Thursday, October 04, 2007

A Lesson to Be Learned

by Ken Houghton

Even with the family away for the week, I'm buried. But these two are too good not to highlight:

  1. Quote of the day, via Dr. Black: "In fact, the most homes in foreclosure [in the Orlando, FL, area] are in ZIP codes that didn't exist five years ago." If that is true, then (1) it is clearly the speculators who are suffering the most right now and (2) those are precisely the contracts (second homes, rental properties) that current bankruptcy law allows a judge to revise. No wonder:
    Some mortgage companies and lenders don't want you to know how bankruptcy lawyers can help, telling you bankruptcy is for deadbeats.

    In bankruptcy, retirement savings and 401(k)s are protected. You can be freed from second and third mortgage obligations. Some lawyers are even negotiating directly with lenders, which has never been done.

    "It just absolutely breaks my heart when I have a couple who wiped out a humongous retirement account nest egg before they came to see me," bankruptcy lawyer Lori Patton said.

    If you want a textbook definition of a principal-agent problem, look no further.

  2. The Derivatives world has turned upside down in the past twenty years. Proof: this quote from Tanta at CR from about a week ago:
    One of the ways LIBOR was "sold" to consumers who were used to old-fashioned indices like Constant Maturity Treasury (CMT)or Cost of Funds (COFI)...

    I spent about an hour in early 1994, during my first round at The Old Firm, on a conference call with an economist and one of our salesmen, discussing with one of his clients why COFI was underperforming the market. And CMT Swaps were not anywhere near so prevalent as LIBOR-based ones.

    Time marches on.

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// posted by Ken Houghton @ 2:03 PM
Comments:
In general, new ZIP Codes = fast-growing (or formerly fast-growing) exurbia, so it's not obviously the case that the "speculators" aren't by and large "poor slobs who thought they were getting a 'deal' by moving to the far exurbs."

And doesn't Florida have permissive laws w/r/t shielding home equity in bankruptcy proceedings?
# posted by Blogger Tom Bozzo : Thu Oct 04, 05:23:00 PM
 
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