Bailout passes committee

A massive government housing bailout passed committee by a large, bipartisan majority.

It's an allegedly optional version of the McCain cramdown, but Barney Frank warns servicers that if they don't cooperate, he'll screw them in the... oh, nevermind:

"Servicers should put a pause in some foreclosures until they can wait to see exact details of this as it moves forward. If after this we continue to get very little participation by servicers, I can guarantee you that the servicer industry will look very different a year from now than they do today. If after everything we do in this cooperative way falls short, then you are going to see legislation that puts some very real restrictions on the role of servicers and give many more rights to the borrowers," Frank continued.

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Famed investor Jim Rogers, in a CNBC interview with Maria Bartiromo today, on the strengthening dollar:

"I expect it to go a lot longer than anyone expects, including me."

What gives?

In San Diego, defaults are up, but foreclosures (NOTs, Notices of Trustee Sale) are down.

It's not just a local phenomenon. Countrywide, Countrywide is posting skyrocketing delinquencies but their REOs for sale are slowly declining.

What's going on here? Some think it's just a statistical blip before foreclosures pick up steam again. I think something bigger is at work. Lenders either can't handle the volume of foreclosures, or don't want to foreclose. I suspect a bit of each.

Lenders' back offices have never seen foreclosure volumes like this. They are overwhelmed. But they also probably do not want to foreclose. Politicians from both sides of the aisle have been proposing a massive taxpayer bailout of bad lenders. John McCain's plan is to have lenders take the a writedown only to "current market value" (likely on a rosy appraisal) and then have taxpayers eat the entire loss on any further declines (which may be huge as many forecasters are predicting double-digit additional declines). If I were a lender, I'd wait for McCain's bailout rather than foreclosing and trying to dump inventory into an already flooded market.

What's a borrower to do? If your loan balance exceeds your home's value, stop paying your mortgage immediately. Remember, in the Bernanke/Pelosi/McCain world, the responsible get screwed, and the reckless get rewarded. If you stop paying your mortgage, your bank will either voluntary renegotiate the terms, or Congress will force them to do it. If you keep paying on an underwater house, you're just throwing good money after bad.

Countryfried cut to junk

This morning:

Bank of America Corp., the second- biggest U.S. bank, said it may not guarantee $38.1 billion of Countrywide Financial Corp.'s debt after taking over the mortgage lender, increasing the likelihood of a default.

"There is no assurance that any such debt would be redeemed, assumed or guaranteed," the bank said in an April 30 regulatory filing, adding that no decision has been reached. Investors had grown more optimistic the bank would back Countrywide debt, and Standard & Poor's said this week it may raise Countrywide's rating to

This afternoon:

Countrywide cut to junk by S&P

Does Bernanke panic here and guarantee CFC's garbage to save the deal? JP Morgan got the Fed to take all the risk in the Bear Stearns deal, so why shouldn't B of A get the same treatment? Nice precedent, Bernanke.

Development for Dummies: Mercer Walnut Creek

Our correspondent Negocios Loucos keeps us up to date on news from Mercer Walnut Creek, a condo development that went up near the BART station.

These condos are pitched as hipster urban living in the suburbs -- "Mercer boasts the perfect blend of urban sophistication with suburban ease." One problem: urban hipsters don't want to live in the suburbs. That's why they're called urban hipsters, not suburban hipsters. High-income young people pay asinine prices for condos in San Francisco because it's so cool to live in San Francisco. You can't get the same asinine prices for a two-bedroom shitbox a half hour out of the city. People who want to live in the suburbs want a little space, and a back yard.

Nevertheless, after more than a year on the market, Mercer is still trying to charge outrageous prices for tiny suburban shitboxes with big HOA fees:

Our Featured Luxury Collection includes the following designer homes:

Residence 449 - 1 bedroom, 1.5 baths, private, top floor home with rare 10-foot ceilings, interior pool views for $530,000.

Residence 222 - 2 bedrooms, 2 baths, upgraded entry hardwood floors, glass tile kitchen backsplash, west facing interior courtyard views for $707,777.

Residence 235 - 2 bedrooms, 2 baths, upgraded entry hardwood floors, east facing interior courtyard views for $717,944.

Residence 217 - 2 bedrooms +den, 2 baths, extended hardwood floors, Berber carpet, closet cabinetry, east interior view for $932,772.

Residence 130 - 3 bedrooms, 2.5 baths, extended hardwood flooring and Berber carpet for $1,048,739. mercer walnut creek

Anyone who buys those condos at anything close to those prices should be locked up in a mental institution for his own good.

UPDATE: Huge price reductions in October and they still aren't selling.

Jingle mail: celebrity edition

The latest person to mail the keys back to the bank on an underwater house? Jose Canseco:

Canseco, 43, one of the most flamboyant U.S. baseball players until his retirement from the major leagues in 2001, told the celebrity TV show 'Inside Edition' that it did not make financial sense to keep his 7,300-square-foot home in the Los Angeles suburb of Encino. 'Inside Edition' said it had foreclosure documents showing Canseco owed a bank more than $2.5 million on the house.

Canseco is a true American hero, and a role model. I hope his shining example encourages thousands of Americans in bad mortgages to mail their keys back to the bank.

HT: T-Dub.

Banker's Backstop

So the banks have loans that they can't sell in the open market and because of this student loans are in jeopardy. So instead of the government providing student loans (BECAUSE THIS IS TO MAKE SURE STUDENT CAN GO TO COLLEGE OF COURSE) which is option 1.bad, they are instead going to bail out the private institutions and purchase, at above market prices, those loans, option 2. super bad. HERE

Which would cost more I wonder since the loans are worth what the banks think they are, wouldn't it make more sense to not pay their "market rate" and just finance themselves? Again I don't like that idea either but they are rewarding bad business.

Privatize profit, socialize loss. Big fan of the former; pure dripping hatred for the latter.