This judge in DC has found the ideal way to finance his divorce; sue his local Korean dry cleaners because they messed up his pants. You got to love the screwy math of this guy. Perhaps, he works as a realtor in his spare time.
WASHINGTON (Reuters) - A judge in Washington pressed a $54 million lawsuit Tuesday against a dry cleaning shop which he said violated consumer-protection laws when it lost his pants.
Roy L. Pearson, an administrative judge for the District of Columbia, told a local court that Custom Cleaners should pay the sum because a "satisfaction guaranteed" sign deceived consumers who, like him, were dissatisfied with their experience.
"You will search the records of the District of Columbia courts in vain for a case of more egregious or willful misconduct," Pearson told D.C. Judge Judith Bartnoff.
The lawyer for the Korean immigrants who run the dry cleaner said Pearson was looking for a way to resolve his financial difficulties after a divorce.
"It's simply a frivolous lawsuit brought by an unhappy customer with a bone to pick," attorney Chris Manning said.
Pearson filed suit after the cleaners lost his pants in 2005. Jin Chung, Soo Chung and Ki Chung said they located the pants a few days later, but Pearson said they were not his.
Pearson counted 12 separate violations of a consumer-protection law over 1,200 days, multiplied by the three defendants. At $1,500 per day, that is $65 million. He also seeks $15,000 to rent a car to take his clothes to another cleaner for the next 10 years, among other charges. He has rejected several settlement offers.
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Is there any good news coming out of the housing market? Of course not.
Freddie Mac didn't disappoint. It is losing money - no suprises there. The volatility in our results will continue," says Buddy Piszel, their chief financial officer. Overstatement of the day, perhaps?
NEW YORK, June 14 (Reuters) - Freddie Mac, the No. 2 U.S. mortgage finance company, on Thursday reported an unexpected net loss of $211 million for the first quarter, citing a souring outlook for mortgage credit risk that widened credit spreads.
The loss contrasts with a net gain of $2 billion the company reported for the same period in 2006. The company reported a net share loss of 46 cents in the first quarter. Excluding unusual items, Freddie Mac was expected to show a profit of $1.09 per share in the first quarter, according to Reuters Estimates.
The company said mark-to-market losses tied to the wider credit spreads on the mortgages assets in its portfolio was the main driver of the first-quarter loss. "The volatility in our results will continue," Buddy Piszel, chief financial officer at Freddie Mac, said in an interview. The swings are driven by "the predominant impact of mark-to-market items on both our GAAP and fair value."
It is not a good time to be in the mortgage lending business. Bear Stearns are finding that out the hard way. The investment bank quarterly earnings tumbled by a third as trouble in the mortgage market hurt bond trading revenue. The bank was also forced wrote down assets at a stock trading venture.
Bear Sterns is one of the US's largest mortgage bond underwriters. Given the present conditions in the housing market, mortgage exposure is a bad thing right now.
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The Mortgage Bankers Association have just reported first quarter foreclosures data. Their numbers make grim reading. Foreclosures are now at record levels. The rate of loans entering the foreclosure process was 0.58 percent on a seasonally adjusted basis, or more than one out of 200 loans. The delinquency rate for mortgage loans on one- to four-unit residential properties stands at just below 5 percent of all loans outstanding in the first quarter.
Mortgage brokers, stung by a surge in defaults, are at last begining to think about risk. Suddenly, they have learnt the power of that long neglected word - NO. Yes, brokers are beginning to turn undesirable borrowers down. They should have been doing five years ago, but better late than never. Borrowers who can't pay back loans should not get loans. When they are turned down, they win (no trauma of foreclosure or bankruptcy) and the bank wins.
So lets here some more negative responses from brokers. It is what America needs right now.
June 13 (Bloomberg) -- Josh Tullis, who in his eight years as a senior loan officer rarely felt compelled to reject a first-time home buyer's mortgage application, is sending people away empty- handed in 2007. Tullis's latest clients are a married couple that banks ought to love. Between them they make $70,000 a year and they've been renting the same apartment for three years with zero late payments, he said.
Lenders won't approve them because they don't have enough money in the bank, said Tullis, Virginia sales director at A. Anderson Scott Mortgage Group in Falls Church. With mortgage companies cracking down due to rising subprime defaults, Tullis needs them to sock away two months of payments for the $500,000 townhouse in Fairfax. ``Six months ago, these folks might have qualified, a year ago, definitely,'' Tullis said. ``It's a lot, lot harder than it used to be for first-time home buyers.''
Subprime mortgage lenders have tightened credit guidelines so much they're squeezing about 500,000 first-time buyers out of the market, according to the National Association of Home Builders. A decline of that magnitude would reduce sales of new homes by 4 percent and sales of existing homes by 7 percent, and deepen the worst housing slump since the Great Depression.
The housing market numbers from San Diego are just horrible
The US housing market is sliding into the abyss. In May, home foreclosures rocketed 90 percent compared to a year earlier. Default notices, auction sale notices and bank repossessions totaled 176,137. Furthermore, foreclosures were up 19 percent from April, suggesting that the foreclosure rate is accelerating.
Lets summarise; foreclosures up, interest rates up, inventory up, sales down, and prices tumbling. Can things get worse? Yes, they can get much worse.
Today, the Wall Street Journal speculated that US interest rates might need to rise further. It seems that the current interest rates are not in "the restrictive zone". The WSJ speculate that 8 percent interest rates might be needed to push inflation below 2 percent.
In terms of the housing market, there is perhaps little that the Fed can do right now. Long term interest rates are creeping up, and killing off what little hope there was for the market stabilizing.
WALL STREET JOURNAL EUROPE
Investors are starting to worry that the U.S. Federal Reserve will have to push overnight interest rates up in order to get inflation under firm control. But how much higher than the current 5.25% will the central bank have to go? If New Zealand is any guide, something like 8% might be called for.
Many economists think that overnight interest rates are "neutral," neither inflationary nor disinflationary, when they are two to three percentage points above the inflation rate. U.S. inflation is at 2.6%, measured by the consumer-price index, so the current overnight rate would still be within the neutral range.
If the Fed starts thinking like its counterpart in New Zealand, it will want to move well into the restrictive zone. Until a few weeks ago, such extreme thinking seemed positively un-American. Investors were confident that Alan Greenspan and Ben Bernanke, his successor as Fed chairman, would manage to get inflation down without causing much financial pain.
But with inflation trends creeping upward, in Europe as well as in the U.S., it may be time to think again. The Fed's policy of keeping rates low wasn't the only reason that prices crept up. The big U.S. trade deficit and less regulated financial markets also contributed. But the central bank's complacency in the early years of the decade increasingly looks like a mistake. It may take 8% rates to reverse it.
I don't know how Casey Serin does it. Everyday, I promise myself that I will not look at his blog. However, at some point in the day, my fingers move faster than my brain, and I end up clicking on his link and having a quick look. He never disappoints; he always has some crazy story about some madcap financial wheeze.
One recent post absolutely blew me away. It concerned the foreclosure sale on his Larchmont property. According to Casey, he bought the property for $330,000 in March 2006, with 100 percent financing. Casey claims that the property was irresistible because he negotiated a $50,000 cashback. He wanted the money to “float other properties” that he was buying at the time.
Like all of Casey's real estate investments, this one went into foreclosure. Recently, the bank sold the property for $199,000, meaning that our friend Casey now owes the bank a cool $131,000. What is more, Casey has seven other real estate investments that probably lost a similar amount of cash.
It is worth stepping back from and thinking through what actually happened here. Casey went into a bank, probably misled the bank about his true financial status and walked out with $330,000. He then bought a house that was at least $50,000 overvalued at the time of sale. A year later, he loses the house, and stacked up a debt equivalent to almost 4 ½ times his previous annual income (Casey was earning around $30,000 before he became a property tycoon).
So who gained from this ridiculous enterprise? Top of the list comes the Realtor, who probably pulled out 6 percent of the sale value. The original owner of the house also did well; selling an asset for $270,000, when a year later it was only worth $199,000.
However, the bank shareholders were the big loser. The bank has no prospect of getting back the $131,000 it lost on this loan. That loss will mean a lower dividend for shareholders this year. However, there remains a mystery; why have bank shareholders been so quiet in the face of this overwhelming mismanagement of their assets? The bank management who presided over this loan transactions are totally incompetent. How could they have allowed someone like Casey could to walk into their bank and convince a loan officer to give him such a massive loan with 100% financing? If I were a shareholder, I would be outraged at this incredible misuse of my investment.
Over the last couple of months, Casey has been the subject of an extraordinary wave of abuse. However, Casey's financial idiocy could only have taken place because there were even greater finanial idiots out there - the banks and in particular, their loan officers. This explains why I keep coming back to his blog, I keep searching for the answer to the question how could anyone seriously give Casey a loan? Unfortunately, I haven't yet found the answer on his blog, so I keep coming back.
I fell out of my chair laughing when I read this article from Realty Times. According to the joker who wrote this article, there is no risk in real estate; there is no real estate bubble; and that value is a complicated cocktail. In fact, this article is so ridiculous that one has to think that it is a spoof.
I was also struck by the inverted conspiracy theory. Normally, we think of the media as being a cheer leader for the housing bubble. Not according to this article. Instead, the media has been talking real estate down way too much.
Perspective can be a funny thing.
Real Estate Sky Won't Fall: Here's Why
Real estate hasn't made much of a case for itself lately and it's not getting much help from any of the sub industries, such as builders and mortgage makers. Just in the past few weeks, so called experts from the mortgage industry, the building industry, and the resale real estate industry have all been quoted as saying that the sky is falling. Nice job guys! And while real estate's reputation as the number one investment is on the ropes, the general media and other investment categories have stepped up their attacks on real estate value. What do you need to know?
The real estate market always fluctuates.
Real estate sales prices are largely determined by the principal of substitution and reflect the uniqueness of the property, at a specific point in time, competing against only those other similar properties that happen to be available for sale, at that point in time.
If there are many similar homes available at that time, there will be downward pressure on sales prices. As an expanding population absorbs the excess, competition for a dwindling resource will cause selling prices to escalate.
Real estate is unique.
There's a reason that homes and real estate aren't traded like commodities on the Chicago Mercantile. They are too dissimilar. Even each tract home has a somewhat different location, orientation, lot dimension, proximity, and view.
There is no bubble.
The value of real estate isn't driven by speculation; it's driven by its utility. If the economy moves away, such as in the rust-belt, that utility may decline. If high paying jobs are headed into a region, the value of the scarcest of all commodities, real estate will rise. Increasing development costs absolutely guarantee that new construction will cost more than existing properties are selling for. This factor alone has caused many developers to mothball projects in the pipeline until shortages again push prices up.
Value is a complicated cocktail.
Assessed value, appraised value, market value, replacement value, and selling price all mean something different. When the media says that real estate values are falling, they really mean that the prices people paid for a small number of homes, last month, was less than what a different group of people paid for a different assortment the month before.
There is always a baseline of demand.
An increasing population must be housed. There is a natural ebb and flow, not a boom bust. At various times, demand outstrips supply; supply is increased until the surge recedes to baseline or below.
There is always a baseline of mortgage defaults.
There will always be unforeseen circumstances that will bring some homeowners into default. Even in good economic times. And even with good mortgage loans. In an appreciating market, they are able to sell in a short period of time. So, in most markets, foreclosure activity has been below the historic baseline.
Now, it could increase, spiking a little to reflect those who can no longer survive on increasing equity and then may level out at baseline again. When the next rapid appreciation cycle begins, and it almost assuredly will, rates may fall back below the newly adjusted baseline.
There is no risk.
Save the term risk for high stakes poker in Vegas. Buying real estate isn't inherently risky. But it isn't a get-rich-quick scheme, either. It's a formula for building long term wealth.
Real estate is a great way to build wealth.
You have to live somewhere. If you rent, you are making some or all of someone else's mortgage payment. But even if you have to work two jobs and barely scrape by to make your own mortgage payment, you are building equity that over time will be quite substantial. So, perhaps, don't believe every "the sky if falling" report or article. Educate yourself on the market and happy wealth homeowning!
Hey! You've won a ride back to the top
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