 dd on 10.11.10 at 4:53 pm

#92 skip on 10.11.10 at 12:36 pm

…Lets face it, capitalism screws the working class over, time and time again….

And socialism, communism, … Let’s face it, the people in power will always do the screwing.

#122 Victor on 10.11.10 at 4:59 pm

Okay so with this news, can anyone offer suggestions on where one can reasonably invest?

Are energy etf’s, commodity stocks (Canada), and our 5 big bank stocks good places to be in?

Open to hearing where some folks here think is a good place to be (including cash if that is your view).

#123 Taxpayer like everyone else on 10.11.10 at 5:29 pm

114 Jeff – with your extra time today….

http://www.cmhc-schl.gc.ca/en/corp/faq/faq_001.cfm#20

#124 TheBigLebowski on 10.11.10 at 5:53 pm

Sell Canada, buy America. I remember that was the mantra for the day. I was attacked for saying this was dumber than dumb. Anyone who rushed out to buy U.S realestate is going to get screwed

Hardly. Current buyers may end up paying 10% or 20% more than a year from now, but that’s not exactly a fortune on an $80K condo, is it? — Garth

#125 Jeff Smith on 10.11.10 at 6:17 pm

>#123 Taxpayer like everyone else on 10.11.10 at 5:29 pm
>114 Jeff – with your extra time today….
>http://www.cmhc-schl.gc.ca/en/corp/faq/faq_001.cfm#20

Oh too bad, I didnt realize they were already trying to pull of the same hat trick.

#126 Dumfukanuk on 10.11.10 at 6:30 pm

At #117: Vancouver Realtor, you really don’t get it, do you?!?!? The USD weak against the CAD prevents the Canadian economy from exporting its commodities and goods to the US in a competitive manner. This is NOT good for Canada. A strong CAD relative to the USD does not do the Canadian economy any good at all. Sure, you can think the CAD strong against the USD will let you buy up all those “goodies” for now, but you’re clearly not thinking long-term about the implication of a strong CAD relative to other major currencies, especially when EVERY damn major economy is TRYING to devalue its currency right now. WAKE UP!

As for U.S. real estate going down, how’s that real estate in Vancouver going? LOL What with a recent price drop of 40% on all remaining inventory at the Fairmont Pacific Rim, nothing selling in Millennium Water, and price drops all around on resells? I’ve been watching it VERY closely, and there’s no debating it is starting to erode in Vancouver.

#127 45north on 10.11.10 at 6:38 pm

obert: talking about CMHC Can it be made explicit that no taxpayer money will be used to rescue or bailout it – can it become a law?

government obligations are subject to politics, government can say to CMHC that it will honour all CMHC contracts but subject to budget constraints, like max of $10 billion a year

#128 PR on 10.11.10 at 7:06 pm

79 dd on 10.11.10 .Thank God we do have a lot of ngas. Peak oil is still alive and well..

Peak Oil is a Fairy tale!

#129 timbo on 10.11.10 at 7:33 pm

#118, Sam

True, title insurance is for mortgages but what if your an investor or a snowbird who paid in cash or invested in a timeshare?

http://www.nytimes.com/2010/10/09/your-money/mortgages/09money.html?
_r=1&ref=business&src=me&pagewanted=all

This is going to get very interesting as law firms are under the microscope and many lawyers will flip to save their licences. Another good read on this is at:

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aejJZdqodTCM
Read the date and you should see a trend. This has been going on for years not months.

Again from other blogs I have viewed the notes are not lost and have never been lost. Banks hold them in centralized vaults but for years have not gone back to the vault to get the note in a foreclosure. The risk and expense to do this outweighed the simple task of robo-signing forgery’s to a foreclosure that in all respects will not be contested in court. This is and was system wide and happened for years. The lost argument is smoke to not expose the true fact that they just do not call for the real note back in a foreclosure due to risk, cost and speed.

We misplaced or lost a note (mistake) covers Fraud and all banks hold hands in the same card game.

#130 Evangeline on 10.11.10 at 7:33 pm

((,…and with the war mongers (neocons) yelling for a nuke attack on Iran..))

I haven’t seen anything of the sort … could you please point me to 3 or 4 links to prominent and influential “neocons” who are calling for a nuke attack on Iran?

tia

#131 timbo on 10.11.10 at 7:57 pm

A breaking story and the blog that broke it.

President a victim of robo-signer,

http://voices.washingtonpost.com/political-economy/2010/10/were_president_obamas_own_mort.html

http://4closurefraud.org/2010/10/11/4closurefraud-exclusive-part-duex-president-obama-falls-victim-to-another-robo-signer/

this is obviously nation wide and as far as I am concerned Racketeering by the banks.

thanks Garth for the topic and I hope this does not create a Minsky moment for insurance companies or banks.

#132 Contrarian Canuck on 10.11.10 at 8:01 pm

#128
“Peak Oil is a Fairy tale!”

Dumbest comment of the day. Congrats

#133 Nostradamus Le Mad Vlad on 10.11.10 at 8:13 pm


#130 Evangeline — FYI. As mentioned earlier, plutonium, enriched to above 90% is what creates active nuclear warheads, which is what Israel has by the bucketful (ask Mordechai Vanunu).

Brazil will enrich Iran’s nuclear material to less than 20%, so Iran is able to provide further electricity to keep people’s homes warm during winter.

The last time Iran sent nuclear fuel outside to France for enrichment, France never returned it. Is it any wonder the east and far east doesn’t trust the west?

Timeline “If you work in the mortgage industry or for a title insurer, you might not want to make any plans for the next six months. Foreclosuregate is about to explode.”

Countries who are bankrupt by The Next Generation. Would this be a lead-in to a single currency?

6:55 clip Currency wars? You betcha! Choose your side wisely, and invest billions in Bre-X. Guaranteed!

4:48 clip Stock markets are higher but the world is in rough shape. What gives?

Yen / US$ If the yen keeps flying, the buck keeps sinking. “The US dollar may well be headed for disaster in the not too distant future.” wrh.com.

QE — The Sequel Critics say the sequel is visually stunning and financially draining.

WW2 1/2 — Is a financial world war. It leads to WW3.

To keep sheeple under control. Don’t baaabaaaaaa too loudly!

5:14 clip GW = Pink and purple dragons. A knightmare for scientists!

Unclear on the Concept Banks — a few — are in charge. Govts. are facades, to tell us everything is okay.

Comment by wrh.com is better: “The banks know that pretty printed paper is at a 15-year low and headed to zero. The rush is on to grab the real wealth of the nation away from the people.”

Smart Inventions Russia is certainly gearing up for something.

Honeybees contribute more than food to the economy.

Silly Season on Wall St.!

Precious Metal Fans — FYI.

#134 Nostradamus Le Mad Vlad on 10.11.10 at 8:20 pm

#130 Evangeline — “. . . to prominent and influential “neocons” who are calling for a nuke attack on Iran?”

Sure. Just about anyone in Congress, Joe Biden (an admitted zionist) or anyone in DC can give you the heads up.

My pleasure to help you out.

#135 Junius on 10.11.10 at 8:31 pm

#127 45North,

You said, “government obligations are subject to politics,government can say to CMHC that it will honour all CMHC contracts but subject to budget constraints, like max of $10 billion a year.”

No they can’t. The CMHC guarantees are contracts with the lender. The gov’t cannot change the law of contract retrospectively.

I haven’t seen anywhere a reasonable estimate of losses we will face if the market goes down 25% or more nationally as predicted by many. The CMHC generally covers most of the riskier loans so we can assume a lot of their loans will become problematic. However they can still work out the loans with the borrower and have a right of re-sale on the foreclosures they guarantee. Tricky math but I am sure someone in Ottawa has an accurate range for internal consumption.

#136 Evangeline on 10.11.10 at 8:48 pm

((Sure. Just about anyone in Congress, Joe Biden (an admitted zionist) or anyone in DC can give you the heads up.))

ok so you can’t back up your statement with direct links … didn’t think you’d be able to

#137 TheBigLebowski on 10.11.10 at 8:50 pm

Hardly. Current buyers may end up paying 10% or 20% more than a year from now, but that’s not exactly a fortune on an $80K condo, is it? — Garth

Technically you are right, on paper that isn’t a huge fluctuation. My feeling is that these prices could persist for the next 15 years , then you are looking at 80k of dead money for the next decade and a half, plus the tax burden and upkeep incurred over that time period. I think a person’s money could be much better positioned in that time frame. But if you feel prices will turn on a dime a year from now and make a remarkable resurrection out of the grave then I can’t debate that.

Buying a place on the beach is not all about dead money, dude. Get out of Kamloops. — Garth

#138 OttawaMike on 10.11.10 at 8:55 pm

Here’s a Halloween costume based on some past realtors covered here by this blog:
http://www.foxyladyboutique.com/d3767-sexy-costume-estate-agent-69-uniform.html

I wonder if Turner owns the licensing rights to this amongst his media empire?

#139 Dmitri on 10.11.10 at 9:32 pm

I would not bet on title insurance. Insurance companies are not in the business of loosing money and are ahead of the game:

Can You Get Title Insurance?

Earlier this month a couple of title insurers stopped issuing title insurance for homes foreclosed on by J.P. Morgan Chase and Ally Financial’s GMAC Mortgage.

Please consider the USA Today report Old Republic to stop writing policies for some foreclosures

Old Republic National Title Insurance, among the nation’s largest title insurance companies, will no longer write new policies for homes foreclosed upon by J.P. Morgan Chase and Ally Financial’s GMAC Mortgage unit –– a sign that concerns about faulty foreclosure paperwork could now endanger new sales of foreclosed homes.

#140 Dmitri on 10.11.10 at 9:34 pm

This whole fiasco is a huge mess that will prolong the pain.

#141 Behavioral Finance on 10.11.10 at 9:40 pm

I still have a hard time seeing how the loonie will rise if the Canadian Real Estate folds?

Canadian housing will not collapse, but it will decline. The loonie is considered a commodity currency and will rise against the US dollar for that reason, as well as the interest rate differential and the economic morass in America. There is no correlation between our currency and house prices. — Garth

#142 prairie gal on 10.11.10 at 10:01 pm

Jeff Smith: CMHC has been securitizing mortgages for years.

#143 45north on 10.11.10 at 10:22 pm

Junius: talking about the right of Government to modify CMHC guarantees of mortgages: No they can’t. The CMHC guarantees are contracts with the lender. The gov’t cannot change the law of contract retrospectively.

maybe, insurance companies do delay payments if they suspect fraud or fool-hardy behaviour. Many present mortgages would be subject to such arguments. Moreover politicians are free to comment on the payments and suggest and in fact enact policies that impact them. A 25% decline in housing prices across Canada would be quite the calamity. I believe that in the US overall price decline is around 5% from 2006 to 2010. Correct me if I’m wrong.

I think we are seeing a tipping point in the US where the distinction between fraud and lending in bad faith is becoming irrelevant. In this environment, general opinion exerts enormous pressure. The law is simply reinterpreted to reflect the new reality.

#144 Behavioral Finance on 10.11.10 at 10:23 pm

Right, but you are assuming that commodity demand will never face substitution effect or technological change. You may also face another run to safety by the investors if the global economy does not get off life support.

#145 Behavioral Finance on 10.11.10 at 10:25 pm

Are you saying that US does not have commodities? There is more needed for a currency to raise than just interest rate changes and supply of resources.

#146 skip on 10.12.10 at 1:26 am

So Garth, you say nobody has a right to a house do ya?

Well who came up with that one? You?

Actually, everyone has a right to shelter from the elements . Being that a house or clothing. It’s the capitalists that are anti-social when it comes to human nature.

Property rights? Only if they have enough guns.

Well unfortunately for us all, Capitalism comes up short one more time, as Garth points out day in and day out. Can’t even distribute housing properly. Leaves everybody at each others throats.

Welcome to the new reality of the Canadian life style! You’re homeless and the bankers get a bonus.

#147 murray on 10.12.10 at 8:18 am

Watch this right now….http://www.democracynow.org/

#148 Patz on 10.12.10 at 11:59 am

Another blog hound here posted this link a little while ago, sorry I forget who.

This is a quote from a Phoenix RE broker giving his 21 reasons to “bank on the Phoenix real estate market.”

“There is no downturn in the Phoenix market. There has been a return to pre-boom activity levels. Assuredly this return was caused by sticker-shock, but that is hardly a permanent affliction. The Phoenix area will continue to grow rapidly for another 35 years.”

http://www.bloodhoundrealty.com/BloodhoundBlog/?p=114

He wrote this on July 21st, 2006. The market had turned. In fact it was about where Vancouver and Victoria are now. The first comment in response to his post was a model of rationality—dare I say Garth—like. And the above quote was part of the broker’s response. If you read it substitute Vancouver/Victoria for Phoenix and see if it makes sense.

But that’s not the end of the story. Our boy in Phoenix is nothing if not eternally optimistic. Now he’s pumping *low–priced* real estate as a great investment for making rental income.

Current quote:
“I’ve been talking about low-priced condos lately, but don’t get the idea that single-family homes are selling for a king’s ransom. Just the opposite is true. If you’re willing to drive to some of the near-in suburbs, you can pick up a newer single-family home for less than $100,000.”
Have a look at some of these homes too. Definitely not crack shacks. http://www.bloodhoundrealty.com/

But of course like the Phoenix broker, reason will not prevail, denial will.

#149 Bill Gable on 10.12.10 at 1:31 pm

To echo Mr. Turner = the worst is NOT over in the States…

They came by the thousands, transforming normally festive Cal Expo into a venue emblematic of California’s nightmarish housing meltdown.

An estimated 10,000 people were in line Friday morning when the Cal Expo Pavilion’s doors opened on a five-day event aimed at helping distressed homeowners avoid foreclosure.

The line for the Neighborhood Assistance Corporation of America’s “Save the Dream” event stretched from the Pavilion, through Cal Expo’s east parking lot, onto Exposition Boulevard and nearly to Ethan Way – a distance of half a mile.

Sacramento-area homeowners stood shoulder to shoulder with those from all parts of California, Oregon, Washington, Nevada, Arizona and far beyond, hoping to have their mortgage payments lowered in order to keep their homes.

Their stories ran the gamut: underwater mortgages, unemployment, financial crises, long-missed loan payments and frustration trying to talk with lenders.

NACA officials this week wrapped up a six-day event at the Los Angeles Convention Center, where an estimated 40,000 came through the doors.

NACA CEO Bruce Marks said Friday that he expects that many at Cal Expo by closing time Tuesday.

“You’d think that the crowds would diminish by now, but they’re not. They keep coming,” Marks said. “This (Sacramento event) is probably going to have about as many as we had in Los Angeles.”

NACA, headquartered in the Boston suburb of Jamaica Plain, will be working with homeowners around the clock through 8 p.m. Tuesday.

More: http://tinyurl.com/26gq56c