For our regular readers interested to make sense of mainstream media reporting of the economic crisis, I recommend to you our archive feature. Every now and then I go back to earlier posts, to get a sense of how my own thinking and writing has changed. For instance, at the start of Eyeonmiami I was much more snarky to The Miami Herald than I have been recently. These days, I see the mainstream media as in the ferocious grip of insolvency; on its good days, the Herald is worth every dollar of subscription price. (Jim Morin is always good.) On its bad days, Eyeonmiami can sometimes fill in.
There is, however, one guiding thought that has remained my perspective from the very first I began this course of public journalism... but to read about it, you will have to click on "read more".
I have contended from the beginning, and based on a long lifetime of investing and observation of human behavior, that the mainstream media like The Miami Herald could have done much, much more to throw cold water on the flames of the housing market bubble; the source of the worst economic crisis since the Depression. It could have done more if it had raised a critical voice from its editorial board and through the pages of its investigative reporting. The paper failed, because of its symbiotic and cozy relationships with production home builders, lobbyists in the "environmental land use" industry, cement makers, sugar barons, and other speculators. The Herald has plenty of company among the mainstream media, in missing the biggest story of the past 100 years. (On the other hand, there is the St. Pete Times which did a credible job of reporting out the excesses of the boom. Even the Naples Daily News did better.)
Today's story in the Herald, "Home seizures sharply higher", might have been anticipated a long time ago. They were, on this blog. Read the following post from our archives, December 8, 2006:
"From today’s Financial Times: “the failure of a small Californian mortgage lender yesterday increased nervousness in the credit derivatives market about the large number of US “subprime” mortgages extended this year… its failure is the latest in a series of ominous developments in the market for subprime mortgages.”
Of condos and homes built by the area’s largest builders—Shoma, Caribe, Century, Lennar, Centex, Horton Homes—what is the percentage of sales based on subprime mortgages? What is the historical foreclosure rate on these mortgages compared to foreclosures in the last three months?
We would like to know because it occurs to us, that the 13 members of the Miami Dade county commission and Miami City Commissioners who facilitate turning the region into a chop shop for condo and production home builders—lead by Natacha Seijas for the county—might take reality into account.
So far, mortgage lenders have been hanging on doggedly with frozen smiles. But you can see the vultures circling.
Little people can’t pawn their debt the way big banks can. If the pain starts spreading to bigger financial institutions—hang onto your hats."
Two years after writing these words, the wind has blown the hat straight off my head. The pain has not only spread deep into the largest financial institutions, I have a deepening sense that despite the optimism of a new Obama administration, a little more than a month from now, there is no "Plan B" if the trillions of taxpayer dollars, a de facto nationalization of the nation's distressed core businesses, fail to revive the economy.
Our problem is that executives currently or formerly employed by those core businesses are trying to dictate terms of bailouts as if fundamental change is unnecessary; not in Miami, the county, the state, or the nation. I am increasingly worried that we will not be able to muster the political will for fundamental change until we experience social unrest unlike anything we have seen in our lifetimes.
The Miami Herald and its brethren in the mainstream press have little to lose-- as they imagine they had, before-- by taking a far more assertive position to prevent that vision from materializing. It never made sense to me, and never more so than now, for the press to simply stand back and report the economic disaster as though it is a blameless exercise. It is not.
That is what we try to do, with no resources but determination that a public record must exist, at Eyeonmiami.
Posted on Sat, Dec. 06, 2008
Home seizures sharply higher
BY MONICA HATCHER
A weakening Florida economy helped push 90,000 more homes into foreclosure in the third quarter, amid mounting job losses and falling home prices, according to an industry report released Friday.
Florida's foreclosures stood at 7.32 percent at the end of September, representing 261,027 homes, the Mortgage Bankers Association reported. The percentage of all homes in foreclosure in Florida easily outranked those of other states. Nevada's rate of 5.58 was second highest.
''Florida has lost 156,000 jobs [this year], the highest in the country, and that now is clearly driving problems in Florida in addition to some of the overbuilding issues we saw there,'' said Jay Brinkmann, MBA chief economist. He noted that speculation and poor underwriting had contributed to both Florida and California's high rates.
On Friday, the Labor Department reported that employers slashed 533,000 jobs from their payrolls in November. Brinkmann said the unexpected figure has thrown economists for a loop and many would be forced to chuck their forecasting models out the window when it comes to predicting a bottom in the mortgage market.
Unemployment ''is going to have such a major impact on mortgage performance,'' Brinkmann said.
Many analysts had said foreclosures would begin tapering off in the third quarter of 2009, as home prices stabilized and after interest rate resets on most subprime adjustable-rate loans have taken place.
Nationally, about 575,000 homes entered foreclosure in the third quarter, with more than one in six in Florida, on track to hit roughly 2.2 million foreclosures by the end of the year, Brinkmann said. In addition, 6.99 percent of all loans were either 30 days or more past due. In Florida, the percentage was 9.11, up from 7.86 percent the previous quarter.
DRAMATIC COLLAPSE
Foreclosure figures over the past two years show the dramatic crash of Florida's housing market. In the third quarter of 2006, the total percent of Florida homes in foreclosure was 0.6 percent. It rose to 2.19 percent in 2007. It's now 7.32 percent, the highest in the country. The figure does not include homes that have already been repossessed by lenders through the courts.
The report comes a day after Federal Reserve Chairman Ben Bernanke told lawmakers more government intervention was needed to keep borrowers from losing their homes. As solutions, he suggested buying delinquent mortgages and creating bigger lender incentives to refinance.
In testimony to Congress on Thursday, Neel Kashkari, interim assistant secretary for the Financial Stability Department of the Treasury, said HOPE NOW estimates that nearly 2.7 million homeowners have been helped by the industry since July 2007 and that lenders were helping some 225,000 homeowners a month avoid foreclosure.
The numbers have not resulted in a dramatic drop in foreclosures. New filings in the third quarter fell to 1.07 from 1.08 in the second quarter nationally, though not in Florida.
''The question is what would the numbers have been without the modification,'' Brinkmann said, pointing out that a rise in the rates of loans 90 days past due was likely the result of lenders holding loans in delinquency to see if borrowers could perform under new loan terms.
Unlike unemployment figures mid-year, Brinkmann said recent job losses are affecting a broader swath of technical and collegeeducated employees who are more likely to own homes.
WORSE ACROSS BOARD
Conditions in Florida are worsening, Brinkmann said. All loan types showed higher delinquency rates than the previous quarter, compared to other states where certain categories are leveling out or falling slightly.
Another sobering indicator of the market conditions: Florida borrowers who fall behind on their payments by 30 days or are more than twice as likely to enter foreclosures than borrowers elsewhere.
The so-called roll rate from delinquency to foreclosure is 65 percent in Florida compared to 30 percent nationally. Brinkmann said it is probably far higher since the national average had been heavily skewed by roll rates in California and Florida.
Florida ranked sixth in percentage of borrowers 30 days or more past due on payments, however, and second in the number of new foreclosures started during the period, the MBA data showed.
The Mortgage Bankers study tracks 45.5 million loans, representing about 85 percent of first lien mortgages.
© 2008 Miami Herald Media Company. All Rights Reserved.
http://www.miamiherald.com
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