Another Garrett County/Deep Creek Lake short sale contributing to the pain being felt on Wall Street and Main Street ..

Since the sale price listed here is well below the $400,000 loan amount from May 2007 we can assume that M&T Bank (or whoever they sold the mortgage to) took a significant loss on the sale of this property. The really sad thing is that sales like this one are robbing banks and financial institutions of the necessary capital they need to make loans for hard-working folks and small businesses who are responsible enough to repay any loans they might receive. Maybe in the new bailout bill Congress can ask the CEO of the company who approved this loan in the first place, the real estate agent who made a large commission from this sale and the previous homeowners who basically got a gift from the bank to contribute a portion of those proceeds towards the roughly $1trillion that might be necessary to fix this mess. That sure makes a lot more sense to me.

Don't forget to check back to Dan's Deep Creek Blog for future updates.

Here's an idea ..

In the Financial Times Raghuram Rajan, Professor of Finance at the University of Chicago’s Graduate School of Business, proposes that the government force banks to raise capital from within (i.e. from shareholders) instead of simply throwing taxpayer money into a bottomless pit. His position is that there is too little capital (and by the same token too much debt) in the financial system and that simply trading their worst assets for government money and thereby passing the debt onto the government still does not go far enough to prevent more problems from popping up. Interesting idea to say the least.

Don't forget to check back to Dan's Deep Creek Blog for future updates.

Sometimes it's no fun being right ..

and today the IMF is predicting that the worst of the crisis is still ahead. No fun indeed. At this point there is no need for me to pile on since millions and millions of Americans are hurting because of this and the entire global financial system is on the brink of collapse. But as I have said previously, think for yourself and be careful who you listen to or take advice from.

Don't forget to check back to Dan's Deep Creek Blog for future updates.

Mike Kennedy weighs in on the Fannie/Freddie takeover and what it might mean for the Deep Creek area ..

As I've alluded to earlier if anyone can be counted on to give you the real story, it's Mike Kennedy. Here, it seems he has given us another objective view of some of the potential changes we might see in the local market. The only thing I might add is that the takeover plan as it is currently structured allows Fannie and Freddie to take on more loans in the short term (loans no one else will currently buy) but also requires them to become smaller in the longer term. The first question that came to my mind was is this another Washington band-aid solution that doesn't address the real problem and simply delays the inevitable? Ignoring the fact that few in Washington could be trusted to balance a checkbook, ask yourself who is going to buy these loans when Fannie and Freddie are required to start selling them off at a rate of 10% per year in 2010? Are we really solving anything or just delaying the pain of pushing the reset button and cleaning up the entire mess right now? Of course by 2010 Mr. Bush and Mr. Paulson will be long gone and it won't be their problem to deal with will it?

So yeah, after all else failed, the government is essentially stepping in and subsidizing cheaper loans in a effort to get people with record levels of debt to borrow even more. As I have said before, I may never understand how more borrowing solves a problem due to over borrowing, isn't that like stuffing your face in an attempt to lose weight? I want someone to say step away from the feed trough, put down that fork, look in the mirror and get real! I guess that is neither here nor there at the moment, we are just supposed to follow the herd and spend, spend, spend while enjoying the lower interest rates for as long as they may last. Wasn't that the same story we heard in 2002 as well? And guess what, we are in a bigger mess now than we were then. Shocking, huh?

How long rates may actually remain lower though is anyone's guess because it is basically out of our hands at this point and depends directly on the rest of the world being willing to send us their money at low rates of return. If Japan and China say wait a minute this doesn't really look like a good deal to us afterall, the short term decline in interest rates will suddenly disappear just as quickly as it appeared. In any case, beware because just when you think we're in the clear, 2010 will be here and no one will want to buy what Fannie and Freddie are selling and then we're two years down the road from today and nothing has really changed.

In a related story from CNBC, we may be running out of options to prevent recession. That Dan Mitchell sounds a lot like someone else I know.

Don't forget to check back to Dan's Deep Creek Blog for future updates.

"US Government seizes control of mortgage giants Fannie Mae and Freddie Mac" ..

I guess the Bush Administration had their own answer to the question I posed for all my readers on Friday. As one reader put it in an e-mail to me, no matter what happens get ready to "open up your wallet" to pay for someone else's mistakes.

Don't forget to check back to Dan's Deep Creek Blog for future updates.

Doppler radar picked up on a ton of stormy housing related news yesterday ..

not to mention a nasty little hail storm that I got caught in last evening. Don't worry though I'm safe and sound and blogging away extra early this morning. Here are just a few of the news items I saw scroll across the bottom of the page yesterday or pop up on the news that wasn't about the Olympics.

Leading things off is a piece from Seeking Alpha, which is a great site for the individual investor that I have not mentioned here before but read regularly for free advice and education. The article discusses the ongoing fallout in the housing market and cites an industry source who claims 1/3 of all home buyers in the past 5 years are now "under water" on their mortgage, meaning they owe more than the house is currently worth.

CNNMoney.com has a very similar story detailing the fact that 25% of all home sales over the last year were sales in which the sellers lost money. Pretty amazing stuff there.

The Yahoo! Finance Tech Ticker has a video of an analyst discussing why he thinks there is no housing bottom in site yet. His thoughts are very similar to what I have offered here myself: lots of supply, fewer qualified buyers and prices still historically high by a number of valuation metrics and are due for an extended correction. He even says real estate agents are telling him sellers have unrealistic expectations.

Then there is Mr. Housing Bubble himself, Alan Greenspan, predicting that housing prices will stop falling in early 2009. This guy is still alive and still babbling? Doesn't he realize he's been replaced? The story was printed in the Wall Street Journal but can be accessed easily at Yahoo! Finance.

And another story from CNNMoney.com on rising defaults in the prime mortgage arena. Of course the story here is that it's not just subprime anymore and it's not just people with bad credit, but even people with previously solid credit records got in over their head it seems. Swept up in the frenzy and the euphoria you might say.

And finally, Jack M. Guttentag, also from Yahoo! Finance writes about how the down payment makes a comeback and offers a good explanation on why that is the case. He also gives some pointers on what you can do to help yourself out if you are looking to buy a home, including "save, save, save." He must be reading this blog or maybe he just has some common sense too. And not the kind one of my readers is talking about in his recent comments on this blog to former State Senator John Bambacus either.

Don't forget to check back to Dan's Deep Creek Blog for future updates.

What went wrong from someone on the inside ..

A great read from CNN Money.com on the story of Richard Bitner and his failed lending business. And remember as I commented on a few days back many of these loans issued in 2006 aren't even due to reset until 2011 so it is completely possible many people still may not even realize what is coming. One thing is known, however, there are some really horrible stories coming out of this mess and they are sure to continue for some time to come. I can't stress it enough, if you are a buyer, do your due diligence and find a trustworthy, honest and responsible realtor, lender, appraiser, inspector, etc.

"The broker, buyer, appraiser, and realtor all conspired to perpetrate this fraud," said Bitner. Indeed, just about all the documentation was falsified.

Don't forget to check back to Dan's Deep Creek Blog for future updates.

Covering all the bases ..

While I do appreciate Mike Kennedy's fair and objective assessment of the current mortgage market, I do have to question his authenticity when he states "loans that only required 5% or 10% down are a thing of the past" and "these stricter lending guidelines and much needed changes in the mortgage industry should have an overall positive effect on the real estate market ..."

Maybe they've had a change of heart at Railey Realty and are shifting away from the days of promoting the "power of no money down buying" and haven't had a chance to remove these items from the website or buying guide or maybe they are just speaking out of both sides of the mouth. You be the judge.

Don't forget to check back to Dan's Deep Creek Blog for future updates.