Category Archives: Short Sale

Time to Payoff

Irvine doesn’t have any great cashflow properties. Today’s is cashflow positive, but it is still have to believe in appreciation to pay these prices for small condos.

228 Orange Blossom 34 Irvine, CA 92618

Address: 228 Orange Blossom 34 Irvine, CA 92618
Asking Price: $130,000

I’m givin’ up, on everything
Because you messed me up
Don’t know how much you
Screwed it up
You never listened
That’s just too bad
Because I’m moving on
I won’t forget
You were the one that was wrong

Forgotten — Avril Lavigne

Investment wisdom of yesteryear has been forgotten. People started drinking kool aid and convinced themselves they can make and spend a fortune through real estate appreciation alone. They were wrong. This mistake caused The Great Housing Bubble, and the result is foreclosure, ruined credit and even bankruptcy. Most have not learned this lesson yet.

{book5}

Time to Payoff

When people examine investments, they often look at rates of return to compare between asset classes. Rates of return are a valuable metric. When thinking about retirement finance, rates of return become less important than steady cashflow. We need a new measure of success for reaching your retirement goals: Time to Payoff. The Time-to-Payoff is the amount of time it takes to retire the debt used to acquire the asset (house). It is a handy tool of those who use Accelerated Amortization.

Today, I want to look at another feature of cashflow investing: debt retirement. In Real Estate, Cashflow Investment and Retirement I noted, “… you can take the excess rent and put it toward the mortgage paying off the debt more quickly. Remember, the goal is to have maximum free cashflow in retirement, so you want to pay off those debts.” Retiring debt is part of the cashflow investment mindset; it is diametrically opposed to speculation.Biggest Saver

Paying off debt is as difficult as dieting — there is always a temptation — whether it be spending or eating. The success rates for debt retirement are no better than they are for weight loss. Perhaps we should have a TV Show for the Biggest Saver.

Calculating Time-to-Payoff is a challenge. It requires looking at the available sources of cashflow and the impact the property has on its owner. There is a level of cashflow that can be diverted toward debt service that otherwise does not impact the owner’s life.

For example, if a property is about $600 per month cashflow positive before debt or taxes, the debt service payments can actually be closer to $900 per month before the owner is truly cashflow negative. How can this be? Isn’t paying out $300 a month more in payments making you cashflow negative? Not really. Part of that payment is equity that is paying down debt, so that is not a true expense. The interest will be tax deductible for most wage earners, so the owner can adjust paycheck withholdings to compensate for the difference in payment. In short, the property has no net financial impact on the owner.

If the property is cashflow positive — which it must be for this analysis to work — there will be money that can be put toward debt service. If the maximum available cashflow is put toward debt service, how quickly does the loan amortize? That is Time to Payoff.

If you invest in the Time-to-Payoff way, your property investments will have no impact on your financial life — plus or minus — until you retire. There is no demand on your income to service the investment, and there is no net benefit for you to spend on your lifestyle. Let’s just say, it isn’t a lifestyle alternative many people were choosing during The Great Housing Bubble.

{book2}

IHB Investor Report

A few weeks ago, we introduced IHB Investor Reports. After reviewing the comments and some further reflection, we have updated our reports to include new features — one of which is the Time-to-Payoff calculation. Today’s featured property is as close to an investor property as I could find here in Irvine. The deal still isn’t very good unless you are betting on appreciation.

One of the changes we made was to run the report based on what we believe to be the most likely transaction price. It does nobody any good to run a report based on an asking price that is either WTF high or so low that you know 20 bids will be over the ask. The comps are what guide short-term pricing.

Another feature we added is a chart showing the impact of different downpayment and interest-rate scenarios. Rather than run multiple financing scenarios, I set up the spreadsheet to automatically run 165 of them and report the results in terms of cash-on-cash rates of return. What you will notice is that low downpayments and low interest rates increase returns at any given price. BTW, you don’t want to know how it is calculated…

=($D$51-(-PMT(H$145/12,$C$57*12,($C$54-$C$54*$F150))-1*($C$63)*((($C$54-$C$54*$F150)*H$145)/12+$D$42)-1*(-PMT(H$145/12,$C$57*12,($C$54-$C$54*$F150))-(($C$54-$C$54*$F150)*H$145)/12)))*12/($C$54*$F150+$D$71+$D$72+$D$73)

IHB Cashflow Investor Brokers Opinion of Value — 228 Orange Blossom.pdf

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IHB Cashflow Investor Brokers Opinion of Value 04 228 Orange Blossom-3

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IHB Cashflow Investor Brokers Opinion of Value 04 228 Orange Blossom-5

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IHB Cashflow Investor Brokers Opinion of Value 04 228 Orange Blossom-7

Getting an IHB Fundamental Value Report

We are up and running and ready to serve. If you want to see an IHB Fundamental Value Report for either your own home or a house you are looking to purchase, you can request a report at our newest navigation stop: Reports. You will be automatically signed up for our introductory emails and our periodic newsletter when you request a report. In order to avoid responding to robot submissions, we will process your
request when we receive confirmation from your email address.

228 Orange Blossom 34 Irvine, CA 92618

Address: 228 Orange Blossom 34 Irvine, CA 92618

Asking Price: $130,000

Income Requirement: $23,927
Downpayment Needed: $26,000

Purchase Price: 62,500
Purchase Date: 10/29/1997

Net Gain (Loss): $59,700
Percent Change: 108.0%
Annual Appreciation: 9.1%

Monthly Payment $673
Monthly Cash Outlays $925
Monthly Cost of Ownership $653

Redfin Property Details for 228 Orange Blossom 34 Irvine, CA 92618

Beds 1
Baths 1 bath
Size 471 sq ft
($276 / sq ft)
Lot Size n/a
Year Built 1976
Days on Market 359
Listing Updated 8/3/2009
MLS Number F1786080
Property Type Condominium, Residential
Community Orangetree
Tract Cm

According to the listing agent, this listing may be a pre-foreclosure or short sale.

Charming end unit. Lower level one bedroom with full bathroom and kitchen. Inside laundry. Living room and patio area overlooking water stream and soothing sounds of a waterfall. 1 car port. Association has pool, spa, tennis courts and clubhouse. Excellent location next door to Irvine Valley College. Near 5 and 405 Freeways, Irvine Spectrum Entertainment Center, Business District, Shopping. Located in Building # 12.

Moon Real Estate

So what happens when we run out of land? Perhaps we will develop the moon; although, we will run out of land even faster there since it is so small…

20 Moonstone Irvine, CA 92602 kitchen

Address: 20 Moonstone Irvine, CA 92602
Asking Price: $529,000

Mars ain’t the kind of place
To raise your kids
In fact, it’s cold as hell
And there’s no one there to raise them
If you did

And I think it’s gonna be a long, long, time
‘Til touchdown brings me ’round again to find
I’m not the man they think I am at home
Ah, no no no…
Imma rocket man
Rocket man
Burnin’ out his fuse
Up here alone

Rocket Man — Elton John

I would love to go to the moon. If I live long enough (and make enough money), I will visit the moon. Would the moon be an interesting final resting place?

It is not legal to own extraterrestrial real estate. Wikipedia noted the following:

Extraterrestrial real estate is land on other planets or natural satellites or parts of space that is sold either through organizations or by individuals. Ownership
of extraterrestrial real estate is not recognised by any authority.
Nevertheless, some private individuals and organizations have claimed
ownership of celestial bodies, such as the Moon, and are actively
involved in “selling” parts of them through certificates of ownership
termed “Lunar deeds”, “Martian deeds” or similar. These “deeds” have no
legal standing.

A number of individuals and organisations offer schemes or plans claiming to allow people to purchase portions of the Moon or other celestial bodies. Though the details of some of the schemes’
legal arguments vary, one goes so far as to state that although the Outer Space Treaty,
which entered force in 1967, forbids countries from claiming celestial
bodies, there is no such provision forbidding private individuals from
doing so.

Many states and countries have corollaries to their real estate and
property laws to prevent wanton claiming of new-found lands, that state
that a simple claim to the territory is not enough; the claimant must
also demonstrate “intent to occupy,” something that, at this time, is
obviously difficult to do with the Moon or any other celestial body.

Considering these facts, legally, the schemes’ “deeds” have only
symbolic or novelty value and no official governing body in the world
has yet granted any legal validity to them.

When you are ready to start your search for moon property, you can start with Google Moon. Since there are no surveyed properties, you will have to explore and stake your claim on your own. There are organizations (Lunar Registry and Moon Shop among others) willing to take your money and give you some paper saying you own a piece of the moon, but as noted above, these claims have no legal standing.

20 Moonstone Irvine, CA 92602 kitchen

Address: 20 Moonstone Irvine, CA 92602

Asking Price: $529,000

Income Requirement: $133,084
Downpayment Needed: $105,800

Purchase Price: $595,000
Purchase Date: 11/10/2005

Net Gain (Loss): -$97,740
Percent Change: -11.1%
Annual Appreciation: -2.8%

Monthly Payment $2,740
Monthly Cash Outlays $3,458
Monthly Cost of Ownership $2,348

Property Details for 20 Moonstone Irvine, CA 92602

Beds 3
Baths 2 full 1 part baths
Size 1,500 sq ft
($353 / sq ft)
Lot Size n/a
Year Built 2001
Days on Market 32
Listing Updated 9/11/2009
MLS Number P701348
Property Type Condominium, Residential
Community West Irvine
Tract Mand

Quiet inner location and very desirable open floor plan, rarely on the market. Oversized Master bedroom + 2 larger bedrooms, upstairs laundry room. Walk-in closet in the Master bedroom and one of the bedrooms. Plenty of storage spaces throughout, in addition to storage cabinet in the garage. Custom painting throughout and designer carpet upstairs. Porcelain tile in Living room & kitchen area.

Today’s featured property was purchased on 11/10/2005 for $595,000. The owners used a $476,000 first mortgage, and a $119,000 downpayment. They are hoping to recover some of their downpayment and get out without this becoming a short sale. Unfortunately, the property next door has an even more motivated seller; twenty-one Moonstone is being offered for $499,000. They competition puts the owners of today’s featured property underwater.

Buying in 2005 cost these owners their substantial downpayment, and they too may end up as a short sale.

Frank Sinatra

Come fly with me, let’s fly, let’s fly away
If you can use some exotic booze

Once I get you up there where the air is rarefied
We’ll just glide, starry-eyed

Come fly with me, let’s fly, let’s fly
Pack up, let’s fly away!!

Come Fly With Me — Frank Sinatra

Accelerated Amortization

Very low interest rates make prices affordable. We used to have unsustainable loan programs; now we have unsustainable loan terms. Affordability at these price points is fleeting. It is an opportunity for home ownership most people should pass on.

145 Roadrunner Irvine, CA 92603 kitchen

Irvine Home Address … 145 Roadrunner Irvine, CA 92603
Resale Home Price …… $649,000
{book7}

The people were intrigued
His wife held back her fears
The headlines gave acclaim
He’d realized their dreams.

Faster than a bullet from a gun
He is faster than everyone
Quicker than the blinking of an eye
Like a flash you could miss him going by
No one knows quite how he does it but it’s true they say
He’s the master of going faster.

Faster — George Harrison

Most people realize their dreams of home ownership when they purchase a house. This is not ownership; it is debt slavery. You don’t own the property until the debts are retired. Real home ownership is the reward for those who master paying debts faster.

Affordability is a measure of people’s ability to raise money to obtain real estate; it is a function of financing. During The Great Housing Bubble, financial innovations dramatically increased the amounts people were able to borrow; unfortunately, Affordability Products Make Prices Unaffordable. The affordability was short lived because the loan programs themselves were unstable. The collapse of these loan programs resulted in a massive credit crunch that removed affordability from the market; prices fell.

During The Great Housing Bubble, the loan programs were unstable and interest rates were too low because lenders were not property pricing risk. Now, the Federal Reserve has artificially engineered unsustainably low 4.5% Mortgage Interest Rates? to compensate for the affordability lost when toxic loan programs got crunched. In short, we substituted unsustainable interest rates for unsustainable loan programs — the key word being unsustainable.

I have predicted that we will see a 2011 Inflation Spike. If inflation does go up, mortgage interest rates will go higher because banks will not loan money at rates lower than the level of inflation because they would come out behind. So what happens when interest rates go up?

Is it about the payment?

It is worth noting here that lower prices does not increase affordability. What? Yes, that is right, lower prices does not necessarily increase affordability. A house loan of $460,509 at 4.5% has the same payment as a $317,995 loan at 8%. The loan balance is 31% smaller, but the payments are the same.

From a cashflow investment perspective — assuming the property will never be sold — the Federal Reserves efforts to lower interest rates has increased affordability. Like the loan programs the FED initiative replaces, ultra-low interest rates are not sustainable.

So why shouldn’t you be buying now?

  1. Most people will sell their home, so resale value does matter.

  2. You can never refinance into a lower payment or faster amortization schedule.

I wrote about point #1 in Temporary Affordability and the Third Foreclosure Wave:

If there are properties in which you would be willing to live for the
long term, and if they can be had for at or below rental parity, then
you are only hurt by rising interest rates and declining prices if you must sell while resale values are depressed (an event that happens more often than most believe). Eventually—cue
the 20 year holding time—fundamentals will rise to support prices at
higher interest rates. On an inflation adjusted basis, you can never
recover from overpaying up front, but in nominal terms, there will come
a point when you can get out at breakeven. Keep in mind, you are
trapped in an underwater situation once interest rates start going up
and values start going down; however, you are trapped in a property that still costs you less than renting, so you are far better off than the typical homedebtor trapped in their homes today.

From a purely cashflow perspective, buying now is not a problem; however, in the real world, people need to sell their homes for many reasons. If they are underwater when they need to sell, bad things happen. Are you willing to take that risk?

It point #2 that I want to examine more carefully today. In Real Estate, Cashflow Investment and Retirement I noted, “… you can take the excess rent and put it toward the mortgage paying off the debt more quickly. Remember, the goal is to have maximum free cashflow in retirement, so you want to pay off those debts.” Retiring debt is part of the cashflow investment mindset; it is diametrically opposed to speculation. Retiring debt is the key to retiring from work. The faster you can
accelerate the repayment of debt, the sooner your investments are paid
off, and the sooner you can retire.

Pay more when you can

There are methods anyone can use to accelerate their home mortgage payments: (1) pay more when you get a raise and (2) make extra payments. One of the advantages of home ownership is that you have a stable house payment while renters face yearly increases. Why not take that raise and put some of the extra into your payment? If you get a 3% raise, you should be able to put 3% more toward your mortgage. If you do this, a 30-year amortization drops to 20 years.

Another method people use to pay down their mortgages is to make extra payments. If you are like the many people who are paid every two weeks, you get what seems like two extra paychecks a year. If you make one extra payment a year, you can pay off your mortgage five years early. If you can make two extra payments a year, you can pay it off almost eight years early.

If you combine both methods, you can pay off your mortgage in 16.5 years!

This plan does not require heroic efforts. You are putting the same percentage of your income toward housing, and you are spending part of two extra paychecks per year. It that too much to ask in order to pay off your debts early? Good financial planning can accelerate your retirement by many years. Do you want to work longer than you need to?

Refinancing for accelerated amortization

During The Great Housing Bubble, and even now, most people who refinance do not accelerate their amortization. If given the chance, most people will suck the equity out of their home and spend it. The more conservative ones will refinance into a lower payment and enjoy more spending money that way. What I am proposing is the most conservative alternative; take out no money, make the same payment, and pay off the debt quicker.

Those that fail to learn the lessons of history are doomed to repeat its mistakes. What did you learn from The Great Housing Bubble?

{book3}

145 Roadrunner Irvine, CA 92603 kitchen

Irvine Home Address … 145 Roadrunner Irvine, CA 92603

Resale Home Price … $649,000

Income Requirement ……. $119,450
Downpayment Needed … $129,800

Home Purchase Price … $830,000
Home Purchase Date …. 6/26/2007

Net Gain (Loss) ………. $(219,940.00)
Percent Change ………. -21.8%
Annual Appreciation … -9.6%

Monthly Mortgage Payment …. $3,362
Monthly Cash Outlays ……….. $4,219
Monthly Cost of Ownership … $2,858

Property Details for 145 Roadrunner Irvine, CA 92603

Beds 3
Baths 1 full 1 part baths
Size 1,610 sq ft
($403 / sq ft)
Lot Size n/a
Year Built 2004
Days on Market 1
Listing Updated 10/1/2009
MLS Number S591179
Property Type Condominium, Residential
Community Turtle Ridge
Tract Whgl

Beautifully upgraded single level home in Turtle Ridge’s Whispering Glen. This lovely home features maple flooring in most rooms, a gourmet kitchen with granite counters and GE Profile stainless steel appliances, a stone faced fireplace in the living room, a separate dining room, a large master bath with separate shower and tub, a large walk in closet, an inside laundry and an attached two car garage with built-in storage units. The home is currently configured as two bedrooms and a den, but the den can be converted back to a third bedroom. Highlighting this home is the very private back yard and patio area that looks out onto a lush greenbelt. It provides a wonderfully serene setting that is a true delight. The association also has a resort-like pool and spa area.

If my property information is correct, this was an all-cash purchase by a knife catcher. Perhaps the $220,000 loss will cause him to rethink his investment strategy….

Maginot Loop

The defensive perimeter of the kool-aid intoxicated in Woodbridge is Yale Loop. The foreclosures and defaults are threatening to overrun market prices.

1 Cornsilk Irvine, CA 92614 kitchen

Irvine Home Address … 1 Cornsilk Irvine, CA 92614
Resale Home Price …… $769,000

In my defence, what is there to say?
All the mistakes we’ve made must be faced today
It’s not easy now, knowing where to start
While the world we love tears itself apart

I’m just a singer with a song
How can I try to right the wrong?
For just a singer with a melody
I’m caught in between, with a fading dream

In My Defence — Freddie Mercury

At the end of World War I, the French decided it would be a good idea to construct a massive defensive line along the German border to deter a major ground offensive: the Maginot Line. It turned out to be an expensive boondoggle as the Germans simply flanked the complex and conquered the French in May 1940. Never has so much money been spent in a completely wasted effort to overcome a problem… sounds like our various homedebtor bailouts and market manipulation, doesn’t it?

Just as the French had the Maginot Line to give them a false sense of security, residents of Woodbridge have Yale Loop.

Woodbridge Map

As I noted in my community profile of Woodbridge:

Woodbridge Home 3

Residents who really “know” Woodbridge will tell you there is a
hierarchy of desirability radiating outward from the center.
Neighborhoods closer to the lakes have larger homes and are more
desirable. People in this area are the creme de la creme, and they defecate without odor.

Ducks on North Lake

Those who live outside the loop are the “wannabes” who really aren’t
worthy of Woodbridge’s aura of greatness. You must pardon my facetious
banter, but I was given a very similar description by a long-time
resident. Interesting that even within one of Irvine’s best
neighborhoods, the competition to put oneself above others is notable.

Prices inside the loop have barely budged since the peak, whereas prices outside the loop are getting hammered. Not all of the product inside the loop is single-family detached housing at high price points. Wherever the condos have crossed the Maginot Loop, the foreclosure problem has taken hold, and further price blowouts are on the way.

Woodbridge loop foreclosures

Here is what is happening with 1/2 mile of today’s featured property.

ForeclosureType Address City State Zip
Bank Owned 127 GREENMOOR 53 IRVINE CA 92614
Auction 15 BLOOMDALE IRVINE CA 92614
Auction 242 GREENMOOR IRVINE CA 92614
Auction 158 GREENMOOR 67 IRVINE CA 92614
Auction 23 FALLINGSTAR 10 IRVINE CA 92614
Bank Owned 360 E YALE LOOP 15 IRVINE CA 92614
Bank Owned 31 SPRINGFLOWER 37 IRVINE CA 92614
Auction 9 GREENBRIAR 30 IRVINE CA 92604
Preforeclosure 21 GOLDENROD 86 IRVINE CA 92614
Preforeclosure 366 E YALE LOOP 12 IRVINE CA 92614
Preforeclosure 9 SEADRIFT 66 IRVINE CA 92604
Preforeclosure 1 FALLCREST 98 IRVINE CA 92614
Auction 135 FALLINGSTAR 7 IRVINE CA 92614
Preforeclosure 388 FALLINGSTAR 39 IRVINE CA 92614
Auction 643 SPRINGBROOK N 20 IRVINE CA 92614
Auction 212 GREENMOOR 94 IRVINE CA 92614
Preforeclosure 21 GOLDENROD 86 IRVINE CA 92614
Preforeclosure 153 CHERRYBROOK LN IRVINE CA 92618
Preforeclosure 38 WINTERHAVEN 107 IRVINE CA 92614
Preforeclosure 5 BAYPORTE IRVINE CA 92614
Auction 409 E YALE LOOP 16 IRVINE CA 92614
Preforeclosure 7 SAND IRVINE CA 92614
Preforeclosure 37 FIRWOOD 29 IRVINE CA 92604
Auction 5 CHAMOMILE 23 IRVINE CA 92604
Preforeclosure 346 FALLINGSTAR 54 IRVINE CA 92614
Preforeclosure 110 DANBURY LN IRVINE CA 92618
Preforeclosure 366 E YALE LOOP 12 IRVINE CA 92614

Will the Maginot Loop hold?

1 Cornsilk Irvine, CA 92614 kitchen

Irvine Home Address … 1 Cornsilk Irvine, CA 92614

Resale Home Price … $769,000

Income Requirement ……. $141,537
Downpayment Needed … $153,800

Home Purchase Price … $741,000
Home Purchase Date …. 4/14/2004

Net Gain (Loss) ………. $(18,140.00)
Percent Change ………. 3.8%
Annual Appreciation … 0.7%

Monthly Mortgage Payment …. $3,984
Monthly Cash Outlays …………. $4,981
Monthly Cost of Ownership … $3,369

Property Details for 1 Cornsilk Irvine, CA 92614

Beds 4
Baths 2 full 1 part baths
Size 1,900 sq ft
($405 / sq ft)
Lot Size 3,400 sq ft
Year Built 1985
Days on Market 2
Listing Updated 9/23/2009
MLS Number S590292
Property Type Single Family, Residential
Community Woodbridge
Tract Othr

According to the listing agent, this listing is a bank owned (foreclosed) property.

Wonderful Inside Loop – Corner Lot Location. Convinient One Bedroom & 3/4 Bath Downstairs. Owner Spent $20k to Create A Beautiful Back Yard Retreat With Tranquil Fountain, Custom Follage Lighting, Stone Planters Box Wall, and Stamped Concrete (See Pics). It’s like Having Your Own Tropical Get Away. This Home Also Boasts A Whole House Attic Fan To Cut Down On A/C Costs. Plantation Shutters, Vaulted Ceilings, Direct Access Garage, and Longer Driveway To Park Your Cars Make This A Must see. Short Walk To School Pools & Parks. Enjoy All Woodbridge Amenities

Convinient? Custom Follage Lighting?

Why Title Case?

This asking price is relatively easy to explain; these owners have money in the property. This house was purchased for $741,000 on 4/14/2004. The owners used a $592,800 first mortgage and a $148,200 downpayment. They later refinanced the first mortgage for $585,000 which suggests they were paying down the first mortgage. They did get a $250,000 HELOC at the peak, but there is no indication they spent it. Perhaps they were the exception to the rule.

{book3}

Just for fun, let’s try to identify the objects on the mantle.

1 Cornsilk Irvine, CA 92614 fireplace

First the black wooden statue on the left and the picture on the right. Rama Sita and Edward Scissorhands?

What is on that decorative plate?

The plaque looks to have a red pig on it. Perhaps they are Arkansas Razorback fans?

What is next to the tiny champagne bottle? Blue topaz? Wyland Gallery?

We all go through life attaching ourselves to objects. Some appear on our mantles to remind us of times past. What is on your mantle?

Who Will Fix the System?

Are the key players in Washington’s finance and mortgage lending issues up to the task of reforming our system. Do they even see the need?

10 Fuchsia Irvine, CA 92604 kitchen

Asking Price: $479,000
Address: 10 Fuchsia Irvine, CA 92604
{book5}

Was a long and dark Decemberbarney-frank-tim-geithner-ben-bernake
From the rooftops I remember
There was snow
White snow

Clearly I remember
From the windows they were watching
While we froze
Down below

When the future’s architectured
By a carnival of idiots on show
You’d better lie low

Violet Hill — Coldplay

Who is the architect of our system for financing real estate? We know our current system enabled a massive housing bubble. Is that the system we want to keep in place?

If we reform this system, Christopher Dodd (shown below), Barney Frank, Ben Bernanke and Tim Geithner are the men we must to rely on to get it done right.

Great?

The Three Stooges

I suppose, it could be worse…

I have outlined both A Free-Market Solution to Prevent Housing Bubbles and Regulatory Solutions to Prevent the Next Housing Bubble. I am not holding my breath…. Neither is Paul Krugman:

In the grim period that followed Lehman’s failure, it seemed inconceivable that bankers would, just a few months later, be going right back to the practices that brought the world’s financial system to the edge of collapse. At the very least, one might have thought, they would show some restraint for fear of creating a public backlash.

I was startled last week when Mr. Obama, in an interview with Bloomberg News, questioned the case for limiting financial-sector pay: “Why is it,” he asked, “that we’re going to cap executive compensation for Wall Street bankers but not Silicon Valley entrepreneurs or N.F.L. football players?”

That’s an astonishing remark — and not just because the National Football League does, in fact, have pay caps. Tech firms don’t crash the whole world’s operating system when they go bankrupt; quarterbacks who make too many risky passes don’t have to be rescued with hundred-billion-dollar bailouts. Banking is a special case — and the president is surely smart enough to know that.

All I can think is that this was another example of something we’ve seen before: Mr. Obama’s visceral reluctance to engage in anything that resembles populist rhetoric. And that’s something he needs to get over.

Without leadership from the administration and a desire in Congress, reform has little or no chance.

Christopher Dodd is Democratic politician currently serving as the senior U.S. Senator from Connecticut, according to Wikipedia. Most importantly for this issue, he is Chairman of the Committee on Banking, Housing, and Urban Affairs. According to Michael Moore, Christopher Dodd is in Countrywide’s pocket. His involvement with the housing bubble is less well known than the other players. I do remember his idiotic populism appealing to homedebtors during the presidential campaign. He doesn’t seem to get it.

Now, Christopher Dodd wants to put the Federal Reserve in charge of out entire financial system. That doesn’t sound like a good idea to me, nor does is sound like a good idea to Calculated Risk. Imagine how bad Alan Greenspan could have screwed up our financial system if he would have been in charge of the whole thing.

Barney Frank is the United States House Representative for Massachusetts’s 4th congressional district since 1981 and a member of the Democratic Party, according to Wikipedia. He is also noted for his complete cluelessness concerning the housing bubble (great video BTW). He does not use a computer. Perhaps he is a good legislator, perhaps not. As chairman and of the ranking Democrat on the Financial Services Committee, he is one of the most powerful men in Washington when it comes to mortgage finance.

Both Christopher Dodd and Barney Frank are the ranking Democrats, and their party has a secure majority in both houses. If these two men can get the members of their own party to agree on legislation, it will get passed, and the President will sign it (This is true of anything the Democrats want to do between now and 2010).

According to Wikipedia, Ben S. Bernanke is the current Chairman of the Board of Governors of the United States Federal Reserve. Bernanke succeeded Alan Greenspan — the chief architect of the housing bubble — on February 1, 2006. He is just as clueless as his predecessor and Barney Frank. Perhaps he is a good central banker, perhaps not. He is arguably the most powerful man in Washington, and he certainly is the most powerful banker in the United States.

Timothy Geithner is the 75th and current United States Secretary of the Treasury, serving under President Barack Obama. He was previously the president of the Federal Reserve Bank of New York, according to Wikipedia. He is a classic crony who worked his way through the banking system. Is it likely that he will work to impose draconian regulations on the banking industry? I doubt it.

It is easy to criticise our government’s stooges from afar. They may really understand the problem and know the best solutions and recognize that it isn’t politically feasible to get the reforms past. That is giving them the benefit of the doubt. I think they lack the understanding and the desire to fix the problem.

Nothing will be changed.

When 100% financing comes back next time around, will you take the free money the banks are giving out?

10 Fuchsia Irvine, CA 92604 kitchen

Asking Price: $479,000

Income Requirement: $90,688
Downpayment Needed: $95,800

Purchase Price: $335,000
Purchase Date: 3/19/2002

Net Gain (Loss): $115,260
Percent Change: 43.0%
Annual Appreciation: 5.7%

Address: 10 Fuchsia Irvine, CA 92604

Beds: 3
Baths: 3
Sq. Ft.: 1,495
$/Sq. Ft.: $320
Lot Size: 1,495 Sq. Ft.
Property Type: Condominium
Style: Townhouse
Stories: 2
Floor: 1
View: Greenbelt
Year Built: 1974
Community: El Camino Real
County: Orange
MLS#: S589143
Source: SoCalMLS
Status: Active
On Redfin: 5 day

This is a beautiful home with 3 bedrooms 2.5 baths, formal living room with fire place, dining room, kitchen with granite counters, extra room off kitchen that is great for eating area or many have used this area as a family room with sofas and TV area, upstairs family room and office area, this home has a nice patio that leads to a 2 car garage. Close to great schools and shopping!

10 Fuchsia Irvine, CA 92604 giraffe

The HELOC abusers at this property did well during the bubble. They paid $335,000 back in March of 2002. They used a $268,000 first mortgage, a $50,250 second mortgage, and a $16,750 downpayment.

These owners periodically added to their HELOC, and finally in November of 2004, they refinanced their first mortgage for $448,000 and opened a HELOC for $100,000.

Total property debt is $558,000 assuming they maxed out their HELOC. Their pattern suggests they did.

Total mortgage equity withdrawal is $239,750.

Is this the kind of life we want to enable as a culture? Are these owners entitled to an extra $80,000 in mortgage equity withdrawal each year for spending money?

I suppose it is a good gig — if you can get it….