I have my own theory about why the banks are looking the other way: they know how widespread lender fraud was at their institutions and they don’t want to open that can of worms.

Just sitting in lenders’ offices and listening I must have witnessed a good half dozen fraudulent loans written.

When a family of 5 comes in, in a 15 yo old beater car, with hungry kids who haven’t been bathed that day and the officer puts them into a stated income with $100K AGI, that’s lender fraud.

And I don’t think the lenders want to go there.

Mike,

Kudos for the awesome research. This blog is an incredible resource. But….

While I understand that you are angry with people that you perceive as taking advantage of the crisis, I don’t see how what they are doing constitutes fraud, as you have asserted in this post as well as a few others. When you sign a promissory note it contains the remedies that are available to the lender if you default - credit report, foreclosure etc.

Unless you can show that a person intentionally deceived a lender in the formation process of the note, e.g. they lied about income or assets, then its unlikely that any kind of fraud occurred.

A business decision to default on a note does not equal fraud, even if the day after defaulting you are on the courthouse steps buying a newly foreclosed on house. Should the bank be free from any responsibility for making a bad business decision by lending more and more money in an ever inflating housing market?

I think that the people facing up to the situation and acting logically are doing EXACTLY what needs to be done. That is, coming to terms with the fact that the consequences of default are greatly outweighed by the benefits, and likely will be for some time into the future.

The sooner accept the consequences of our collective stupidity and hit the reset button, the sooner we can get back to building a productive society. Lest we end up zombies in zombie houses financed by zombie banks in a zombie country.

If anyone should be flogged its the bankers and the legislators, not the homeowners.

“ALL of the cases I have found of people losing properties then turning around and paying CASH for Trustee’s Deeds are all in the industry. That’s RE brokers, agents, bankers, developers, title and mortgage folks.”

These are the same weasels who were screaming “real estate only goes up” a few years ago as they drank their own Kool-Aid, offered up senseless arguments to back up their pathetic utterances, and proceeded to go “all in” on houses.

Funny we don’t here from these pieces of garbage anymore. Where are they now? Sneaking around on the courthouse steps, apparently.

Well Bantering Bear, considering Mike’s post about ‘lateral moves’ was deleted off this blog completely, presumably from pressure by lawyers of the mentioned homebuyer in the article coming down on either Guy or Diane or Mike, unless you have the funds and a team of lawyers to fend off every pissed off exposed homeowner out there, your idea probably won’t see the light of day. Good idea though! If I had a team of lawyers, I’d put the site up myself.

Mike
Go with open office http://why.openoffice.org/

I have it on all my machines and it works really well. Tried to cloud compute through google but it may be too far outside my old comfort zone.

Keep with the spirit of the title of Mike’s thread, pls see the following:

http://globaleconomicanalysis.blogspot.com/2010/02/school-crisis-in-nevada-governor-seeks.html

“Dan Klaich, Nevada’s higher education chancellor, told the system’s governing Board of Regents the state is facing the worst economic shortfall in anyone’s memory, nearly $1 billion. This will mean either massive cuts to every aspect of government, or woefully unpopular tax increases. Or both.

Klaich outlined three scenarios that would cut that much from the system:

1. Close Nevada State College and the College of Southern Nevada.

2. Close Great Basin College, Truckee Meadows Community College, Desert Research Institute, UNLV’s law and dental schools, and the system’s medical school.

3. Close the state college, Great Basin, Truckee Meadows, Western Nevada College, all athletics at the two universities and the agricultural experiment station at UNR.

Don’t like those options? Klaich laid out a few others.

The system could implement 20 percent salary cuts across the board.

It could lay off 1,290 faculty and staff.

It could implement tuition and fee hikes of 48 percent.”

Increased taxes, more layoffs of state employees, and salary reductions are a certainty, and no matter your political bent, they are necessary.

Not a great time to be buying a place in Nevada….

Thanks for the link, skeptical. I found some of those quotes to be absolutely hysterical. Shutting down the higher education system in Nevada would be the death knell for the state. Those proposals lead me to but one conclusion: fire Dan Klaich.

Well, Smarten, have at it. It seems you know the names of the offenders at IV. So please tell us. Since IV is in Washoe County, the data miners on this blog can no doubt have the whole stories up and running in no time. So tell us, Smarten, who are the ones “who played the game and got burned” and “continue to hack their wares” in the world of IV real estate?

No kidding. If the people voluntarily defaulting on their mortgages and then buying another house for cash on the courthouse steps are “brokers, agents, bankers, developers and title and mortgage folks”, then those are the very people Guy has to work with every day. Come on folks. Guy sponsors this blog to assist in his business, not to impede it.

I share the same disgust as many others here about what is going on. But this blog is not the place for the public outings being called for.

The notion of addressing a budget deficit by imposing big cuts on educational facilities is very-short sighted, in my view.

Closing down community colleges and cutting back on the university would be the worst thing Nevada could do. It would essentially encourage the college-bound segment of Nevada’s best and brightest young people to leave the state to find better educational options elsewhere. It seems to me that Nevada needs more educated young workers, not fewer, in order to show business management teams that there is a capable work force available in the state.

Diversifying the region’s business base is probably something Reno needs to do. But without a consistently refreshed local pool of educated young workers, this would become very difficult. Does Nevada want to see a significant share of its brightest high school graduates encouraged to leave the State? That couldn’t be helpful, in the long run.

I think UNR strives for mediocrity. These coming budgetary cuts might make attaining that goal difficult.

My nephew was one of those nerdy kids who hung out at Reno HS with all the other nerdy kids. Socially inept, but academically top notch. In his group of 5, one went to Brown, one went to Middlebury, one went to Stanford, one went to Princeton, and one went to Caltech (spread out over two years).

Not one of them ever even considered UNR. These were the best and brightest.

Corine - those students were very lucky to be able to attend such fantastic private institutions - I hope their financial burden at graduation will be manageable.

UNR is currently charging around $150 a credit hour for undergraduate classes. Would you be so kind as to tell us what Brown, Middlebury, Stanford, Princeton, and Caltech charge per credit hour?

This is way off thread, but the cost per credit hour is of little consequence when colleges are gouging students for several hundred dollars per book. I saw a soft bound workbook half the thickness of Cosmopolitan magazine, and of the same material, for $80. Tell me that’s not criminal.

I’m still puzzled by all the fuss about the diners and dashers. Businesses do things like this all the time. Plus the stuff they do in or right before bankruptcy makes this look positively innocent. No one calls those guys out at all. Seems that if a business does it then it’s OK; if an individual does it we should tar and feather them. I’m not condoning dine and dashers, but let’s keep some perspective.

FWIW I second mescalito’s recommendation of Open Office. Great program at a great price. Should work for you so long as you don’t need Powerpoint.

Wazoo,
Stanford tuition is ~$37k per year, flat rate.

Considering Sage Ridge (private, 5-12) in Reno charges ~$20k, it doesn’t seem like a bad deal.

That said, I think UNR is a fine school, and don’t understand the insults. The Mining School is among the best of breed. Have the critics of UNR actually ever visited the school? It’s pretty impressive.

I agree with BB, Reno could be an amazing college town. It’s a shame the city’s leaders don’t leverage off the university to create a virtuous circle of smart growth and cooperation.

Could it be that the casino interests just have too much influence to allow for the organic growth of other industries? Reno has so many natural treasures (Tahoe, the Truckee, great weather, fantastic outdoor rec) it’s a shame it has such a one dimensional economy (casinos).

If diversified industries were fostered and allowed to develope, this town would be in much better economic condition.

Reading the comments on higher education in the state and its link the future in this state, I am struck by the strong support for higher education here, in contrast with many comments posted on the RGJ page, where many posters seem content to eviscerate the Nevada higher education system, and are happy to see it go. To all of the education supporters here, please be sure to speak up at every opportunity you get, and spread the word that higher education is important in a 21st century economy where knowledge is the most valuable asset for an employee to possess.

Like Bantering Bear, I strongly believe higher education is vital to the economic future of this area. Full disclosure: I teach at UNR too, and while I agree with the fact that many attributes of UNR resemble those of third tier institutions, it IS getting better, and not just a little. Reno could be a great college town because of its location, if only UNR could do a little better job of attracting and graduating strong students. I myself came here because of the location, though I have an academic pedigree that could have landed me a job at Stanford, Brown, Princeton etc.. Many other faculty, especially the younger faculty, have similar qualifications, and came for the location. That is a strong resource that could really be an educational foundation to build on if UNR can stay on the right track.

“I think you do get what you pay for in higher education. It is sometimes more about the connections you make at the top ranked schools. My son goes to Princeton. Two weeks ago, in a seminar in which he is one of 11 students, Ben Bernanke was present to talk to the kids.”

I think, by accident, you’ve actually made the argument that you DON’T get what you pay for when it comes to college. Ben Bernanke? Pleeeease. All you’ve done is illustrate that this country is nothing but a good ol’ boys network, and it’s not what you know, but who you know. Students get into those expensive schools most times because their parents are loaded, not because they are the best students. I also think it’s impossible to fail, as the Universities wouldn’t want to embarrass themselves.

Wazoo. Seems like we we have hit a sensitive spot with you. Your defensiveness is showing.

The comment above about the son who attends Princeton really says it all. Economics students at UNR talk about the Chairman of the Fed. Economics students at Princeton talk to the Chairman of the Fed.

Your implication that UNR provides an equivalent education as the top ranked schools in the country for less money is absurd. And everybody knows it is absurd. You have generally been an insightful contributor to the blog. However, on this topic which is obviosuly too close to home for you to be objective, you are losing credibility by the minute.

I don’t think Wazoo is suggesting that UNR provides an equivalent education to that of the country’s top schools for less money. I think he is saying that UNR provides a lesser education for less money. At least I hope that is what he is saying.

BTW - take a poll of the contributors here - how many are working in the field you’re college degree was obtained?

In ”80 mine was Aerospace Engineering. Haven’t used that in a while.

Number of Nobel winners that have been on faculty at Princeton…….20

Number of Nobel winners who have been on faculty at UNR……….0

Number of Princeton graduates who are Nobel winners……..14

Number of UNR graduates who are Nobel winners…… 0

Sorry, Wazoo, you do get what you pay for.

Kenna - those statistics mean NOTHING to me when it comes to our kids education. Princeton is no doubt a great school. So are others, but the matrix isn’t how many Nobel winners by any means. Using your analogy to send your child to Princeton - WORTHLESS.

The fact that Obama to received the Nobel Prize - well, that sums it up to me.

Oh did you go there?

Oh my God, they may have to close the law shcool at UNLV? I can’t imagine what life would be like with a lawyer shortage.
Surely we all would be willing to pay more taxes to insure that Nevada has a sufficient supply of new lawyers.

I have enjoyed reading the interesting viewpoints above on the fine opportunities offered top high school graduates when they attend some of the most prestigious universities in the country. That is a fact nobody would probably want to debate, because it is a truism that such institutions offer great opportunity to their students.

But the existence of such prime institutions doesn’t mean that Nevada should strive to meet such a high standard of comparison, or that because it cannot do so, its educational system is not worthy of financial support in hard times. Can anyone disagree with the proposition that it
is not realistic to try to compare UNR to a Princeton, Stanford or Yale? Of course not, so why do so? The fact that a particular institution is not among the nation’s elite doesn’t mean it should be castigated or cut back. Also, those small state colleges referenced in a comment above have a valued role, too, just like a lesser-known Cal State campus does.

No, I am not a teacher or a UNR graduate. I am just one of the nation’s small business owners who has been making a payroll for many years. I can tell you that closing local community colleges and cutting back on a regional university–the only in the region–would make it less likely I would ever want to relocate my business to such an area. I suppose some might respond with a parochial remark like “Good, who needs him anyway, or other outsiders like him.” But before making that kind of reponse, consider that adding diversified small businesses creates new jobs in new fields. That helps the economy, and a healthier economy with people employed in jobs paying better wages, supports real estate values.

Should the niece of a long-time Reno family, who is bright but not necessarily a Princeton-bound type person, not have other options locally? Is there truly a desire to diversify the economy, or is that just a politically correct comment? I repeat my propostion that the goal of economic diversification, which necessarily involves attracting new employers, requires a consistently refreshed pool of young people who are educated–and I don’t mean at a card dealer’s trade school.

I submit that joining in the defense of your educational institutions is important to the long term economy of the region. Further that making the argument against doing so that the institutions are not among the nation’s best is not a well-founded rebuttal. We don’t necessarily need a Harvard MBA to apply for every job opening that may come along, but having a pool of bright local young people with associate of arts degrees as potential applicants would certainly be attractive to us.

The politicians who advocate closing campuses and cutting back on the university are not helping the long-term economic situation in the region.

Tom, with all due respect, this is not political posturing. Nevada has huge, huge money problems that are real. The reality is that the budget CANNOT be balanced without cuts to education from top to bottom.
And, please note that to date, no politician has advocated closing any campuses. That is Mr. Klaich’s hyperbole and catastrophic fantasizing intended to stir up fear. Apparently it works with you.

I have to say, the more I read over Mr. Klaich’s possible options, the more they appeal to me.

Close down the law school? Count me in.

Tom, you going to argue Nevada needs a yearly fresh supply of new lawyers to be attractive to people like you thinking about moving here? We need to be like California where everybody is related, by blood or marriage, to a lawyer?

Alps, that is funny, but it is a valid point that maybe there is no need for a professional school at this time. Others also raise good points about hard choices that need to be made.

My theme was that in the long run, attracting new businesses, which is part of economic diversification, is going to be very difficult if the prospective business owners don’t perceive a regular, local source of educated new employees. It is the community colleges and the mid-range state universities which meet that need, so cutting there should be very judiciously done.

Hillside, I –and others–have already sent your state a check each year, for decades, by way of visits to your resorts over the years.

Budget issues are everywhere currently, I only mean to suggest to you that heavy cuts imposed on higher education is in my opinion a short-sighted solution.

Just a quick word in defense of UNR. I graduated from a Las Vegas high school with a sufficient GPA to attend more prestigious schools. For a variety of reasons, one of which I was paying for my own education and the scholarships available would not have paid my way at the more prestigious institutions, I decided to attend UNR. I have also taken classes (and later taught ) at both WNC and TMCC.

After I graduated from UNR, I attended graduate school at Rice University, in Houston, which is a first-tier university and is often ranked in the top-three best values in higher education in the U.S. Rice is a great university, and I indeed made some great contacts there, but the level of education provided to the undergraduates (at least from my observation) was not significantly greater than at UNR, or even at the community colleges with which I am familiar (at least with respect to core courses). Admittedly, the level of education at Rice is more consistent across disciplines, and certainly the resources at Rice far out-stripped those at UNR, but I do not believe that undergraduates at Rice left with a significantly better education than I received as an undergraduate at UNR. Having said that, I also found that the quality of the students at Rice was across the board more consistent than the quality of my peers at UNR had been, and I believe that I may have received a comparable education at UNR at least in part because I took some of my education there into my own hands. Nevertheless, I know that UNR gave me sufficient educational opportunity to obtain an education that allowed me to attend a top-tier institution for graduate work.

As for closing the law school at UNLV, doing so will not reduce the number of attorneys in Nevada. Like I did, many attorneys in Northern Nevada went to McGeorge in Sacramento (a third-tier law school, but one that afforded me the opportunity to meet a sitting Supreme Court Justice and make contacts in the area in which I want to remain), as Northern Nevada based law students continue to do today. McGeorge openly embraces Nevada students, and some classes even include Nevada law issues. As for Southern Nevada, a large percentage of attorneys there (maybe still the majority) are from out of state. I personally would prefer to see more homegrown and educated attorneys in Las Vegas who understand Nevada issues and Nevada law than to send potential lawyers out of state for education (and jobs) and import more and more CA attorneys and law firms to Las Vegas (no offense to CA attorneys in general, Tom).

I wonder how this thread morphed from a discussion about NODs and TDs to a treatise on Nevada higher education?

My daughter was salutatorian at Spanish Springs HS and chose to attend NYU over Notre Dame, UNR, and another school I’ve forgotten.

Financial pressures may result in her returning to NV for her sophmore year, but her first choice was an out of state school.

And as far as the original thrust of the thread, I fully expect strategic defaults to rise throughout the year, affecting higher value properties first, then trickling down through the price bands. The more affluent homeowner will see the economic dead end, especially if similar housing is available in their neighborhood for less than a mortgage payment.

I believe lower income people have more of a ‘moral’ distaste for defaulting on their mortgages, having been taught that ‘paying your house note is the most important thing.’

Well, it’s not. Anymore.

Reno #2 “drunkest city” in America:

http://www.huffingtonpost.com/2010/02/05/drunkest-cities-in-americ_n_451074.html

“In compiling the rankings, Men’s Health considered “death rates from alcoholic liver disease, booze-fueled car crashes, frequency of binge-drinking in the past month, number of DUI arrests, and severity of DUI penalties,”

Well….at least Reno is good at something….a little more effort, and perhaps we can beat out Fresno. Too skeptical? Yeah…..right….

Hey Grand Wazoo….

I think that you got beat up here in a way you certainly don’t deserve. You are not resposible for the flawed tax structure that we have in Nevada, and you are not responsible for the calibre of university that UNR is. Only a fool would suggest that UNR can stand alongside the finest private universities in terms of endowment and financial strength. It does not take a Ph.D from Princeton to understand that deep pockets surely do improve the educational offerings of a university. I think that UNR does as good as job as it can given what it is……a modestly funded state school in a relatively sparcely populated state. A state that does not have any tradition of supporting education at any level. I don’t know what you teach, but I glean from the fine comments you have offered on this blog over the past 3 years or so, that you do a fine job. I for one appreciate your contribution to this blog, and I hope you continue to offer your quality insight.

for those interested; regarding the state’s current fiscal crisis:

http://www.npri.org/publications/pub_detail.asp?id=621&css

Sully - A good article on how Nevada got in this mess. It could apply to all of government, however, local up to the national level.

The ‘Last In, First Out’ method makes the most sense for any financially struggling government entity to reduce it’s budget immediately.

How many will do this? Few I imagine. It’s one thing to talk about reduced funding for schools, another to layoff or disband the most recent government run programs and the government employees running them.

Programs we lived quite well without in 2004.

MikeZ you’re right - we can JUST walk away [I say “just” because as you know, I’m not against “walking away” if it’s through a permissible procedural vehicle (like a short sale, deed in lieu,BK, etc.)].

We can walk away from an unwanted pregnancy.
We can walk away from our spouse.
We can walk away from our family.
We can walk away from our friends.
We can walk away from our country.

Yes MikeZ, all of these things we CAN do.

But the measure of who we are the paths we take when we reach the fork in the road which leads to either walk away or not.

Just a thought.

MTR states “there is nothing immoral in walking away from an underwater asset as long as one is aware of the consequences.” Tell that to Mrs. Tiger Woods. Or Governor Gibbons. Or Paul Teutle, Sr. [American Choopers for those of you who don’t follow the program]. Still think the reasoning is “improper?”

Hope everyone enjoys the Super Bowl!

mike,

a person with ability to pay can walk away, but will be pursued (unless the bank goofs up or the
person lies and/or cheats)

what are you warning me about? your post made no sense

RE: “a person with ability to pay can walk away, but will be pursued (unless the bank goofs up or the
person lies and/or cheats)”

CAN be pursued.

I’d be interested in some data on how often the lenders seek recourse, I suspect it’s less than 1%.

What your are saying, CL, is that it should be the mortgagee who suffers from the lack of sound mortgage underwriting standards and dubious appraisals, not the mortgagor.

Unfortunately, it was the mortgagor who set the standards and accepted the appraisal of the property. Turns out the standards were totally hollow and the appraisals bogus.

The mortgagor is the professional expert here, the mortgagee is considered a novice to things like home buying.

Just doesn’t seem fair to me that you want the housedebtor to keep making payments just because it is in the best interests of the bank and its depositors since the housedebtor was manipulated by the corrupt system of which the bank is a principal player.

MTR,
I don’t buy it for a minute. Its the same argument that people beholden to credit card debt attempt to make: it was the evil lender, never my over-spending ways. Its always someone the $#@#% else, isn’t it? Instant gratification at the expense of long term risk. For all of our sakes, this country needs everyone in it to get a dose of personal responsibility.

Do you deny that borrowers demanded the instant gratification of cheap debt to buy homes above their means that they felt entitled to at the expense of long term fiscal risks? That this demand to satisfy the instant gratification borrower caused banks and Wall St to offer products with lower and lower underwriting criteria at the expense of long term repayment risks? That bankers and Wall St bond traders were greedy, demanding instant gratification of commissions and pay at the expense of long term risks to the buyer of the papers they’d sell? That power crazed politicians demanded of the private sector that people’s need for instant gratification be magically satisfied at the expense of long term risk and financial common sense? Then why is it always just the bankers’ fault? Why is it always someone else’s fault?

You are damn right borrowers who chased after instant gratification and spent beyond their means should suffer. Add to that list the bankers and politicians, bond traders, realtors, etc. who each should suffer to their level of culpability. But I for one am sick of watching this housing mess unfold while some refuse to take responsibility for their own part of the mess.

Are there some players in the food chain who lacked the sophistication to take on that home, that mortgage, that luxury vehicle, that credit card agreement? Yes, and they should never have been buyers at all. You state “the mortgagee is considered a novice”. Well, then they should obtain financial advice, save up more money, etc. but don’t buy a wildly expensive item until you’ve gained necessary experience, down payment, or financial accumen! A house or mortgage or credit card is not a right, nor is your desire to have something financed by someone else a right. Barring any odd circumstances whereby we as a society should grant compassion, they need to feel the pain. Banks need to fail (happening), borrowers need to fail (happening), politicians need to get voted out of office (happening), realtors need to suffer for their bad advice, etc. etc., but everyone up and down the damn line needs to gain from this experience the key learning of it all: accept personal responsibilty for your own actions.

In extreme cases, we all have compassion and laws to help them out with society picking up the tab, but those voluntarily walking away with cash in their pockets are sticking the rest of us with their bill.

If Incline Village follows the same pattern as Reno it has much further yet to go. $/sq.ft as of early Jan in IV was $287. If it reverts back to 2001 or earlier pricing, it will be below $200/sq.ft.

And why shouldn’t it? Considering that >$500k is an exceptionally weak segment of the market (esp. in CA and NV), I don’t see how IV will not go down much further. Considering the very high number of second/vacation homes in IV (the ones underwater homeowners unload first), it most certainly will go down further.

It seems the Forbes article of Jul 09 was spot on when it described IV as America’s Most Troubled Luxury Neighborhood: http://www.forbes.com/2009/06/25/housing-crash-unsold-homes-southampton-personal-finance-zipcodes_slide_2.html

DBNO,
I agree with everything you have said. And I believe that explains why IV has been a bit “stickier” than Reno.

That said, I’ll stick my neck out and predict that IV RE has some very ugly days ahead. FWIW.

True but volume is somewhat governed by those that are forced to sell, and typically, in the more upscale areas owners have options, or maybe a better way to put is they have deeper pockets that extend the timeline for being forced to sell (denial?). The longer this trainwreck goes on the more we’ll see an increase of those forced to sell and therefore setting lower prices. If/when this hits critical mass, watch out.

To RB,

I agree with you that the Knowledge Center is truly a world-class facility.

I wonder if the university is doing a good enough job at marketing itself locally?

FWIW, the Elko Daily Free Press lists all people who are filing NODs or foreclosing in a column right next to the Police Blotter (not sure if it is once a month or once a week).
The only thing I don’t like about that is that the mortgage lenders and real estate people who walked with the loot aren’t also reported.

Hillside,
according to the RGJ article, the legislature has basically raised a few taxes and fees and reduced a few outlays. But one thing caught my eye, which pertains to this blog:

“Financial institutions also will pay more for filing foreclosure actions, from $50 to $200, to raise another $13.8 million.”

So, doing the quick math with my cheap microsoft calculator utility, NV is counting upon 69,000 more foreclosures in the next year, so that the state can rake in $13.8 million. In a way they are dependent upon huge numbers of additional foreclosures. In a way, they must be rooting for them!

Wow, what a way to balance the budget.

http://www.rgj.com/apps/pbcs.dll/artikkel?Dato=20100301&Kategori=NEWS07&Lopenr=100301011&Ref=AR

I for one believe we are seeing the fraying of the idea that Americans pay their mortgages.

It was something you just did, and you would go to any lengths to make sure that the mortgage was paid. I distinctly remember my parents frantically negotiating with their lender to keep from having their home seized. It worked.

Later, when my father left, my mother and all of us kids (3 of us) worked to make sure the mortgage got paid.

Now, it’s an option.

What does that say about the sanctity of contract?

(I am in the camp of walk away if it makes no financial sense, but I’ve already lost a home, so perhaps my view is a bit tainted.)

Perhaps sanctity of contract is an old fashioned concept. Like doing what you said you would do.