New York Renovator

Couldn’t believe me eyes when I woke up to see this headline at the New York Post: LOST SOVEREIGNTY: Oil-Rich Fund Eyeing Foreclosed U.S. Homes. American mortgage brokers have been shopping– shopping for foreclosed American homes– on behalf of “sovereign funds” like Abu Dhabi, Norway, Singapore, and Kuwait. Unbelievable.

There’s a new land grab starting in America.

Foreign money, which up to now has focused its attention on investing in iconic commercial real estate – like Barneys New York and the Chrysler Building – is now moving to scoop up tens of thousands of discounted foreclosed homes across the country.

One sovereign fund, said to have earmarked $29 billion to purchase foreclosed residential real estate, recently hired a West Coast mortgage broker and is starting to search for bargains, The Post has learned.

The search, which is being carried out, in part, by Field Check Group mortgage consultant Mark Hanson, who was retained by the broker, Steve Iversen, is concentrating on single- and multi-family REO (real estate owned) homes, or homes that have already been taken over by the mortgagee.

Of course the American brokers are hush-hush about who they are working for.

A sovereign fund would have two distinct advantages over other investors – the depressed value of the US dollar makes the homes a bargain, and sovereign funds have deeper pockets.

So far, prices on bulk sales of REO properties vary based on location and are selling from 60 cents to 80 cents on the dollar. Hanson started out offering 40 cents on the dollar for about $2.5 billion worth of California properties owned by IndyMac and Washington Mutual but was turned down. The banks refused to comment.

Doesn’t anyone suspect in the slightest that the economy problems we’ve been having in this country have been manipulated to occur? Who is getting rich and who is benefiting from ALL this speculation. It would be one thing if a smattering of foreclosures were occurring– lots of homes foreclose, and lots of investors snap them up (see my post How to Create a Serfdom about that). But this is a HUGE, across-the-board failure in the United States (and in a few other countries). It is a purposeful devaluation of 1) the American dollar, 2) American ownership of property, 3) high taxation, 4) ethanol which has raised food prices and oil speculation which has raised gasoline prices and everything else, 5) the inability for Americans to make ends meet and make those home payments.

And when we have a crisis like this, who gets bailed out? Not the American taxpayer! Our country is being sold out right from under us.

Hat tip to Vulcan’s Hammer for cartoon.

Interesting news from Bloomberg this morning: the second-largest U.S. securities firm is tightening the home-equity belt.

Morgan Stanley, the second-biggest U.S. securities firm, told thousands of clients this week that they won’t be allowed to withdraw money on their home-equity credit lines, said a person familiar with the situation.

Most of the clients had properties that have lost value, according to the person, who declined to be identified because the information isn’t public. The New York-based investment bank will review home-equity lines of credit, or HELOCs, monthly from now on, the person said yesterday.

I’ve never liked the idea of a home-equity line of credit. It’s risky for investors and it is incredibly risky for home-owners. It’s far too easy to spend into the indebted obscurity of a black hole. I would never, never, never get a line of credit for this house– it would gobble up every dollar and then demand blood. It is essential to have a budget and stick to it.

But this move by Morgan Stanley sends shivers up my spine. They are being secretive about their losses, but speculative estimates are upwards into the billions, most of which is unrecoverable.

The president and his cronies can toss flower petals all day, and say that the economy is “good” or “recovering.” But when you see the biggest and riskiest of banks and firms closing their doors and shutting down lending systems, it evokes bells and whistles that things are going down for a while. I’m as optimistic as any one, but it would be plain dumb to pretend that nothing is wrong and to keep spending, spending, spending like drunken sailors. Why oh why is our government the first to create the problem and the last to fix it?

I have always been very vehemently against bank mergers and federal takeovers of banks. You’ve heard the saying “Follow the money”? We the people have less and less control over our own economy and financial market as the government and the bankers continue to scarf up the banks and make laws favoring their banker pals.

Here’s news on the latest bank closings and federal takeover. Happened in Arizona, where a lot of New Yorkers have moved. I’m not going to freak out and give a clarion call to head for the hills and bury your money in the ground. HOWEVER, this is a very unstable time, and we would be wise to be cautious right now. The feds and bankers would love us to continue our consumeristic spiral of debt and profligate spending; I am exercising caution by being very frugal, and no big purchases here! I’m also doing what I can to grow my own food, get my yard prepared for growing lots of vegetables, etc. I encourage you to so the same.