The Moulin Rouge Housing Bubble: 3 Fascinating Stories. Who Moved my Compensation Package? Free Spouse and Granite Countertop with Home Purchase. You Mean You Still Had Those Horrible Loans?
“One should always play fairly when one has the winning cards.” -Oscar Wilde
Take a deep breath. The first half of the year has officially come to an end. Talk about a brutal time for the markets. The housing market is still in a deep slump and oil jumped from $99.62 a barrel in January to the current $140 price tag. A stunning 40% jump in crude in 6 months. At this rate, we’ll be nearing $200 come New Year’s Eve. With this high price tag, U.S. automakers have been struggling to keep their fuel inefficient cars on the road and airlines struggle to remain viable. On top of that, the American consumer is facing evaporating equity, higher food costs, a worsening housing market, and a massively declining dollar. But there is some good news. CEOs that engineered a large part of the credit garbage and mortgages that went along with it are making out just fine!
Americans are reeling from the Great American Garbage Mortgage Experiment (GAG-ME), the one that included loans where you had the ability to pick your own payment and some that allowed you to cash out every year as if your house was an ATM. The engineers of these products are doing just fine while some of their companies are quickly going into penny stock territory quickly following many that signed onto these loans.
As people become more desperate, you are starting to see some of the weirdest parts of human nature emerge. Money problems have a way of doing this to folks. That is why one of the stories we’ll highlight today is simply stunning. A realtor in Florida is trying to sell her home and trying to get married, all in one shot. This isn’t the way your mom and pop met, you can rest assured.
We are also going to discuss Wachovia’s press release in which they are waiving the pre-payment fee associated with their Pick-A-Payment loan and also their discontinuation of pay option products including negative amortization loans. You mean those where the family is ecstatic on TV since they get the option of picking their payment as if they were ordering off the McDonald’s dollar menu? One of the many reasons why the $500 billion Pay Option ARM disaster is going to be one of the major stories of the second half.
Someone is Still Making Money and it Ain’t You!
Most Americans are feeling the bitter sting of this economic prosperity. I call this prosperity because we can’t officially call it a recession. Yeah, home prices are down 15% on a national level and in California, the median price is now down 35% but all is well. In fact, those stimulus checks boosted spending a bit! Yet this is tantamount to giving a heroine addict a “little taste for old time sake” before hitting rehab. And by the way that “stimulus” was pulled out of thin air since we are running bigger deficits so it wasn’t like we went to WaMu and withdrew some money. Speaking of WaMu, some people are getting big pay for those Pay Option ARMs:
Chairman and CEO, Kerry Killinger
Salary: $1,000,000
Vested Stock Awards: $669,104*
Vested Option Awards: $3,183,914*
All Others: $397,752
SEC Total: $5,250,770
There is another calculation from the AFL-CIO’s own estimates:
*Grant Date Fair Value of Stock and Option Awards: $12,967,131
AFL-CIO Total: $14,364,883
Not bad for running a company that has nearly half of their loans in option-adjustable mortgages with the bulk being in imploding California!
“(wiki-invest) In early 2006, the Home Loans Group was strategically focused on building its non-traditional mortgage origination and investment; in particular, the Home Loans portfolio consisted of 46% option-adjustable rate mortgages (option-ARMs) and 11% subprime mortgages.”
But this post has come to an end:
“(ABC news June 19, 2008) Mounting losses caused the thrift this year to slash its dividend and raise $7 billion of capital that diluted existing shareholders. The thrift this month stripped Chief Executive Kerry Killinger of his role as chairman, after a majority of shareholders voted to name an independent director as chairman.
Washington Mutual has said it may still need to charge off $12 billion to $19 billion of its $187 billion one-family residential home loan portfolio within four years.”
The current market cap of WaMu is $5.21 billion and they have a $187 billion home loan portfolio? Talk about maximum leverage! Those loss estimates are extremely optimistic given the banana republic nature of California and that fact that we probably won’t see a state budget until August or September.
Who else is making tons of money while you aren’t? That loveable Angelo Mozilo from Countrywide is racking in the dough. Now there is nothing wrong with making money but making money from toxic destructive products that have put our nation’s financial security at risk is. Have these products really improved the lives of Americans or added value to the health of our economy? Let us look at the compensation here:
Chairmen and CEO Countrywide (2006 Compensation), AFL-CIO
Salary: $2,866,667
Vested Stock Awards: $1,103,745
Vested Option Awards: $23,047,104
Non-equity Incentive Plan Compensation: $20,461,473
Changes in Pension Value and Non-Qualified Deferred Compensation Earnings: $10,961
All Others: $286,257
SEC Total: $48,133,155
Good job Bank of America is helping out this poor company. I mean how did people ever live without interest only, pay option arm, 2/28, 3/27, and other exotic mortgages? Whenever you feel bad about the economy which was caused by this hyper easy credit and housing speculation, you can look at these compensation packages and you’ll certainly feel better. But if you are having problems selling your home may I suggest holy matrimony?
I Do…After you Sign That Mortgage Contract.
In one of the more interesting cases of deal making, a divorced realtor in Florida is offering her home for sale…she’s included:
*Click to watch video and new definition of “housewife”
I love how the media is playing this up as “woman selling home, hand in marriage on EBay” as if this was a case of finding “true” love. Now I don’t want to be the anti-Romeo here but give me a freaking break! Next we are going to see ads like:
“Great deal on slightly used Hummer. Free massage and gas card with purchase.”
Bwahahaha! This is as much about finding love as the Moulin Rouge is about visiting a confessional. I have an uneasy feeling with this one. I’ve gotten a few e-mails from readers showing me some “realtors” on Myspace with provocative photos. Now let us not kid ourselves and pretend that sex does not sell. Sex does sell. My issue with this story is the romanticism the media is trying to spin on this. Do you folks really believe this is a love story or a desperate ploy to avoid financial ruin? Also, has marriage become so baseless that all it takes is an eBay ad to commit to someone? In addition, I’m sure most of you are financially savvy and realize that the number one reason for divorce is financial issues. Now using your logic, why would you get involved with a realtor that is now in a major negative equity position? Look at her reasoning:
“(team sugar) I figured, let’s combine the ad because I’m looking for love and I’m looking to sell the house,” said Trabosh.
“Marry a Princess Lost in America,” Trabosh wrote in the ads posted on eBay and Craigslist last week. She describes a life of romance and travel and a home with vaulted ceilings, upgraded tile and a soaking tub in a gated community with a pool and tennis courts.
Trabosh, a licensed real estate agent who hasn’t practiced in years, knew she would struggle to sell the home in the troubled real estate market, but insists her fairy-tale ad isn’t just a sales gimmick.
“I’m struggling … I don’t want to lose my house, and I want to find somebody,” Trabosh said. “So I came up with this dream plan because I’ve always dreamt about being a fairy-tale princess.”
And Santa Clause is going to give all of us gold bricks because we’ve been good boys and girls. Seriously folks, what are your thoughts with this?
Pick a Nose Loans Just Got Tastier
The most toxic loans as I have referenced many times on this site, are the Pay Option ARM mortgages. These are the most toxic since they give people the ability to pay from a menu of options. You can pay the fully 30-year fixed amount, an interest only amount, or the ever popular negative amortization amount. By the way, many reports estimate that 80 percent of people elected to pay the absolute minimum.
Most people by now should know that these loans should be avoided at all costs. So Wachovia announcing that they are eliminating their Pick-A-Payment loans is as shocking as someone telling us water is wet:
“(Yahoo!) Effectively immediately, Wachovia is waiving all prepayment fees associated with its Pick-A-Pay mortgage to allow customers complete flexibility in their home financing decisions. This includes all Pick-A-Pay mortgages on 1-4 unit residences.
Additionally, for all new loan originations, Wachovia is discontinuing offering products that include payment options resulting in negative amortization.
Wachovia continues to be actively engaged in assisting customers through a number of programs to provide mortgage relief to help them avoid foreclosure. Over the past 12 months, Wachovia has worked with approximately 18,000 homeowners to help them stay in their homes and make payments that are more manageable under their current circumstances.”
Too bad a large amount of these loans are in California. Who in their freaking right mind would refinance a home that is underwater in this state? The only one nutty enough to do such a thing is the government and that is why they are trying to pass that absurd bailout plan. After all, the median price is now down 35% and shows no signs of letting up! I’ve already talked about how $1 trillion in write-downs are estimated to come down the pipe-line and we’ve only seen $391 billion so far.
Needless to say, another mortgage lender suspected of easy lending, IndyMac is now riding in the penny stock range hitting an all time low of .62 cents. Sure is a far cry from that $48 a few years ago:
Be safe with your money and stay away from the charlatans and credit addicts that are trying to suck in those who responsibly stayed out of this smoke and mirrors bubble. You thought the first half way insane? Just wait until the next few months with the upcoming election, acceleration in foreclosures, state craptastic budgets, and further write-downs. And some still believe there will be a second half recovery. Now that is the true fairy-tale.
Did You Enjoy The Post? Subscribe to Dr. Housing Bubble’s Blog to get updated housing commentary, analysis, and information
Subscribe to feed
24 Responses to “The Moulin Rouge Housing Bubble: 3 Fascinating Stories. Who Moved my Compensation Package? Free Spouse and Granite Countertop with Home Purchase. You Mean You Still Had Those Horrible Loans?”
If anyone has any doubts that the excrement is not about to blow through the turbine of our financial system consider that Indymac “Bank” now offers an annual dividend that EXCEEDS its share price. For 62 cents a share Indymac offers you a $1 dividend! Want to retire on $100,000/year but only have $62,000 in savings. Indymac stock offers you this once in a lifetime opportunity.
Other financial institutions lacking the know how and strength of Indymac can, nonetheless, offer you solid returns on your money. In a world of 2-3% interest
rates on your deposits you need only convert your low earning deposits into the shares of the same bank to earn much more. Wachovia offers dividends paying 9.2% and Bank America a rich 10.4%.
These are not some exotic convertible debentures or preferred share invesment opportunity available only to mega investors and hedge funds. These are the yields on common stock available to anyone with an account at Schwab, Scott Trade or TD Ameritrade. Its only a ‘click’ away.
These are professionally run banking institutions not some mom and pop mortgage brokerage or pay day loan company. Solid, venerable institutions chartered and regulated by the United States government so how risky could such investments be?
“I’m struggling … I don’t want to lose my house, and I want to find somebody,†Trabosh said. “So I came up with this dream plan because I’ve always dreamt about being a fairy-tale princess.â€
This is why I hate living in the states and why I am moving back overseas soon. This child like stupidity that people have in this country. She always dreamt of being a fairly tale princess? She is a 42 year old used up divorcee. Here is my dream, I dreamt that after years of frugal living, saving, prudent investing and hard work I would actually be able to enjoy the fruits of my labor. Instead it seems it will be taxed and inflated away to bail out fools like this. Amerika, what a country.
So if you trade a house as well as access to your chocha it’s not considered prostitution and you get on MSNBC? What a country…
I’m wondering if this isn’t the new Nigerian scam for America. So she marries some sucker willing to buy the house. And then promptly divorces him for half of everything. But he can keep the house, of course. So she is off the hook for the house and even comes out ahead!
Incredible. And it is not like she’s some great catch anyway.
Sorry Scott, but IndyMac indefinitely suspended its dividend back on Feb 12, 2008.
OMG! I can’t stop laughing! This country has gone nuts. Maybe I should have taken drugs when I was younger. It would have prepared me for this.
Is anyone out there so stupid to marry a woman so that she can keep her accustomed lifestyle? Doc Housing Bubble says sex sells, well yeah, but a box of kleenex, a bottle of lotion, and an x-rated DVD are a lot less expensive than marrying someone who looks like she’ll be hitting you up for plastic surgery in a year or so.
This FL realtor’s attempt to sell herself and her house on the internet horrifies me.
Does this woman have any clue of the danger she’s exposing herself to? Has she considered what type of men will respond to this vulgar promotion?
Fairytale princess- what rot!! I thought women got over this in the 70s, but it looks like we have socially regressed much more than I thought when a prematurely aged 42-year-old divorcee with kids and debt thinks that some Prince is going to rescue her.
I only hope that this deluded and deeply childish woman and her unfortunate children don’t end up being homocide victims.
I think housing is an indicator for society. Americans have been over spending for years. Now, housing is hurting most stocks. I think the stock market is going down another 10% by the end of the year. I will tell you why at
http://www.theinvestingspeculator.com
Hey Doc
LOL funny on this line – “Great deal on slightly used Hummer. Free massage and gas card with purchase.â€
Have you seen the hand written signs about – “buy one house, get the 2nd one free” – I am NOT kidding.
@Mary and Laura – I wondered about that, too.
@John – a year? I think maybe sooner than that.
General comment and question – so we’re screwed. Now what do we do? Will American’s learn to become prudent? Will we move away from bottled water, not buy planned obsolescence, slow down on the freeway, consume less? Or will the inevitable drop in oil prices return us to the days of 80 MPH on the freeway, and a return of the disposable culture we’ve been sold the last 50 years?
Does this idiot Claudio (or any other guy this might interest) have any clue to the danger to which he’d be exposing himself? Far from being a potential murder victim, this woman is positioning herself to be a black widow. Marry some schmuck, suck his bank account dry, kill him and inherit the house… could this be any more obvious?
Watch for this woman’s picture on the post office wall in a couple of years.
Laura, nice to hear the feminist perspective on this, as you usually only hear the male (and frankly often rather misogynist) perspective, though she’s sure not a good example for anyone’s daughters.
–
I guess she represents a type, the dumb optimist type, probably lining up to buy pop psychology books about getting anything as long as you believe it enough.
–
“I’ve traveled all over the world” she says, well that’s nice I guess, but maybe she should have considered whether she could actually afford to do so, and you know buy that house as well. Maybe should have settled for liking “long walks on the beach” instead, as she wouldn’t even have to leave the state.
I agree with Laura. This woman is definitely endangering herself and her children. It is disheartening to see the media play this up as if it is a cute or creative bit of advertising. Talk about giving girls growing up today a bad role model.
Speaking of risk which is riskier:
1. Spending 500,000 for this woman (plus the house – ha)
2. Spending 500,000 on Indymac (and the hypothetical $1 dividend.)
This story is disturbing to say the least & she has 2 children? As my mother use to say , there must be some kind of an intelegence test before you are allowed to have a child.
I have a degree in psychology & based on what I know there is only 1 conclusion that can be drawn. that Deven’s contact with reallity is somewhat poor, almost child like, perhaps even resembling polliana like simptems. This could lead towards risky behavior for herself & put her kids in danger as well. Watch it again & you’ll see what I mean.
You make a good point here, since she has such a parasitic mentality.
But any man who’d take an interest in her is probably someone who wants to set her up to give him the house just to get out of the loan, and who thinks he’ll pay it off by getting an insurance policy on her. She is desperate, deluded, and not horribly intelligent, and can obviously be made to believe anything or sign anything, including a quit claim to the house, or to her car.
I mean, I can’t imagine a halfway normal man taking an interest in her or her offer. Any one who does definately has an angle she hasn’t thought of.
Anyone, man or woman, who advertises desperation this way, is asking for very big trouble.
Sean –
Can you explain how poor/child-like contact with reality can lead one toward risky behavior ? Is it because she is unaware of dangers in life ? Any particular type of risky behavior ?
Thanks.
What she is really selling here is ass. If I wanted a house like hers I would just buy the one next door and invite her a for a drink at night, come to think of it, I would stay away from that silly b—-, unless it was her daughters I was after. She is way past her prime and that thing probably has more mileage on it than her 10 year-old Honda civic.
Oh my this is a tremendous deal. An instant family just add money and stir.The great American dream all in one shot. Im sending her a money order she will be great addition to my humble harem.
MMMMMMMMM very interesting deal yes.I would like to purchase this lady and her house. Im sending her payment in gold coins and precious stones.
America you should be proud. On your continent everything is for sale
I have much more oil money to spend are there any more women out there making package deals such as this one?
John, I’ve traveled the world excessively. Especially Europe. I’m typing this from Germany, in fact. The trouble with most of the world, for a woman, especially, is they are terribly rigid in their notions of how people should live their lives. The social pressure is unceasing and crushing. That’s great if you happen to want that but if you are “different” it’s like living in a box with no windows and very little air. I don’t mind it for a visit, but I’d have to be heavily medicated to take it more than month. For all its problems, I’ll take the fascinating and diverse landscape of the people in the U.S., even if they are insane. They are part of the show called life. Better than living in a land of clones that can’t absorb an immigrant even after three generations they are so locked into a notion of a “proper” citizen.
And btw, even europeans are insane. This belgian woman we had lunch with thought we were nuts for saving some of our money for retirement. She made a proud point of spending every last bit of money she made, right away. After all. the government was going to take care of her, forever. Uh, her totally bankrupt government that can’t even open enough bathrooms to keep their cities from smelling like piss. Right. To me, that’s at least as insane as this woman, and I bet there are a million like her, and only one of this lady.
Why let it bother you so? Don’t like it, don’t live your life that way. Other people are free to choose how to live their lives, that’s the beauty of the U.S. I happen to respect their right to do that. Good luck going back to living in a box.
Absolutely sickning. Ms. Deven is a very desperate realtard.
What on earth can Mozillo be doing to “earn” $90/minute every minute of the day?
Lynn,
you are on the right track, she believes or at least claims to believe that selling herself online has no risks at all. Put another way she is risk adverse & is unable to see the consequences of her actions. Did you watch the video a second time? this should be very clear.
I cant see the name here, but someone braught up her being a black widdow a few posts back. I think that would be unlikely, do to the fact she was not specific on what kind of man she is looking for. Just saying Europeian is to general. It semes to me she doesn’t have the street smarts to pull that off. It is more likely that she is going to bite off more than she can chew & as I said before put her children in danger. What does this say to her 14-year old, that the only way to get ahead is to sell yourself like a prostitute. In this case however the stakes are much higher.
Any more questions?
Emmi I have to give you kudos for your comment. I cant agree with you more. Live and let live…I think we all need to follow that rule.
Hey,
So how is Wells Fargo doing? First, that is where I have my money, second, I have noticed that they don’t seem to be mentioned.
Are they doing ok?
Leave a Reply