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    Daily Digest – June 10

    by Davos

    Wednesday, June 10, 2009, 2:39 PM

  • Uh oh, Year over Year GDP (Chart)
  • Foreclosures and the Home ATM
  • From Michael Covel’s Blog, Fed Inflation Video
  • Michigan closing eight prison facilities by year’s end (H/TMesaBoogieMan)
  • The Psychology of Short Sales by Tanta, April 2008
  • Parent Resources for Growing Green Children
  • Shiller: Home Prices May Keep Falling
  • Rainwater Harvesting Poised To Grow In US West
  • On American sustainability: anatomy of societal collapse (Crash Course Cited)
  • Banks Try to Stiff-Arm New Rule (H/T Fujisan)


Uh oh, Year over Year GDP (Chart)

Foreclosures and the Home ATM

From Matt Padilla at the O.C. Register: Do these homeowners deserve help?

Homeowners who treated their houses like cash machines, tapping the equity as home values rose, are among the most likely to end in foreclosure, even more than those who bought at housing’s peak, a new study finds.

Often homeowners have had second, third and even fourth mortgages at time of foreclosure — a trend not adequately addressed by any of the federal or state foreclosure avoidance progams, said Michael LaCour-Little, a finance professor at Cal State Fullerton who authored the study.

I plan a bigger story on his findings, but wanted to share a few results now.

For example, for the early November 2008 data sample, he tracked 2,358 properties. Here’s what he found:

  • They were purchased at an average price of $354,000 and average year of 2002 (long before the housing peak of 2005).
  • Total debt on the properties averaged $551,000 at time of foreclosure. That’s 56% more than the properties were worth when purchased, meaning at least that much was cashed out!
  • An automatic valuation model estimated average value at time of foreclosure was $317,000, which suggests a combined loan-to-value at foreclosure of more than 170% ($551,000/$317,000). And that is a conservative estimate. Properties that banks later sold had an average resale price of $271,000!
  • During the housing bubble, many bought homes they could not afford using "affordability products" like Option ARMs. But there was another group of speculators that lived beyond their means, using their homes like ATM cash machines. I think this an important issues and I’m looking forward to Padilla’s article.

From Michael Covel’s Blog, Fed Inflation Video

Michigan closing eight prison facilities by year’s end (H/TMesaBoogieMan)

With Michigan facing a $1.4 billion deficit in the next fiscal year they are closing eight prison facilities by the end of the year. It is believed that almost 1,000 state workers will lose their jobs.
Director Patricia Caruso made the announcement today which facilities will be closed.

There are five prison camps that Michigan Department of Corrections (MDOC) ran. These five camps are to be closed thus ending MDOT’s camp program. Three of these camps are in the Upper Peninsula of Michigan.

They are Camp Cusino in Singleton, Camp Kitwen in Houghton County and Camp Ottawa in Iron River. The other two camps are Camp Lehman in Grayling and Camp White Lake in Oakland County. The camps are low-security prison camps.

The other three prisons are Hiawatha Correctional Facility in Kincheloe, in the Upper Peninsula, the Muskegon Correctional facility and the Maximum Correctional Facility in Standish.

Mike Prusi ( D-Ishpeming ) stated that he is upset because the UP of Michigan will be hit hard with the closing of the facilities there.

He said, “These closures are a slap in the face to communities who stepped up to the plate to accept prisons when the state was in need. I am concerned about how these closures will affect workers and their families in these communities, and I hope the Department’s Lansing bureaucracy will not be spared from the budget knife as well.”

The Standish Maximum Correctional Facility (SMF), in Standish, will have 350 employees at the prison lose their jobs.

According to Arenac County Clerk Ricky Rockwell, "Standish looked to that facility to stabilize a shaky economy in the late ’80s after losing a significant employer, Riverside Products, that employed 4-500 people.”

City manager Mike Moran said in city sewer/water debt, the city will lose $1,400,000 in payments after the loss of SMF.

 The Psychology of Short Sales by Tanta, April 2008

There are no doubt some bargains to be had for real estate investors looking into short sales, but for nearly anyone except an expert in certain markets, I think I’d suggest not wasting your time. Unless, that is, the listed “short” price has already been “pre-approved” by the owner’s servicer. That does sometimes happen; the seller will in that case have a letter from the servicer indicating the minimum allowable sales price/maximum concessions. It will also help to be working with a real estate agent who knows more than a little about doing short sales. Otherwise I suspect you’ll end up waiting for Godot. I hate to spoil the plot, if you’ve never seen that play, but in the end he never arrives.

Parent Resources for Growing Green Children

What we do as parents is important for the world and environment to come for our children, but even more than our efforts to preserve and conserve, is our efforts to teach our children why we do what we do to protect the environment and provide them with the education, information, and tools to continue those efforts as what will do today will truly affect the life that our children live tomorrow.

Shiller: Home Prices May Keep Falling

Included: A total fall in housing prices of 41 percent from 2006 through 2010.

Rainwater Harvesting Poised To Grow In US West

There’s more good news…collection systems don’t have to be make-shift ugly. For more about the example pictured above, visit the go-to site The Rainwater Observer, Rainwater News And Blogs From Around The World. More pics from the Observer, below

On American sustainability: anatomy of societal collapse (Crash Course Cited)

Clugston writes, “On American Sustainability—Significant Findings and Conclusions.” This man writes from deep research and profound understanding of what we face. No name calling can degrade pure scientific facts. Clugston writes:

“Our American way of life—300+ million people enjoying historically unprecedented material living standards—is not sustainable."

Let me repeat Clugston’s words, “…not sustainable.” California cannot sustain its own addition of 1,700 people and 400 vehicles added to that state—daily! It cannot sustain its projected added 20 million people. It does not possess enough water today! The USA cannot continue adding 3.1 million annually, net gain, on its way to adding 100 million in 26 years.

“America is irreparably overextended—we are living hopelessly beyond our means, both ecologically and economically. The available supplies of many critical ecological resources and economic resources upon which we depend will soon be insufficient to enable our American way of life,” Clugston said.

He’s not pretending or making this up! We exploded our civilization to over 300 million people that need to be watered, fed, housed and educated. We’re failing across the nation in May 2009 so what will it be like with an added 100 million? Darned frightening!

“The extent to which we are overextended is appalling. Under the best case scenario, the US can support sustainably less than 20% of our existing population living at less than 20% of our current average living standard,” Clugston said.

Look at California for an example. That state accelerates into a basket-case. It won’t get better but it will get worse. Projections show 100 million people added to this country in 26 years. Get a grip! It won’t happen without horrific consequences.

“Our culture of persistent resource overexploitation, which has enabled our “success”—our extraordinary American way of life, is also responsible for our “predicament”—our unsustainable American way of life,” Clugston said.

Banks Try to Stiff-Arm New Rule (H/T Fujisan)

Delay Sought in Accounting Change, as Investor Groups Plot Own Response

The financial-services industry is taking steps to delay an accounting rule that would force banks and others to bring some of their off-balance-sheet vehicles back onto their books next year, which could force some to raise additional capital.

A group that includes the Chamber of Commerce, the Mortgage Bankers Association, and the American Council of Life Insurers and others sent a letter on June 1 to Treasury Secretary Timothy Geithner, regarding the off-balance-sheet accounting-rule change, saying it should be adopted "cautiously and seek to minimize any chilling effect on our frozen credit markets."

The letter was signed by 16 industry ..

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