Home repossessions, the ticking time bomb under the West!

This blog gave up making what it believed were constructive suggestions regarding the property price crisis long ago, as nothing was being done. Eventually something has to change, the self-delusion that appears to have most of Britain in its grip must be seen for what it is. Across the West there are signs of things coming to a head:

Reuters on Ireland, Spanish repossessions on BBC TV News , Daily Mail on Repossessions and walkaways Beverly Hills style while a new EU directive seems set to accelerate this process, read here.

The picture in the headline spread of the Irish Independent this morning pinpoints the intent behind what occurred and provides a clue as to where the responsibility probably lies.

The article, linked here, has the following chilling introduction soon to be repeated elsewhere is my forbidding guess:

BANKS are telling thousands of families struggling to restructure mortgages they will have to cut back on health insurance, private education, groceries and Sky Sports before any deal can be done.

"Debt Forgiveness" - the monster that should not be named - now appears!

This blog has asserted long, loud and oh so often, that it is the house price crash, underwater home owners, walkaways and re-possessions that lay at the heart of the ongoing economic crisis in the English speaking countries of the West. I have in the past suggested means of solving this crisis, expensive but with costs as nothing compared to this proposal from the Irish Independent, this morning, read here. A quote:

"It [debt forgiveness] will have to be done simply because the Irish economy will not be able to function properly at all levels if we keep the levels of debt as they are. So far, we have spent four years of this crisis loading more debt on to the shoulders of already heavily indebted households and families. It is unsustainable," the Trinity College economist told the Sunday Independent.

Pointing to the direct impact the servicing of this massive debt was having on the middle class, whom he described as the "main productive part of the economy", he added: "We will have to simply allow these people to write down their mortgages to closer to the level of the prices of the homes that these mortgages have been written against. It has to be done very robustly at the level of the middle class. The reason why, is that the middle class is being the hardest squeezed by tax increases at current levels and future ones. They also bear the most burden in terms of debt, but also they are the main productive part of the economy."

House price falls - IMF picks Lagarde

The latest on still falling house prices are here for the USA and here for the UK.

In a further sign that the West's economy is now clearly in almost terminal decline, with no politician or world leader of clout prepared to address the underlying problems, Mme Lagarde was appointed to head the IMF.

The silver lining in that fact, I guess, being that as a new start will soon be urgently needed in almost every international economic arrangement, the now certain increasing indebtedness and collapse of the IMF will in iteslf be no bad thing and could well speed on its way, the completely new start, towards sound money, that the western economic model so desperately needs.

Meantime in Europe, Cameron and Merkel, lead the way in extending the begging bowl to China, not much mention of human rights these days you may notice!

Underwater mortgage holders and unemployed, indebted graduates, the latter joining 82 others for every job opportunity, as is presently the situation in the UK, must soon show signs that their patience is reaching breaking point. For every home re-possession, how many other homeowners are struggling to make their monthly mortgage payments, with ever dwindling hope of ever recovering even their original deposit - that is the tinder box for the coming moment of truth!

Playing the ratings agencies for suckers

An item from Reuters, this morning, linked here, caught my eye for this comment:

The FTSEurofirst 300 index edged higher on Monday after France said French banks had outlined an agreement to roll over holdings of maturing Greek bonds, while German bankers also voiced interest in this model. 

I previously blogged that the ECB, under  the arch-trickster Trichet, (one-time 'Saviour of Credit Lyonaise'?????), had been hinting at the Greek privatisation sequestration confiscation programme being potentially linkable to a so-called voluntary rollover of Greek Bonds held by the scumbag bankers.

You bet German Banks would like some secret quid pro quo for "voluntarily" renewing their huge exposure to Greece, (like Deutsche Telcom picking up further shares in the Greek telcom company at a two third discount over that they paid for a similar earlier tranch of shares,) but will the rating agencies allow themselves to be duped in such a blatant fashion?  If they do, with underwater homeowners on both sides of the Atlantic wondering when and what the hell their Governments will do for them, Western Capitalism itself is clearly at the edge of the precipice.

If the Greek Parliament votes for the new austerity package and gets the needed €12 Billion, that will soon be squandered and gone.  Politicians pretending they are acting in the "national" or "wider public interest" will not be believed in either Greece, nor soon after, anywhere else! The voters can see what is afoot, the legislatures by protecting the banks are guaranteeing their own pay cheques and pensions, nobody elses as a detailed reading of the huge cuts for the poorest sector of society, in the new Greek austerity package, makes immediately clear, eg by cutting the level at which tax begins to be payable in Greece from €12,000 to €8,000.

Surely anyone can recognise, that the amounts collectible by such a move will be negligible in any terms, let alone when set alongside the trillions already sent to the Banks!

If the package is passed the Greek crisis will deepen in a matter of days. If the package falls then the Greek Government must surely collapse and the long deferred crisis will surely be seen to have arrived!

Watch Obama admitting he owns the Worldwide Credit Crisis!

As Bernanke's printing presses continue to race and the poorer nation's of the world revolt in response, the following nine minute video shows evidence that US President Obama, now overseeing the trashing of the world's one reserve currency, following in the footsteps of Presidents Carter and Clinton, deliberately forced America's banks into making the unsound loans, the consequences of which are yet to be fully seen. The video clip lasts 9 minutes, watch it through for the real shock comes right at the end, when it becomes clear that all this was known even before Obama was elected!

Irish mortgage interest rates to rise in spite of ECB inaction on inflation.

The linked article from the Irish Times, this morning, warns mortgage borrowers of a likely rise of one per cent today to reach 5.1% on one variable rate.

Tracker rates, are still thought to be low risk according to a Government consumer body the same article concludes. A few moments thought should convince all but the most reckless, both in Ireland and the UK, that not switching early, could to the contrary, prove disastrous.

Delaying an increase in interest rates to tackle obvious primary and now secondary inflation (accepted as present in the Euro Zone by Mr Trichet of the ECB in his press conference yesterday), which is the present policy stance of both the Bank of England and the ECB, must result in higher than necessary increases in rates the future which will also inevitably last for longer. A table showing such a case, UK interest rates (then also roughly applicable for Ireland) between 1979 and 1997 is linked here.  Geoffrey Howe's 1981Budget, necessary after years of Labour Party corruption and misgovernance, "did reduce inflation from 11.9% in Spring 1981 to 3.8% in February 1983. Long-term interest rates also somewhat declined from 14% in 1981 to 10% in 1983."

(Iceland the best case study for Ireland, should the incoming Irish government succeed in ridding itself of economic slavery to the Euro Zone Group, succeeded last year following the default of its banks, in getting interest rates down from 13% to 7%, see here! This year the Icelandic economy is growing at 3% a distant if not non-existent dream for Ireland whilst still stuck within the Euro.)

Unlike in  Ireland, the UK has the freedom of its own currency, which should allow it to adopt policies that will rid it of its servitude and economic enslavement to the EU, unhappily it only has a political class addicted to the subsidies and backhanders of that increasingly foul and mis-directed organisation, and in the words of Ayn Rand (delivered via the fictitious John Galt) will thus continue to sacrifice independence to unity, justice to mercy, reason to faith, wealth to need, self-esteem to self-denial and happiness to duty.

Property - a dagger pointed at the heart of an incipient economic recovery.

At last a respected pundit agrees with what this blog has been stating for years. See the TV interview from here from Bloomberg TV, Betty Liu and Mort Zuckerman.

Downgrade of mortgage backed securities and Walkaways re-visited!

President Sarkozy expressed surprise at Moody's downgrade of Ireland yesterday. He should perhaps of seen this coming, or at least suspected some such bad news was heading his way when JP Morgan suggested a €350 billion gift to the PIG, as I blogged here yesterday.

The Housing Crisis which undermines all the economies of the West could by now have been solved had my suggestion, made way back in September 2008, linked here, been accepted. That posting, one of several around that time, concluded as follows:

Nobody yet knows how far UK property prices will plunge but it is essential to be aware that a fall of 20 per cent from peak levels requires a rising property market of 2 per cent above inflation for a period of twelve years before the original peak value is once again achieved. That is far too long to expect an ordinary mortgage holder to maintain mortgage payments for zero return. Once 'walkaways' begin they will spread like a plague with all kinds of consequences such as cross-squatting which will make counter-measures practically impossible - effectively anarchy could be an end result.

Mortgages have always assumed the equity provided by the mortgagee is the first at risk. In this crisis that has to be changed. I suggest that for houses purchased since Gordon Brown, in the words of incoming BoE Governor King, to paraphrase 'moved the Goal Posts and excluded house prices from the CPI' any loss of value on the resale of such houses be directly proportioned between the first mortgage holder and the mortgagee. This is potentially expensive, but less so if it halts further slides in house prices. As the country is effectively bankrupt such a move will need financing and as a further step to somewhat also put the cost of the greed at the door where it lies I would further suggest the exemption of the first home from capital gains tax be withdrawn.

Mortgage walkaways - the next crisis!

What starts in the USA soon spreads across the Atlantic as we learned in the ongoing sub-prime mortgage inspired credit crunch and Britain's developing bankruptcy and national debt default. As I predicted the problem several months ago and on several different occasions, I chose to call the action "walkaways", or described those involved as "mortgagees handing back the keys". The US has chosen the term "Strategic Mortgage Defaults" read here. The following extract from that article describes the situation:

The number of strategic defaults is far beyond most industry estimates — 588,000 nationwide during 2008, more than double the total in 2007. They represented 18% of all serious delinquencies that extended for more than 60 days in last year’s fourth quarter.

Strategic mortgage defaults are nothing more than a very calculated financial maneuver primarily by people with high credit scores. These people are literally walking away from their homes, and the mortgages on those homes, with little to no warning or indication of stress typically identified by increased delinquencies on the mortgage payment or other credit payments.

Why are people doing this? To fully understand the reasoning behind people strategically defaulting, we need to understand why people bought these homes and took out these mortgages in the first place. The likely result, as predicted in the same article is another crisis, quote: Have loan officers, bank examiners, and regulators factored these strategic defaults into their financial models and loan loss reserves? Rest assured, the thought of strategic mortgage defaults was not incorporated into a bank risk model prior to writing the loan. Now loan officers, bank examiners, and regulators are likely working overtime to incorporate the actuality of this phenomena creating a vicious cycle downward for housing just as the actual lending practices and accompanying purchases of homes drove the housing market higher over the last decade. Did Secretary Geithner incorporate this phenomena into the Bank Stress Tests? Not if we checked the default assumptions on HELOC (Home equity lines of credit) relative to the actual statistics. Have UK politicians considered the likely impact of similar actions in the UK. I earlier predicted such defaults would kick in when price falls began to exceed 20 per cent, a point now reached and with the next downward plunge about to commence as the currency tumbles and Schedule D property taxes look certain to return as one of the few sources for government revenue, a rout to sell at any price appears a possibility. Those walking away from unaffordable mortgages and their homes will start to be such a force they themselves will become a factor not to be ignored. As the non-resignation of Baroness Scotland, supported by the Prime Minister, this evening clearly illustrates, the ministers and leader of this UK administration have not one single moral principle in their make-up. Their financial ignorance in the face of the obvious fact that money has been their sole obsession for many, many years, makes their incompetence and lack of any foresight in the area of economics even more incredible.

Sham Government and Predatory Members of Parliament

I hardly have to write a comment under this headline the press and media in general are saying it all this morning. I do wish to highlight this item in The Guardian, however, the article's headline:

One £285m mortgage rescue scheme. One family helped

The Link. A comparison is this blog's suggested solution for Britain's Property Price Crash posted 22nd September last year, here. Turning from the totally incompetent Government, let us now consider the loathsome Members of Parliament from whose moronic ranks the Government is drawn. One report on the disgusting scenes in the House of Commons yesterday afternoon is here. Yesterday morning, in total contrast, our troops made as dignified an exit from Basra as was possible given the hand they had been dealt by these same despicable and self-serving expenses obsessed politicians!

Britain's House Price Fall now 27%

The builders Barrett in announcing six month losses approaching six hundred million pounds stated the following: Since the peak of the housing market in June 2007, Barratt added that average prices had fallen about 27 per cent. My proposed solutions last Autumn, here and here, were predicated on the real problems beginning to arise when falls passed the twenty per cent mark so we can soon expect the kind of mass walkaways or returning of keys that will indicate we have reached the point of no return as far as prospects for any short term recovery are concerned.

"Uncomfortable implications" - Nationwide

A 1.4 per cent drop in house prices in October takes the annual fall to 14.6 per cent for the year according to the Nationwide Building Society, read here. In the Daily Telegraph report comes this grave paragraph, indicating that even the housing lenders in Britain are finally beginning to grasp the severity of the problem. If only Parliamentarians were now to follow! "The crisis in the financial sector and the latest Government data suggesting a recession is imminent is likely to worsen the housing market slump and has “uncomfortable implications”, Nationwide said."

House price falls gather pace

The following is the latest report from the Press Association, linked here. It begins:

House prices dived by 2.7% during August, figures showed.

The average cost of a home dropped to £211,410 during the month, driven down by a 5.1% fall in the value of flats and a 3% slide in the cost of terrace houses, according to Communities and Local Government.

Meantime Sky News has its own report, linked here. The broadcaster has the fall in prices estimated as much as 40 per cent. If anything like this reduction is indeed being experienced then mortgage lenders will be about to experience a huge fall in mortgage payments as this blog has now been warning for almost a month. There is certain to be a critical level of price falls where the average family either through general price inflation, unemployment or sheer inability to cope will deem it unrealistic to continue payments against a mortgage on a property upon which they are never again likely to enjoy any equity. The squeeze as so far experienced by lenders will seem as nothing if a real house price drop of 40 per cent is ever experienced. Mortgage repayments will fall to a trickle! This blogger berated David Cameron for suggesting a holiday on the 75th birthday obligation to purchase pension annuities would be an idea worth considering, as if there was any short term prospect for a 75 year old to ever see an improvement in the country's economic dire straits. Yesterday we had the Government dreaming that the nationalised banks could quickly return to the lending levels of the past two years for mortgages - like targeting water to flow uphill and supreme market ignorance opined an expert before the Commons Treasury Committee today - precisely, none in the Government nor the Opposition seem to have the first clue of the depths of the economic hole they have all created. Mass misery for millions is now on the menu, the plight of a few wealthy bankers is as nothing to the desperate need for massive sums of aid now required for the ordinary house-buying citizen.

House prices back in focus!

A moment of reality returned yesterday evening to UK politics - No, not the justifiably huge defeat for the Government in the House of Lords with the rejection of the extended pre-trial detention period - I mean the moment when that common bimbo Yvette Cooper (Chief Secretary to the Treasury and mistress of Ed Balls, the moronic Schools Secretary) had her true aims for the nationalisation of banks exposed for all to see on Channel 4 News. Why? She was asked, would the government possibly want the nationalised banks to resume mortgage lending at the levels of 2006 and 2007? Answer came there none, but to all with any brains it is perfectly obvious. For these types of despicable filth who make up much of the Government and their back benches it is the accumulated wealth locked up in their tax payer funded homes and second houses that they are scared witless of losing. Hence the dream that if mortgage lending can be restored to previous levels, the previous dizzying and absurd valuations can be restored and the gains of their 11 years of mis-governance safely stashed away. Remind yourself of some of the background of this obnoxious couple here, here and here. How will the nationalised banks meet this requirement to resume such excessive lending, the very cause of the nation's present plight? Only by sucking in ill-informed first time buyers even more ignorant than Labour MPs, a task I feel sure Ed Balls is setting about with every diligence in his post of supposedly guiding the education of England's youth. This morning, however, banks have been nudged out of the headlines with the real state of the housing market getting even Britain's state-controlled media's attention. Read the summary of the Chartered Surveyor's report in Bloomberg here, read the plight of Estate Agents as reported in the Daily Telegraph here (AAAAAGH). Just in are the latest UK inflation figures at 5.2 per cent. A sum for Ed Balls and Yvette Cooper: House price falls of 13.8 with inflation at 5.2 equals a real price house drop of --.-?

Flat Broke

There was an extraordinary TV programme in Britain on Monday evening which surprisingly received no further media coverage as far as I could discover throughout yesterday. It was titled, as is this posting, 'Flat Broke' and mainly recounted the plight of an apparently single mother with a very young baby who lived in the South of England but had (unseen) invested in flats to rent last year, two in Bury and two in Manchester all priced about halfway between 100,000 and 200,000 pounds. It followed an auction of one such flat, apparently with a sitting tenant paying monthly rent just below five hundred pounds, two bedroomed, two bathroomed which failed to attract any bids at ninety thousand, then eighty thousand and finally seventy thousand pounds and was hence withdrawn from the bidding. At least Hamish Macrae in The Independent this morning is one commentator prepared to address this meltdown, read here. Read the article then ask yourself this: Should the taxpayer spend more billions to bail out financial institutions of the kind who lent so much to this foolish woman, or should they be allowed to follow her into bankruptcy?