House price reality

An article in The Guardian covering the fright of potential bidders for Northern Rock on seeing the detail of the accounts provides some interesting details on the real potential disaster now staring Gordon Brown and his already shaky government in the face. Some figures from the article, linked here: Three years ago, the value of mortgages where the loan-to-value ratio was 90% or more was £2.7bn. It had only 158 mortgages, worth £13m, where the loan exceeded the value of the property. By September this year, the value of mortgages with a loan-to-value ratio in excess of 90% had soared to £16bn. Almost 2,500 mortgages, with a value of £263m, were in excess of the value of the property...... An analysis of the arrears history points to a sharp increase both in terms of the number and value of mortgages in arrears. At the end of 2003, about 2,500 customers were more than a month behind on mortgage payments. The capital value of the mortgages in arrears was £168.8m. By the end of September this year, more than 10,000 accounts were in arrears. The capital value of the underlying mortgages had reached almost £1.2bn. Alistair Darling, the chancellor, may believe the £23bn loan to Northern Rock is secured against high-quality assets such as mortgages. But it is unclear whether the bank has sufficient of those assets to cover the loan in full. The £53bn of securitised mortgages does not represent the full mortgage book, but it is unclear how many other companies have other claims over the rest of the book.

Home foreclosure scandal in the USA

I have been forwarded some startling information on the USA housing scandal, which underlay the great credit crunch, from Australia. Read some details from this link. A quote with links to other background material is here:

Citizens Electoral Council of Australia

Media Release 12^th of October 2010

Craig Isherwood‚ National Secretary PO Box 376‚ COBURG‚ VIC 3058 Phone: 03 9354 0544 Fax: 03 9354 0166 Email: cec@cecaust.com.au Website: http://www.cecaust.com.au

Bank of America ‘pulls the pin’ to explode financial grenade

The decision last week by Bank of America to freeze all foreclosures on its mortgages in all 50 U.S. states amounts to “pulling the pin” on the grenade that will explode the global financial system, according to U.S. physical economist Lyndon LaRouche.

Literally trillions of dollars worth of derivatives contracts based on mortgages could be found to have no asset backing at all, which will implode the inflated financial system.

In recent weeks millions of American families who were evicted from their homes as a result of the subprime crisis have discovered that their foreclosures were probably illegal—three years after leading Democrats in the U.S. Congress allied to Barack Obama, such as Barney Frank, blocked LaRouche’s proposed Homeowners and Bank Protection Act which would have protected all those homeowners from foreclosure while the financial system was sorted out.

The present scandal relates to the fact that in all of the slicing and dicing and bundling of mortgages that underpinned the derivatives speculation in mortgage backed securities (MBSs) and collateralised debt obligations (CDOs)—on which dozens of local councils in Australia lost hundreds of millions of dollars—the legal paperwork to prove title and mortgage contracts was often skipped.

[Click here to read a detailed analysis of the crisis]

Consequently, banks have been foreclosing on homes to which they held no title! This conveniently sped-up the waves of foreclosures that made many American families homeless in the past few years. In one case, a bank officer admitted to mass-processing 10,000 foreclosure notices per month, without once checking the paperwork. Among the horror stories, a man who owned his home outright, having paid for it in cash, was foreclosed on by the bank holding incorrect paperwork.

The potential for this scandal was foreshadowed in late 2007, when a Federal Judge in Cleveland, Ohio dismissed 14 home foreclosure cases, due to the doubt that the foreclosing bank, Deutsche Bank National Trust Co., actually held title to the houses on which it was foreclosing. The judge ruled that there was no proper recording with local government officers, of the property titles, mortgage contracts, and assignment of ownership. At the time, LaRouche commented it smelled of a major problem, that there is legitimate suspicion that loans, which have not been recorded in local registries, have been sold as part of a securitised package over and over again, leading to liabilities that exceed assets by enormous amounts. Even the smell of such a situation could blow the system out, he noted at the time.

The smell is now a sickening stench, in the face of which four major banks have had no choice but to suspend foreclosures, three of them in 23 states, and in the case of the Bank of America in all 50 states.

However, due to the nature of the financial system, this foreclosure freeze will be the catalyst to bring down what is left of it—worldwide.

The trillions of dollars in bailout funds pumped into the banks by the U.S. Federal Reserve and other central banks have shored up securities that were assumed to be backed by assets, i.e. physical houses. The banks foreclosed on millions of those houses to recoup the value of those assets. The freeze will start to reveal that many of the assets claimed by the banks either aren’t real, or aren’t theirs.

In turn, the bailout funds exchanged for those assets will be proved to be worthless, which will set off a global chain-reaction meltdown.

There is only one way to fix this crisis: Lyndon LaRouche’s call for a Glass-Steagall reorganisation to support only what is real and write off what is fraudulent, combined with the Homeowners and Bank Protection Act to keep people in their homes.

Underscoring why LaRouche has called for Obama to be ousted from office under Section 4 of the 25^th Amendment to the U.S. Constitution, White House adviser David Axelrod yesterday announced Obama was pushing for foreclosures to resume as quickly as possible.

To find out how LaRouche’s plan would have prevented the current foreclosure crisis, click here for a free copy of the CEC’s feature DVD, the Homeowners & Bank Protection Bill—the only solution.

To buy a copy of What Australia Must Do to Survive the Depression, click here.

New FSA mortgage rules will cut supply by 50%!

A startling report comes in The Independent this morning, linked here, which spells out the obvious truth that if you make the provision of mortgages subject to sensible or prudent restraint you will necessarily reduce the supply. The Council of Mortgage Lenders have, however, been clearly startled to discover that half of the mortgages issued over the past five years would have failed the new affordability tests proposed by the FSA. They then go on to moan that some 3.8 million of such loans have continued to perform leaving only an estimated 200,000 at risk. The key to that statistic lies, of course, in the horrendous bank bail out figures and the following sentence later in the report, I quote: The report says much of the apparently good news resulted from an "11th-hour spending spree" by the previous Labour government. The present house price levels have only been maintained by the billions squandered on the banks and the disgusting spending spree by Brown and Darling as a last ditch attempt to further defer the moment when they must eventually be held to account. How many of those 3.8 million mortgages still 'working' will be still so doing in another five years of real austerity? Coalition politics again comes into play here, see my posting beneath this and its link.

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.

Ireland's ongoing agony.

I recommend reading the linked article which appeared in yesterday's Irish Times, in full, it is linked from here. It is titled "If you thought the bank bailout was bad, wait until the mortgage defaults hit home" and is written by Morgan Kelly who is Professor of Economics at University College Dublin. It offers a foretaste of what will soon overtake Britain and the following quotes paint a chilling picture which is as nothing compared to the full horror (bearing in mind all this was deliberately contrived by the EU's leaders) which comes with reading the article in full: Instead of the unpleasant showdown with the European Central Bank that a bank resolution would have entailed, everyone is a winner. Or everyone who matters, at least.

The German and French banks whose solvency is the overriding concern of the ECB get their money back. Senior Irish policymakers get to roll over and have their tummies tickled by their European overlords and be told what good sports they have been. And best of all, apart from some token departures of executives too old and rich to care less, the senior management of the banks that caused this crisis continue to enjoy their richly earned rewards. The only difficulty is that the Government’s open-ended commitment to cover the bank losses far exceeds the fiscal capacity of the Irish State........

Since September, a permanent team of ECB “observers” has taken up residence in the Department of Finance. Although of many nationalities, they are known there, dismayingly but inevitably, as “The Germans”......

The next act of the crisis will rehearse the same themes of bad loans and foreign debt, only this time as tragedy rather than farce. This time the bad loans will be mortgages, and the foreign creditor who cannot be repaid is the ECB. In consequence, the second act promises to be a good deal more traumatic than the first.

Where the first round of the banking crisis centred on a few dozen large developers, the next round will involve hundreds of thousands of families with mortgages. Between negotiated repayment reductions and defaults, at least 100,000 mortgages (one in eight) are already under water, and things have barely started........

...once Irish banks pass under direct ECB control next year, they will be forced to stop lending in order to shrink their balance sheets back to a level that can be funded from customer deposits. With no new mortgage lending, the housing market will be driven by cash transactions, and prices will collapse accordingly......

You have read enough articles by economists by now to know that it is customary at this stage for me to propose, in 30 words or fewer, a simple policy that will solve all our problems. Unfortunately, this is where I have to hold up my hands and confess that I have no solutions, simple or otherwise.

Ireland faced a painful choice between imposing a resolution on banks that were too big to save or becoming insolvent, and, for whatever reason, chose the latter. Sovereign nations get to make policy choices, and we are no longer a sovereign nation in any meaningful sense of that term.

From here on, for better or worse, we can only rely on the kindness of strangers.

Northern Rock Shocker- Taxpayers to be fleeced ad nauseum

Anybody watching the Governor of the Bank of England and his associates being questioned by the Commons Treasury Select Committee can hardly retain any faith in either the UK's financial system nor their elected representatives. The report in this morning's Sunday Times, linked here, nevertheless still has the ability to shock even this old cynic! I quote its opening:

Northern Rock still lending ‘recklessly’

Robert Winnett and Roger Waite

Northern Rock stands accused of “reckless” lending after it emerged this weekend that the beleaguered bank is still offering mortgages of six times salary to potential borrowers.

Despite provoking the worst banking crisis for decades, the bank last week offered a reporter posing as a first-time buyer a £180,000 mortgage even though he had a salary of only £30,000.

The loan was at least £30,000 more than other leading lenders were prepared to offer. Repayments for the loan would have accounted for more than 60% of the fictional buyer’s take-home salary.

The reporter, posing as another potential customer, was also offered a so-called “negative equity mortgage” worth 117% of the value of the property he claimed to be interested in buying. The mortgages offered by other banks to the same potential borrower were significantly lower.

"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."

IMF wary of "steep drop" in UK house prices!

The latest Article IV notice on the UK economy is here. Titled "Union Jack be nimble, be quick" presumably a sign of the trivialisation of the Fund following the arrival of Mme Lagarde. There are few reasons to smile in the content. The Daily Telegraph, in its coverage this morning, selects this portion to quote:

The scale of household debt remained a threat to the recovery, it added, warning that the Bank of England would have to raise interest rates “gradually” due to the “potentially large effects of higher interest rates on growth”.

“In particular, growth remains vulnerable to a steep drop in house prices, which in turn are highly sensitive to short-term interest rates,” said the Article IV notice, the IMF’s annual “health check” on the economy.

I first suggested a means of easing the plight of the UK house price crisis in September 2008, as again quoted below, since I have repeatedly warned of the danger of Walkaways and horrors of negative equity, read here:

'What value maturing mortgages' Ironies Too Sunday 21/9/08- A "Professor" whose name I twice missed, but one time member of the Bank of England's Monetary Committee was doing the rounds of the 24 hour TV news channel last week stating that mortgages were worth their face value on maturity. It was clear from the interview with the clearly demented Prime Minister Gordon Brown on Friday on Sky News, that it is this mistaken view that is now driving the British nation into ever deeper bankruptcy. Let me explain. 1) If I am a supposed homeowner with a mortgage of eighty per cent of previous values I have a 20 percent share of that price. If prices fall by 10 percent I still have an equity share of 10 per cent and will therefore continue with my mortgage payments in the expectation of future house price rises and a desire not to lose that 10 per cent stake. 2) If I am a supposed homeowner with a mortgage of ninety per cent of previous values I have a 10 per cent share of that price. If prices fall by 20 per cent I have negative equity of 10 per cent and if prices are forecast to continue to fall I have zero incentive to continue the mortgage payments on a property over-valued by 10 per cent. As prices fall and re-possessions mount there will be a growing stock of unoccupied housing exposed to squatters and/or a tumbling rental market causing more foreclosures in the buy to let sector further exacerbating the problem. Hence the panic in the property industry to hide the true depth of the collapse. A mortgage maturing in 20 odd years at face value with inflation above 5 per cent is worth very little on present day values. A mortgage maturing several years in the future in a high inflation environment with no interest payments being made is on a discounted cash flow basis effectively worthless. The losses must lie with the mortgage lenders who made the loans on their assessments of present and future property prices, they can hardly now expect the borrowers to bear the full brunt of their 'professional' errors, if they do (as seems to be the case at present) then they are likely to be mistaken in my view. That is why the Halifax will now likely end by bringing down Lloyds TSB. Where Britain and Brown (if still in post) go from there is anybodies' guess! (Emphasis in last sentence added by blog editor 2/8/11)

My suggested cure was posted the following day, linked here.

What value maturing mortgages?

A "Professor" whose name I twice missed, but one time member of the Bank of England's Monetary Committee was doing the rounds of the 24 hour TV news channel last week stating that mortgages were worth their face value on maturity. It was clear from the interview with the clearly demented Prime Minister Gordon Brown on Friday on Sky News, that it is this mistaken view that is now driving the British nation into ever deeper bankruptcy. Let me explain. 1) If I am a supposed homeowner with a mortgage of eighty per cent of previous values I have a 20 percent share of that price. If prices fall by 10 percent I still have an equity share of 10 per cent and will therefore continue with my mortgage payments in the expectation of future house price rises and a desire not to lose that 10 per cent stake. 2) If I am a supposed homeowner with a mortgage of ninety per cent of previous values I have a 10 per cent share of that price. If prices fall by 20 per cent I have negative equity of 10 per cent and if prices are forecast to continue to fall I have zero incentive to continue the mortgage payments on a property over-valued by 10 per cent. As prices fall and re-possessions mount there will be a growing stock of unoccupied housing exposed to squatters and/or a tumbling rental market causing more foreclosures in the buy to let sector further exacerbating the problem. Hence the panic in the property industry to hide the true depth of the collapse. A mortgage maturing in 20 odd years at face value with inflation above 5 per cent is worth very little on present day values. A mortgage maturing several years in the future in a high inflation environment with no interest payments being made is on a discounted cash flow basis effectively worthless. The losses must lie with the mortgage lenders who made the loans on their assessments of present and future property prices, they can hardly now expect the borrowers to bear the full brunt of their 'professional' errors, if they do (as seems to be the case at present) then they are likely to be mistaken in my view. That is why the Halifax will now likely end by bringing down Lloyds TSB. Where Britain and Brown (if still in post) go from there is anybodies' guess!

The "End Game" Approaches

"This has been one of the most interesting days in finance ever," said Andrew Roberts, head of credit at RBS. "We are right at the tipping point. Yields are about to collapse even further, equities are about to turn over. The end game approaches, probably in next few weeks."

In the US, the 27pc collapse in existing homes sales in July leaves no doubt that America's property market cannot stand on its own feet without the prop of homebuyer tax credits. "Home sales are in free-fall. These are truly dismal numbers," said Teunis Brosens from ING.

The article from which this quote came may be read in full from here. Readers of this blog will be unsurprised that the western world has reached this point, just as we warned at the start of this summer when JC Trichet pompously departed on his holiday in St Malo claiming that all was incredibly well, indeed with all our warnings down the years, that corrupt self-serving politicians would inevitably land the world in the mess in which we now find ourselves, bankrupt and with no economic weapons left to mitigate the consequences. Sound money or means of trusted international exchange will be required before recovery can begin. Restoring value to the property market, will be a priority alongside finding as yet unidentified honest and decent leaders. In September 2008 I put forward one idea to achieve the former objective, do Clegg and/or Cameron now have the courage to take on such an approach, and perhaps simultaneously convert to decency? A quote from that old posting: 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.Decency for Clegg and Cameron could be guaged as a distant possibility by an immediate large cut to UK contributions to the EU pending a halt to their ongoing and grandoise plans for ever more vainglorious enterprises and aggrandisement.

Fannie Mae, Walkaways and Sovereign Debt Stormclouds mount

Fox News reports on Fannie Mae one of the main factors behind the present crisis as this blog has always maintained, read it here. Negative homeowner equity will shortly become the major problem facing the coalition government yet no plans are in place to avoid the disaster sure to result. This blog made a suggestion to the disaster that was the Brown Government. I repeat that post below, will anybody now listen:

Monday, September 22, 2008

Curing Britain's Property Price Crash.

The Chancellor of the Exchequer, Alistair Darling, in an interview on the Radio 4 Today programme this morning gave no sign that he was ready to confront the UK housing crisis as I feel sure will still be the case in his conference speech later this morning and that of his Puppet Master tomorrow. The steps being undertaken in the USA over the weekend as reported from an EU perspective are fairly well ( although sometimes inaccurately) summarised in this link. Britain, it is generally acknowledged, has the second gravest property price crunch in the world, yet unlike in the USA with the magic Mr Paulson, the UK government, oh so typically, seems to be doing nothing to address it, content with ignorant BBC interviewers throwing out suggestions of bonus caps in the city and windfall taxes for the energy sector while chucking ever more billions of pounds yet further down the drain for added liquidity for the institutions at fault. In my post of yesterday, immediately beneath this posting, I addressed the problem of the householder in negative equity - particularly in my example number 2, of a family with a mortgage in excess of the value of his home but not yet in default - a potential 'walkaway mortgagee' as separate from one in default and given notice of re-possession. In my view it is the potential 'walkaway' who must first be helped. A decision to quit one's home is grave indeed and places that family in a position of effectively turning their back on the system. It is therefore an action that the government must endeavour to discourage even at great cost. (Re-possessions follow from a considered action of the mortgage holder and form a separate problem). 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.

Treasures from the threads -number twenty-nine

From a comment to Simon Heffer's well-stated column in this morning's Daily Telegraph, linked here:

emmiem

on January 10, 2009

at 08:14 AM

.....The banks have lost their capital with massive write-downs, are basically insolvent and have no idea what their liabilities might be due to the impossibility of pricing the monstrous pile of toxic derivative securities, CDO's, MBS, etc, sliced, diced then repackaged and traded with abandon in the heyday of perpetually expanding bubbles. Most of them ended up with European banks. The BIS (Bank for International Settlements), estimates the total might be $1.6 quadrillion with an optimistic firesale value of pennies on the dollar/pound.. if any buyers can be found. A security is only worth what a buyer is prepared to pay, hence the difficulty in estimating value. Brown is not that much interested in savings or diminishing capital for private investors. Our fiat financial system is totally reliant on ever expanding infinite debt as evidenced by the need for year on year exponentially increasing GDP. To re-inflate the bubble he must get banks to lend so that we are persuaded to take on more debt in order to consume more goods from businesses that are themselves in debt. (Blog editor's emphasis) How he will achieve this I do not know. He may in the end have to resort to creating the debt on our behalf in the form of a huge national public works program which will boost yet more publicly funded jobs but do zilch for the economy. Or he may have to nationalize the entire housing stock by buying up all mortgages, in which case he will bankrupt the country. Whatever he decides at some point he will have to concede that our fiat currency is well beyond its sell by date and we are witnessing its death throes. I see a new currency on the horizon (world currency?), or a global return to the gold standard with a coordinated devaluation of all currencies. I also have a nasty feeling this entire financial fandango was deliberately engineered.

PM Cameron's tax affairs become the issue in Indonesia

The British Prime Minister, David Cameron, hoping to put a disastrous two weeks behind him by fleeing to the Far East, was this evening caught on the hop in Indonesia by some well aimed questions from the Sky News Business Editor almost immediately transmitted thereafter on the prime time popular show Jeff Randall Live.

The Guardian newspaper was quick to scent blood immediately after the PM appeared to offer to reveal all his tax affairs, with the following hint at tax advantageous dealings concerning the rental of one of the Camerons' many properties, mortgages for which had already been the subject of questions during the disgraceful MP expenses abuse scandal. The following is from that paper this evening:

Many details of partnerships, apart from the profit accrued from them, are not disclosed. A husband and wife may form a partnership to process income from, say, the rental of a house like the Camerons' Notting Hill home, currently a lucrative let for the prime minister.

The unmitigated disaster of scrapping UK mortgage interest tax relief!

Tax relief in the UK was known as Miras, read here, it was introduced in a bid to encourage home ownership. It followed along from the earlier abolition of annual taxation assessed on the market value of property.

Is home ownership a sensible objective? A few minutes spent watching the following video clip may well incline one to that view, albeit relying on the exagerated comedy features of a popular British TV show:



In the UK today, the three main political parties, compete to claim themselves as being the most "progressive", of which, after any brief  analysis, independently minded researchers would likely be convinced is merely a new word describing modern day marxism, it is unlikely therefore that many proponents of the case for private home ownership can be found amongst their ranks.

Amazingly I have recently been informed by e-mail, that such an aboilition is starting to be considered in the USA itself. I provide a link to a site dedicated to fighting such a disastrous course. Read here and here.

Home ownership benefits society in a miriad of ways providing employment not just to local builders, carpenters and plumbers but countless other service providers attracted by serving communities with a vested financial stake in making their communities attractive and prosperous. The one serious drawback I have been offered being that it may have a slight tendency to reduce the mobility of labour.

What can be learnt from the situation that has developed in the UK since Miras was withdrawn by the social engineering New Labour Party at the beginning of this new century?

Robbed of mortgage interest tax relief, the benefits of property ownership became confined to the imperative for an ever escalating price of property. Britain's politicians, beneficiaries of tax-payer funded second home allowances and thus with a double (in some cases even treble) stake in ever overinflating house prices, connived to ensure this could initially be achieved. This corrupt conspiracy peaked when house prices were deliberately removed from the Bank of England's target inflation figures, which revised inflation calculation method was imposed upon (and/or accepted by) the BoE's new Governor, Mervyn King, upon his appointment.

A reintroduction of mortgage interest relief in the upcoming budget of George Osborne would be the first sign of a return to sanity by the supposedly "conservative" portion of Britain's coalition Government. As the sub-prime mortgage debacle has proven, a property owning democracy depends on a decent education system, as a re-introduction of Grammar Schools are similarly not on this government's agenda, a return to a decent society capable of prudent mortgage management, seems mere wishful thinking for the UK.

I hope the USA has more success in fighting off the removal of the small subsidy central government supplies when providing mortgage interest income tax relief. Considering this provides so many other, often intangible benefits, the actual costs must be minimal. Where have the tax funds thus saved by Britain over the past ten years been spent? An area too murky and dreadful even to begin to contemplate.

Other posts from this blog on the present housing crisis may be found by entering some of the following key words in the "Search" section at the head of this blog or clicking on the links:

Walkaways

Fannie Mae

House Price Crash

Mortgages

Other episodes from Keeping up Appearances, illustrating the inevitable delapidation of socially provided housing versus private property (although the implied social divisions are not an essential prerequisite!!!) are available on YouTube. (I believe the programme has been seen on Public Service Broadcasting in the USA, please note we Brits are not all in one category or the other!).

Walkaways, UK Property Crisis,

It has been a while since this blog re-visited this painful topic. Entering the title of this post in the blog's search bar will yield many posts, amongst which are some proposing a possible solution whereby the pending disaster could well have been somewhat mitigated, if not averted, or read them by merely clicking here.

What prompted my return to the topic, other than the fall in mortgages issued in April, as announced this week, and this detailed analysis from the Wall Street Journal, linked here, has been the huge switch to interest only loans in the UK, effectively making your lender your landlord, and soon, almost inevitably also to be your evictor, as interest rates rise, as they eventually must, with inflation now above 5%.

How can the Ministers of the Coalition Government have done nothing to avert this coming catastrophe, merely sitting on their hands over the last twelve months while all around them chaos mounts.  Another large fall in property prices is just round the corner, which must surely be practically certain to be the final straw for the hard-pressed and long-suffering British taxpayer!

Fannie Mae finally de-listed from New York stock market.

The creation of Fannie Mae as part of Roosevelt's New Deal in 1938, read here, was designed to solve the problem of the Great Depression of the 1930s. Regular readers of this blog will be aware that the later mishandling of the liabilities of these companies is what I believe caused to sub-prime crisis itself leading to the the recent recession. Good news then that the pretense that they continued as viable entities up to yesterday has at last ended. More worryingly is the fact that the huge bulk of new mortgages issued in the USA this year have (in combination with various veteran associations) been issued by Fannie Mae and Freddie Mac.

Walkaway Mortgagees or Drowning Householders?

Yesterday in the USA the Federal Government unveiled a new fifty billion dollar plan to aid its underwater homeowners. One blog gives its views here. Moral hazard is the phrase much used elsewhere in the USA. In the UK we would describe those unfortunates with mortgages greater than their home values as having negative equity. Drowning seems much more apt. It is many, many months since this blog first warned of the dangers of negative equity being likely to result in Walkaway Mortgagees and likely anarchy to follow. Finally a respected member of the mainstream media has finally awoken to the dangers, read here. Earlier postings on this topic, together with my suggested solution, may be found by using the keywords "Walkaways" or "UK House Price Crash" in the search bar for this blog.

Obscene pensions, EU waste and Lost Democracy

Click here for update on the "Jail the Whitehall 600,000". There is a Daily Telegraph report from November 2006 on the 1.7 million pensions available even then and against which this blog has long campaigned, read it here. We wish The Slog much success in its campaign and hope the reference to interest from The Sun in today's post bears fruit, for the blogosphere has so far proved ineffective in arousing the public in the huge criminality at play in the governance of the country over recent years; The conomic crisis might also do the trick, as hinted at in this from today's Telegraph web pages. A quote:

Yields on 10-year Swiss bonds fell to 1.02pc as investors flocked into the ultimate safe-haven asset, now outperforming gold.

No country in the developed world apart form Japan has ever seen 10-year yields drop below 1pc. Rates remained significantly higher during the two great depressions of the 1870s and the 1930s.......(blog editor's highlight)

While it concludes....

The next phase of the crisis will see revenge by all those who have already taken a big hit, or expect to do so: whether under water on their mortgages, unemployed, dependent on health support, or state employees. Democracy will have its way.

Well we can indeed hope that will be the case, but how it will play out given the apparent powerlessness of the nations states to prevent runaway EU expenditure, reported elsewhere in the same newspaper's pages, remains to be seen!

Fannie Mae and Freddie Mac Fellatio!

Yesterday was not just the anniversary of the beginning of The Blitz of Britain by the Germans 70 years ago, no doubt being gleefully drooled over on the next morning by German leaders as the aerial reconnaissence photographs revealed the gruesome details of the death and destruction wrought by Germany's might, just as this morning, no doubt, a new generation in Berlin and Frankfurt relish the economic humbling of the City of London brought about by the humiliation of Britain's Chancellor of the Exchequer, George Osborne, in Brussels yesterday in an event that appears to have deliberately taken place on this hugely significant and bloody anniversary, no indeed, for it also marked the second anniversary of Fannie Mae and Freddie Mac being taken into the custody of the US Government. Does yesterday then perhaps also mark the end of the era of US moral leadership, might and world domination? Fannie and Freddie brought the pride of home ownership to many lower income Americans over many decades. They helped in pulling the country out of the Great Depression of the nineteen-thirties. Has the US Government, Congress, the Federal Reserve or any other body used the past two years to address the underlying problems of these two grossly over indebted mortgage suppliers? It appears not. In fact the very opposite has been the case. Over the past two years these now government controlled institutions have been the major supplier or underwriters of most of the new mortgages recently issued, therefore merely compounding their underlying problems, read a Bloomberg report from here, tellingly titled "Subprime 2.0 Is Coming Soon to Suburb Near You: by Edward Pinto". The housing crisis, such as that in the US and in Britain is the main underlying economic crisis on both sides of the Atlantic and it appears for the entire english speaking world, yet neither the US nor the UK Governments will face up to that fact. Solutions have been regulary suggested from this blog. Most recently David Cameron and Nick Clegg have been urged to return their property portfolios to the state from which they have indirectly been drawn. Other Cabinet Ministers would be wise to follow suit so that they can address the economic disaster in which the country now lies with clear eyes and from a sensible starting point. A man is worth more than the value of his home or the marque of his car. Economic might when misused can be overcome by ordinary people pulling together, that was the lesson of The Blitz. We can overcome this economic mess by grasping the fact that homes have values because they are secure, situated near schools and jobs priced at a wage which makes them affordable. Bricks and mortar torn down and resold with flat screen TVs or used modern kitchen gadgetry in an environment where no building is taking place have little value at all. Look round your possessions at home today, what are they really worth and if mortgaged to a typical bank, building society, or even Fannie or Freddie ------ what could these failing institutions obtain for their supposed secured assets when society has no hope?

Treasures from the threads - Number Twenty-two

This comment from the aptly named "UK Debt Slave" at 11:08 am (I normally do not include anonymous comments but make an exception for this interesting posting) was to a rather strangely written opinion piece by Jeff Randall in the Telegraph this morning, linked here: The classic response to any and all ills in British society Let's have an enquiry! Let's spend million writing a report that will tell us NOTHING we don't already know. TO HELL WITH ENQUIRIES! Let's straighten a few things out for you Jeff. I'll save the public purse millions right now by explaining what has happened. A VERY BIG CRIME HAS BEEN COMMITTED. That's what's happened. We are supposed to believe this debacle is all just a terrible accident. All the talking heads are saying how foolish everyone has been. "Oh dear. What a mess. Let's put the kettle on." The FACTS are very different. 1. On both sides of the Atlantic, the central banking system, the Fed and the BoE have presided over the biggest credit bubble in history. by keeping base rates way too low. They knew damn well what the consequences would be. 2. The regulatory bodies charged with overseeing lending practices and regulating 'inflation' have all FAILED miserably. 3. Both the Fed and the BoE used a wholly bogus yardstick to measure inflation. They based their inflation statistics on an easily manipulated 'basket of consumer goods' called the CPI, NOT MONEY SUPPLY. Inflation is ALWAYS a function of money supply. The money supply in the UK has consistently grown by between 11-14% YOY for several years. This growth in money supply is what has funded the asset bubble in property and stocks and shares. The real rate of inflation in the UK has consistently been 8-9%. 4. House prices have tripled, not because they are intrinsicly more valueable than they were 10 years ago but because of excess liquidity and insane lending practices, none of which were held in check. 5. The media has contributed to this fiasco, poured petrol on the fire, by deluging the bovine masses with 'property porn' TV shows, encouraging people to borrow beyond their means to participate in the one way ticket of infinite house price inflation. 6. Banks and mortgage lenders have thrown caution to the wind and thrown every rule of responsible banking out of the window, lending insane income multiples or worse, lending to people who don't even have a job! To make matters worse, they immediately sold these worthless mortgages immediately to get them off their books. They have infested stock markets and pension schemes all around the world with potentially devastating consequences. Banks have ignored every basic tenet of responsibility from capital asset ratios to common sense...GONE 7. The people charged with overseeing the regulation of banking, the FSA, were obvioulsy on holiday for 10 BLOODY YEARS. 8. The people charged with overseeing inflation, the MPC, were using a Mickey Mouse method to measure inflation. It was complete nonsense to measure inflation based on just a basket of consumer goods. Nobody it seems realised the obvious. WHY? 9. The government first under the satanist Bliar and now under Stalin Brown has consistently encouraged this myth with their Orwellian DEBT IS GOOD mantra. They have consistently peddled the myth that DEBT IS WEALTH. This is O-level economics, yet the combined efforts of the BoE, MPC, FSA, Treasury and government didn't see what was coming........OR DID THEY? You see, THIS DEBACLE CANNOT HAVE HAPPENED THROUGH IGNORANCE OR NAIVETY! It had to be contrived at the higest levels. This economic collapse was planned and deliberately orchestrated well in advance. The people behind this disaster, and they are at the very highest levels of the international banking system, the political elite and freemasonry, have DELIBERATELY planned and conspired to create the biggest economic catastrophe in human history. This is NO ACCIDENT. It WAS PLANNED. It is a repeat of the Wall Street crash and the Great Depression, which was also a conspiracy, headed by Paul Wahburg and the Rothschild banking dynasty. This is the NEW WORLD ORDER folks. The asset stripping of the people has begun. Million will lose their homes, their businesses, their savings and pensions. We are to be reduced to penury. Their objective is the biggest seizure of private property in history. Millions are going to have their homes seized, their pensions and savings destroyed, their gold and silver bullion and coins confiscated. They are going to asset strip the people as surety against our humungus national debt. We are to be reduced to slaves. The time for worthless enquiries and writing reports is over. It will require revolutionary acts to bring these people to justice and return freedom and liberty to the people. There's very little time left. WAKE UP PEOPLE It all could be cock-up rather than conspiracy, I suppose, but can the West's political leaders really be that stupid, unhappily perhaps so - I doubt we will ever know!