While the banks are reaping billions of dollars in taxpayer funded relief, not only do they continue to make credit tight and foreclose on mortgage holders, but they have now begun to unilaterally adjust home values on mortgage holders who didn't over extend themselves during the housing boom. The audacity of banks, with Chase Bank being one of the largest banks perpetrating this fraud, is just unforgivable. In essence, they are marking to market the property values of homeowners who are not delinquent, not in danger of foreclosure and good paying customers. Furthermore, the values they are assigning to properties are no more based on reality than the values of the toxic assets they hold on their books.
I happen to be one of the people who didn't overreach during the housing boom, didn't use all of the credit line Chase Bank provided and paid my bills every month on time. Still, Chase decided to arbitrarily lower the value of my home on their website to $200,000, a value 40% lower than its assessed value and thereby wiping out, on paper only, most of the equity in my home. They did this even though I have no intention of selling my home and never asked for an increase in my home equity line of credit. I am sure they did this because the line has an adjustable rate of interest which currently is 2.49%. Obviously, they don't like the fact that I am getting a bit of a break on my interest payments at this time. The kicker is that their website specifically states that the values listed for homes are NOT APPRAISALS and "The tool on this page is provided by a third-party site. Please note that the third party's privacy policy and security practices may differ from Chase's standards. Chase assumes no responsibility for nor does it control, endorse or guarantee any aspect of your use of this tool." Yet, they have used this very tool to value my home.
I checked other sites, including Zillow and found the value of my property to range from a low of $279,000 to a high of 375,000. Even on the Chase site, my neighbors property was listed $61,000 higher than my property. While my neighbor has a very nice property and he was very recently approved for a refinancing which exceeds the value Chase assigned to his home, my house is bigger, has more bedrooms, more bathrooms and other features my neighbor doesn't have. My property was also freshly painted this spring and is in excellent condition. The whole point is that Chase arbitrarily deflated the value of MY PROPERTY to force me to beg them for a fixed rate loan.
When I called their customer service line, they were rude and disrespectful. After my third call, I was given the phone number of the corporate office where supposedly I would be able to talk to someone who actually was involved in the decision making process. As you can imagine, I got to talk to a very nice secretary who told me everyone was busy, but someone would return my call. Of course, nobody returned my call.
So now I have a question for you, Jamie Dimon. Is this the way you build customer loyalty? Is this how you envision using taxpayer dollars, MY DOLLARS, to help homeowners. You can rest assured I have already contacted my lawyer and have begun the appraisal process on my property, because you have hurt me financially, degraded the value of other properties in my neighborhood and fraudulently blocked my line of credit, which is the least of my concerns and the only thing you have the legal authority to do.
So fellow taxpayers, is there anyone else who has had a similar experience. Anyone else who thought they were doing the right thing by paying your bills on time, only to get SCREWED by your multinational, too big to fail bank? Please feel free to comment on this rant and perhaps we can join together to sue this and other culprits who have destroyed the value of our investment portfolios, while paying fat bonuses to the very fools who caused this credit crisis.
John H. Kaighn
Jersey Benefits Advisors
The Kaighn Report
Showing posts with label Adjustable rate mortgage. Show all posts
Showing posts with label Adjustable rate mortgage. Show all posts
Thursday, April 9, 2009
Thursday, October 4, 2007
Housing Market Continues To Struggle
As we begin the fourth quarter of 2007, the housing market continues to cast a troubling shadow over the economic outlook. Even though builders have been giving huge discounts, sales of new homes in August fell to their lowest level in seven years. New home sales dropped 8.3% in August from July, and year over year from August 2006 to August 2007, new home sales dropped a staggering 45% from 11,000 sold in August 2006 to 6,000 sold in August 2007. To see how this is affecting builders, KB Home, a Los Angeles builder, reported a loss of $35.6 million for the quarter ending August 31, 2007 as compared to a $153.2 million net profit a year earlier. Jeffrey Mezger, KB’s president said “We see no signs that the housing market is stabilizing and believe it will be some time before a recovery begins”.
Another troubling sign with the housing market is the declining value of homes, which will be sure to affect consumer spending. Standard & Poor’s Case-Shiller Home Price index, which measures home prices in 20 major cities, showed prices down 3.9% in July from a year ago, which was faster than June’s 3.4% drop. Just as sales of new homes were down in August, sales of existing homes were down 4.3% from July, and the time needed to sell houses on the market has increased to 10 months, which is the highest in 20 years.
Even though employment in the construction, real estate, mortgage and financial services industries is taking a hit due to the housing downturn, overall unemployment has actually shown a drop in claims. Despite an anticipated wave of layoffs expected in the mortgage sector alone, initial claims for unemployment fell 15,000 in the latest report by the Labor Department, the second weekly decline in a row and the lowest level since May. According to David Resler, chief economist at Nomura Securities, “The jobless report helps bolster forecasts that the housing slump may brake growth, but the economy will not degenerate into a full-fledged recession”.
The government also reported in the last week of September that the nation’s gross domestic product expanded by 3.8% in the April to June quarter, and this was a bit less than the estimated 4% economists had expected. With the difficulties the economy faced in August and September, many economists expect the GDP to have slowed to 2% in the third quarter. With growth slowing, hopefully the Fed has bought some time to alleviate the credit crunch with its half a point rate reduction, which may allow for an orderly decline in housing prices and sales, as opposed to a free fall. Even though housing prices are expected to continue to fall by some estimates through 2008, and possibly until 2010, an easing as opposed to a rout is always less troubling.
John Kaighn
Jersey Benefits Advisors
Plug In Profit
John Kaighn's Web Business Review
Another troubling sign with the housing market is the declining value of homes, which will be sure to affect consumer spending. Standard & Poor’s Case-Shiller Home Price index, which measures home prices in 20 major cities, showed prices down 3.9% in July from a year ago, which was faster than June’s 3.4% drop. Just as sales of new homes were down in August, sales of existing homes were down 4.3% from July, and the time needed to sell houses on the market has increased to 10 months, which is the highest in 20 years.
Even though employment in the construction, real estate, mortgage and financial services industries is taking a hit due to the housing downturn, overall unemployment has actually shown a drop in claims. Despite an anticipated wave of layoffs expected in the mortgage sector alone, initial claims for unemployment fell 15,000 in the latest report by the Labor Department, the second weekly decline in a row and the lowest level since May. According to David Resler, chief economist at Nomura Securities, “The jobless report helps bolster forecasts that the housing slump may brake growth, but the economy will not degenerate into a full-fledged recession”.
The government also reported in the last week of September that the nation’s gross domestic product expanded by 3.8% in the April to June quarter, and this was a bit less than the estimated 4% economists had expected. With the difficulties the economy faced in August and September, many economists expect the GDP to have slowed to 2% in the third quarter. With growth slowing, hopefully the Fed has bought some time to alleviate the credit crunch with its half a point rate reduction, which may allow for an orderly decline in housing prices and sales, as opposed to a free fall. Even though housing prices are expected to continue to fall by some estimates through 2008, and possibly until 2010, an easing as opposed to a rout is always less troubling.
John Kaighn
Jersey Benefits Advisors
Plug In Profit
John Kaighn's Web Business Review
Sunday, August 19, 2007
Summer Close Out Sale
As we prepare for the last two weeks of August and the Labor Day Holiday, traditionally a time of vacation, low volume and low volatility on Wall Street, there are many folks who hope the Fed move on Thursday was the right prescription for the credit markets. By dusting off a little used weapon in the monetary policy arsenal, Mr Bernanke has attempted to encourage banks to loan to the credit worthy, without bailing out those who have been irresponsible in the use of leverage. By lowering the discount rate by half a percentage point to 5.75%, the Fed lowered the rate it charges banks when they borrow from the Federal Reserve. While borrowing from the Fed is viewed by banks as the creditor of last resort, this should help companies such as Countrywide, which has a banking operation and is able to borrow from the Fed. It also encourages banks to continue to make credit available to other businesses, who are not necessarily affected by the subprime mortgage mess, but have had a difficult time lately selling commercial paper and other short term financing facilities because banks have been reluctant to make any loans, due to the fallout from the mortgage mess.
The markets reacted positively to the Fed move on Friday, and after reading numerous articles over the weekend, my conclusion is that this was a very good move by the Fed. While it may not stop a further slide in the markets in the short term, it doesn't reinflate the mortgage bubble, because the Federal Funds rate, the rate banks charge each other, hasn't changed. While there is a minority calling for a lowering of the Federal Funds rate, and you can be sure these are the people who are being toasted by their use of leverage, most responsible voices seem to be indicating the system can handle the losses from the subprime mortgage sector and lowering the Federal Funds rate could lead to further speculative excess.
The Dow crossed the 10% correction threshold on Thursday, but managed to close in somewhat better shape and rallied on Friday. While the S&P 500 was down as much as 12% from its July peak intraday on Thursday, it also managed to recover late in the day and rose back to 1,445 by the close on Friday. Where the markets go in the next two weeks is really only an issue, if you have a need for short term cash. If you are invested for the long haul, you ride out the volatility and continue to add to your holdings, for when the markets are down, shrewd investors view it as a sale!
John Kaighn
Jersey Benefits Advisors
Plug In Profit
John Kaighn's Web Business Review
The markets reacted positively to the Fed move on Friday, and after reading numerous articles over the weekend, my conclusion is that this was a very good move by the Fed. While it may not stop a further slide in the markets in the short term, it doesn't reinflate the mortgage bubble, because the Federal Funds rate, the rate banks charge each other, hasn't changed. While there is a minority calling for a lowering of the Federal Funds rate, and you can be sure these are the people who are being toasted by their use of leverage, most responsible voices seem to be indicating the system can handle the losses from the subprime mortgage sector and lowering the Federal Funds rate could lead to further speculative excess.
The Dow crossed the 10% correction threshold on Thursday, but managed to close in somewhat better shape and rallied on Friday. While the S&P 500 was down as much as 12% from its July peak intraday on Thursday, it also managed to recover late in the day and rose back to 1,445 by the close on Friday. Where the markets go in the next two weeks is really only an issue, if you have a need for short term cash. If you are invested for the long haul, you ride out the volatility and continue to add to your holdings, for when the markets are down, shrewd investors view it as a sale!
John Kaighn
Jersey Benefits Advisors
Plug In Profit
John Kaighn's Web Business Review
Monday, June 4, 2007
Reassurance or Foreboding?
As we begin the first full week of June, many investors should be asking themselves the same questions Michael Santoli asked in Barrons this week, which are "after a biblical seven years of wandering, the Standard and Poor's last week finally surmounted its former all-time closing high, set near the apex of the market bubble in 2000. Is this a moment to celebrate or lament, a sign of reassurance or foreboding?"
These are very good questions, indeed, because one can never be sure of the direction of the market, but higher highs are usually the sign of a bull market having the strength to continue the upward trend. However, in the short term there could be some gyrations on the way to the next record, because in a bull market one must also witness higher lows! Don't get too caught up in the various news reports you'll hear, but rather continue with your investment plan in order to reach YOUR goals.
I've reprinted an article from my newsletter written in the first quarter of 2005 that spoke of concerns about speculation in the housing market and how to cope with it, especialy if you needed to buy a home. I sure hope we don't enter another era of speculation in the stock markets again, but then, who would have thought we could create a bubble in housing, so soon after the 2000 stock market bubble? One point I must make is that even though bubbles were created, much REAL WEALTH was also created in the 2000 stock market bubble and the recent housing bubble, depending on when and what you bought. A true advertisement for the warning, "Buyer Beware".
Speculation and the Housing Market in 2005
When Greenspan finishes his term as Fed chief, I am one person who surely will miss his succinct use of language to make a point. The use of the term “irrational exuberance” to explain the dotcom bubble, in hindsight, was right on the money. In discussing the current housing boom, he has used the word “froth” to discuss the “relatively exotic mortgages which are of particular concern”. While there are no predictions of a dotcom era style bust in real estate, the fact that 20% of new mortgages in 2005 are “interest-only”, up from 5% in 2003 is the froth of which Greenspan speaks. Consider a 10% drop in home prices for a moment. With a 10% down payment and an “interest-only” ARM, all equity in the home evaporates, and monthly payments eventually will rise with no principal reduction, because interest rates are rising. Does this sound just a bit frothy or even speculative?
The point is to always remember the cyclical nature of the economy, the stock market, the housing market and life in general. In the economic cycle, we are in the middle of the expansion phase, and within this phase, there are ups and downs. The market will rise and fall during this part of the cycle, but the trajectory should be positive if you think long-term. Housing has been in a boom, since the dotcom bust and could very well be near the top. If you need a house, because it will be your home, shop wisely. If you are looking at real estate as an investment at this juncture, perhaps you could wind up in a situation like the above mentioned scenario.
Here are some facts to consider if you are concerned about the housing market. According to Business Week, “today’s housing prices are predicated on an impossible combination: the strong growth in income and asset values of a strong economy, plus the ultra low rates of a weak economy. Either the economy’s long-term prospects will get worse, or rates will rise. In either scenario, housing will weaken.” We’re already seeing interest rates rise, so “perhaps housing is entering a more sober period when it won’t be the prime generator of growth.” Overall, the feeling is the housing sector will cool off, and areas with more speculative markets will see more depreciation in home values than those which had a more modest increase over the last three years. This has happened before, and it will happen again. This is no new paradigm, it is just “the cycle”.
John Kaighn is a Registered Investment Advisor with Jersey Benefits Advisors and writes articles on various business and investment information, ideas and opportunities. For more information about this and other topics you can visit http://www.johnkaighn.com and http://www.jerseybenefits.com
These are very good questions, indeed, because one can never be sure of the direction of the market, but higher highs are usually the sign of a bull market having the strength to continue the upward trend. However, in the short term there could be some gyrations on the way to the next record, because in a bull market one must also witness higher lows! Don't get too caught up in the various news reports you'll hear, but rather continue with your investment plan in order to reach YOUR goals.
I've reprinted an article from my newsletter written in the first quarter of 2005 that spoke of concerns about speculation in the housing market and how to cope with it, especialy if you needed to buy a home. I sure hope we don't enter another era of speculation in the stock markets again, but then, who would have thought we could create a bubble in housing, so soon after the 2000 stock market bubble? One point I must make is that even though bubbles were created, much REAL WEALTH was also created in the 2000 stock market bubble and the recent housing bubble, depending on when and what you bought. A true advertisement for the warning, "Buyer Beware".
Speculation and the Housing Market in 2005
When Greenspan finishes his term as Fed chief, I am one person who surely will miss his succinct use of language to make a point. The use of the term “irrational exuberance” to explain the dotcom bubble, in hindsight, was right on the money. In discussing the current housing boom, he has used the word “froth” to discuss the “relatively exotic mortgages which are of particular concern”. While there are no predictions of a dotcom era style bust in real estate, the fact that 20% of new mortgages in 2005 are “interest-only”, up from 5% in 2003 is the froth of which Greenspan speaks. Consider a 10% drop in home prices for a moment. With a 10% down payment and an “interest-only” ARM, all equity in the home evaporates, and monthly payments eventually will rise with no principal reduction, because interest rates are rising. Does this sound just a bit frothy or even speculative?
The point is to always remember the cyclical nature of the economy, the stock market, the housing market and life in general. In the economic cycle, we are in the middle of the expansion phase, and within this phase, there are ups and downs. The market will rise and fall during this part of the cycle, but the trajectory should be positive if you think long-term. Housing has been in a boom, since the dotcom bust and could very well be near the top. If you need a house, because it will be your home, shop wisely. If you are looking at real estate as an investment at this juncture, perhaps you could wind up in a situation like the above mentioned scenario.
Here are some facts to consider if you are concerned about the housing market. According to Business Week, “today’s housing prices are predicated on an impossible combination: the strong growth in income and asset values of a strong economy, plus the ultra low rates of a weak economy. Either the economy’s long-term prospects will get worse, or rates will rise. In either scenario, housing will weaken.” We’re already seeing interest rates rise, so “perhaps housing is entering a more sober period when it won’t be the prime generator of growth.” Overall, the feeling is the housing sector will cool off, and areas with more speculative markets will see more depreciation in home values than those which had a more modest increase over the last three years. This has happened before, and it will happen again. This is no new paradigm, it is just “the cycle”.
John Kaighn is a Registered Investment Advisor with Jersey Benefits Advisors and writes articles on various business and investment information, ideas and opportunities. For more information about this and other topics you can visit http://www.johnkaighn.com and http://www.jerseybenefits.com
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