Monday, January 28, 2008

60 Minutes Legitimizes Walking Away

I have borrowed the headline 60 Minutes Legitimizes Walking Away from Mish. He has also some more thoughts on this topic ( read also The Business of Walking Away ) . Also a hat tip to my friends from Housing Doom for digging the Youtube version. I hope this clip shows especially the European visitors how bleak the reality looks like and why we are still in the beginning of this painful process of the "correction". Lots of Germans ( including Landesbanker like West LB , Sachsen LB, IKB etc.) can´t understand that it is possible to just "walk away" from the house without facing consequences for the rest of their lifetime like here in Germany.

Dank geht an Mish für die "geborgte" Überschrift die eine ganz neue Dynamik in den "Anpassungsprozeß" der US Immobilienkrise bringen wird . Hier weitere Gedanken von Mish The Business of Walking Away . Zudem dank an Housing Doom für das aufstöbern der Youtube Version.

Nur zur Erläuterung muß erklärt werden das anders als in Deutschland die Haftungen in großen Teilen der USA und insbesondere in den Hochburgen wie Kalifornien bei einer Zwangsvollstreckung komplett anders als zum Beispiel in Deutschland gestaltet sind. Dort wird nur mit der Immobilie gehaftet. Das ist gleichbedeutend damit das selbst wenn die Immobile unter den Hammer kommt und die Bank wie momentan üblich gigantische Verluste macht der Schuldner nicht für diesen Verlust einzustehen hat.

Praktisch, oder?

Würde mal tippen, das auch dieses Neuland für die Manager der Landesbanken ist ( siehe Sachsen LB, West LB , IKB usw ) Sinnvollerweise haben die Verantwortlichen oftmals gleich die ganze Bank aufs Spiel gesetzt um auch ja genug US Hypothekenpapiere zu erwerben.....

So kommt es vor das zum Beispiel wenn ein Haus auf der gegenüberliegenden Straßenseite für 300.000 $ zum Verkauf steht und man für sein eigenes Objekt mit 400.000 $ in der Kreide steht ( Eigenkapital war ja zum Glück dank der wahnwitzigen Finanzierungen in den letzten Jahren aus der Mode gekommen ) es nur logisch ist das neue Objekt zu erwerben und das andere in die Zwangsvollstreckung gehen zu lassen. Der damit ruinierte Creditscore sollte bei dieser Ersparniss nicht weiter ins Gewicht fallen. Noch besser wird es wenn man es sogar geschafft hat während Zeiten steigender Immopreise die Refinanzierungskeule zu schwingen und siene Immobilien mit immer neuen Hypotheken zu belasten. Welch gigantische Ausmaße das ganze in der Verganheit angenommen hat zeigt eindrucksvoll dieser Chart.

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7 Comments:

Anonymous eh said...

Praktisch, oder?

I don't really have a problem with walkaways (das Wort des Jahres 2008 schon gefunden?). There were two sides to the original transaction, when presumably both parties were acting in their 'enlightened self-interest'. This is just a logical continuation of that on the side of the borrower. The possibility that the collateral would be relinquished was known in advance to the lender.

I hope this clip shows especially the European visitors how bleak the reality looks like and why we are still in the beginning of this painful process of the "correction".

Looking at HB stocks in the US you'd think we were at the end -- quite a powerful rally there recently. Is it true that at this point the stock market is a lagging indicator?

1:02 AM  
Anonymous Anonymous said...

I think "walking away" is not sufficiently politically correct. How about "exercising the embedded negative equity option put"?

1:14 AM  
Blogger jmf said...

Moin Eh,

i like the concept of walking away and letting banks and investors eating the losses :-)

Amazing to see once again that the US stock market ( at least in nominal terms ) is holding up better than the rest of the world.

Will be fun to watch what further rate cuts the market will price in after the next jobs report.

The greenback will become one of the biggest carry trade currencies for years to come and i have to thank Ben for pushing gold to new highs.

I´m considering to open an account at an specialist für "Devisengeschäfte". So far this type of investing was always some part of gambling and hedging. But with Bernanke panicking now on a weekly basis...

I´m not sure about the jump in builders. Have seen this before several times. I assume we still will see bankruptcies for some bigger builders.

Have you seen this desperate attempt from Cramer defending his buddy Eddie Lampert....

Cramer: Media Wrong on Eddie Lampert


At the point this guy looses his show i´m willing to make real longer term investments and not only trades on the long side. :-)

1:31 AM  
Blogger jmf said...

"exercising the embedded negative equity option put"?

Brilliant!

1:31 AM  
Anonymous eh said...

J-M,

I´m considering opening an account at a specialist für "Devisengeschäfte"

It makes sense to have as many money-making opportunities as possible. Personally, I don't know enough about that, and since I only recently started dabbling in options it will have to wait.

But with Bernanke panicking now on a weekly basis...

The last "emergency" rate cut was just disgraceful. Considering that it takes some time for rate cuts to have any macroeconomic effect, what exactly was the "emergency"? The cut couldn't wait one week? I think we all know the reason for his action then -- the 'Bernankespan put'.

Who knows, inzwischen he may have developed a spine and will only cut 25bp tomorrow.

They really are kicking responsible people who save right in the teeth.

1:56 AM  
Blogger jmf said...

Moin Eh,

"They really are kicking responsible people who save right in the teeth."

'Bernankespan put'.

I totally agree. It´s sad to see how they make things worse and worse with almost every action they are making.

I am also no expert on currencies but when i look at Norway and the correlation from
NOK vs $
over the past decade my common sense is telling me that at least in the long run a debt free country with a gigantic sovereign wealth fund and decades of oils and gasreserves deserves a better ratio vs the US (even after this runup)

Not to mention that the central bank seems to be a little more responsible
Norges Bank leaves key policy rate unchanged at 5.25 per cent


But with unemployment under 2 percent the only risk i see in this trade / bet is once more the timing. The next move will be probably down from the 5.25 percent with possible pressure on NOK

I´ll be waiting for any weakness to make my first entry and am willing to build a longer term position over time.

Lets hope i can keep the patience.... I doubt it :-)

2:31 AM  
Blogger jmf said...


Tousa, Florida Homebuilder, Files for Bankruptcy


The company, based in Hollywood, Florida, listed assets of $2.3 billion and debt of $1.8 billion in a Chapter 11 petition filed today in U.S. Bankruptcy Court in Fort Lauderdale, Florida.

Tousa, now the largest builder in bankruptcy, missed a Jan. 15 payment on $200 million in 7.5 percent senior subordinated notes due 2015. The company also missed a Jan. 1 interest payment on $300 million in 9 percent senior notes due 2010 and $185 million in 10.375 percent subordinated notes due 2012.

4:04 AM  

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