muses of the moment

November 15, 2012

FHA report doesn’t look good

Filed under: Housing Market, Martin Armstrong, The Banking Crisis, US Government Debt — totallygroovygirlfriday @ 12:39 pm

This is very important for the US Housing Market. Since the FHA is basically the only one insuring new and refinanced mortgages these days, if they can not insurance future mortgages or they are put under more pressure at any time because of more foreclosures, the housing market will take a dramatic turn downward.

Side note: the government is the only one insuring mortgages because no insurer in their right mind will.

Click here.

Martin’s timing for the next turning point in US Housing is 2015. That seems to fit into a timeline with everything else. Any (further) recession will put pressure on homeowners and the current percentage of 16% delinquency will go up. How they can handle the 16% right now is beyond me. Their limit is supposed to be around 4% for staying in “business”, but if the taxpayer is backing you….

Nothing is fixed, more of the same coming soon……

Update: don’t worry, saved by Geithner! Click here.

Really the US Taxpayer on an off-balance sheet debt column. Creative accounting saves the day again!!!

Here’s how it will work:

– Geithner will use his own bank, The Federal Financing Bank (FFB). This bank is owned by the US Treasury, and Geithner is the the Chairman of the Board.

– No Congressional legislation is required for Geithner/FFB to make loans to, or guaranteed by, government agencies. Geithner doesn’t even have to take a call from a Senate Republican. Tim has the only signature required.

– FHA will get a $50Bn line of credit from FFB. It will immediately draw $20Bn in order to replenish the reserve accounts. FFB will book the advance as a loan. FHA will book it as a subordinated capital note, and therefore treat it as tier one equity. Of course this is all accounting rubbish. Just what’s necessary to maintain the charade.

– Speaking of charades and accounting rubbish, the loan from FFB will not be reflected in America’s debt profile. The FHA loans are not part of the Debt Subject to Limit. That’s just the rules of this game. Loans to Solyndra were guaranteed by DOE, so the money Treasury borrowed to make the bad loans to Soly never showed up on the books. Talk about a neat trick!

– Treasury will issue a few more notes to the public to come up with the cash that FHA needs to honor its guarantees. That’s not a problem at all. Maybe Bernanke will buy some of the paper, just to keep a necessary balance.

– With Ben B Zirping, the Vig for the FHA will come in at a very low rate. The FHA will borrow $30-40Bn and not pay a dime over 3/4 percent. Can you say “magic?

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3 Comments »

  1. I read MA as saying that real estate will firm into 2015. and then turn down. Am I missing something? The chart of existing home sales looks like sales will stay firm in number…of course, if the quantity is alot of bank sales, that may mean soft prices. but, it could also be fencesitters coming in to buy as they see prices firming.

    Comment by icd — November 15, 2012 @ 4:43 pm

  2. Real estate “firm” probably means a controlled sell of current foreclosures on and off the bank books. That’s not really positive, stable at best, before the next crisis creates a fresh housing collapse as nothing has been fixed…

    gg

    Comment by totallygroovygirlfriday — November 15, 2012 @ 4:47 pm

  3. This is why the fiscal cliff talk is all crap. The Fed can print “at will”. They will do it to save EVERYTHING … I don’t think the rest of the world cares because they too are printing (Europe, China, Russia,etc.). Nobody is going to call the US on to the carpet. Nobody. The US economy still rules the world. It makes it go around.

    We say it can’t go on forever> Can any of you think as to HOW it can explode if the entire market/economy/world economy is rigged? I can’t. Every answer I come up with are only at the micro level, not macro (i.e. web sites, individuals, small business, very small countries, etc.). All macro level input will be silent to the US printing (i.e. Europe, China, Japan, Russia, etc.).

    Thoughts?

    Comment by MikePhila — November 16, 2012 @ 1:46 pm


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