WaPo has published two very useful items that document and reinforce what EMR has been saying in the for the past five years in 11 columns and in recent Blog posts about the Affordable and Accessible Housing Crisis and the mortgage finance meltdown.

On Friday, 24 October there was “Treasury Considers Backing Mortgages: FDIC Proposal Aims to Help Homeowners” with a map of September 2008 foreclosures. The pattern of defaults is just what EMR has been predicting for two decades. See “Wild Abandonment,” (8 Sept 2003) and “Scatteration,” (25 Sept 2003) which are being updated with new data and references. The text needs little updating to reflect the current landscape. These columns become the first two chapters of ROOTS OF THE HELTER SKELTER CRISIS, PART ONE of TRILO-G. More on the role of Blog posts in updating TRILO-G in “Upon Further Review.”

Also important are the issues raised by David Leonhardt in “Rescue U.S. Homeowners? Wait a Minute.” in the 22 October International Herald Tribune. He explores the $4 trillion dollar hole that “help” for homeowners may dig for federal, state and municipal Agencies.

Just who deserves help?

1) Those who were duped by fraud?

2) Those who knowingly participated in risky ventures and ignored decades of sound advice?

3) Those who were greedy or foolish – they believed the ads – and now cannot make their payments?

4) Those who decide to bail on an underwater mortgage so they can buy a cheaper house in a better location even though they can afford to pay their bills?

On Saturday, 25 October WaPo was back with “Snapshots From a Slow Market” in the Real Estate section. Some will plot the R= locations of these “neighborhoods,” add a Favored Corridor overlay and nod because they understand the New Urban Region Conceptual Framework.

If you do not understand the New Urban Region Conceptual Framework then you may be at sea on just what is happening where and what the impact may be. There is still time to catch up unless you purchased the wrong size house in the wrong location. If you are already underwater on your mortgage, perhaps you should have been paying more attention in years past.

The longer that Fundamental Transformation of settlement patterns (and Fundamental Transformation of governance structures) is postponed, the more painful and less probable any “recovery” will be.

It looks like it will be a while before there is light at the end of the tunnel. Both presidential candidates and every Virginia candidate running for the Senate or the House are still talking about going back to “economic growth” rather than finding a sustainable path.

The “center, left” commentor, Anon 11:31 on HOT, FLAT AND CROWDED post is typical of those who are concerned with the real danger of ‘overshooting’ carrying capacity: They do not understand the magnitude of the impact that would result from Fundamental Transformations that replace dysfunctional human settlement patterns with functional human settlement patterns.

Note for Michael Ryan: EMR uses a 24 hour clock too. You might as well worry about that in addition to EMR’s strategy to keep internet tracking and identity consistent. Try Googling “I.” Turns out this technique work very well for EMR. M_R might want to try it.


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  1. Ray Hyde Avatar

    “Those who decide to bail on an underwater mortgage “

    The mortgage is a private contract. If the terms of the contract provide that the property is the sole collateral for the loan, that it is a non-recourse loan, then what is the justification for suggesting that they should NOT be able to act according to the terms of their agreement? Is acting according to the agreement made what you call “bailing on an underwater mortgage?”.

    Preventing people from executing the terms of their contracts amounts to a bailout to those who provided the risky loans.

  2. Ray Hyde Avatar

    More than 30% of all homes have no mortgage. These people have done nothing wrong and everything right, yet they may still have lost 30 to 50% of the “value” their home was taxed on last year.

    When listing those who shold be considered for needing help, you left out the most innocent group of them all. Since they bought their homes more than thirty years ago and paid off the loans long since, you can hardly blame them for dysfuctional settlemt patterns or today’s financial meltdown.



  3. Ray Hyde Avatar

    “….going back to “economic growth” rather than finding a sustainable path.”

    There is no sustainable path without strong economics.


  4. Ray Hyde Avatar

    “Try Googling “I.” “

    You mean i as in imaginary unit? I imagine that does work well for you.


  5. Ray Hyde Avatar

    “The way to do so is through the shared appreciation mortgage, or SAM. The concept is simple: Homeowners are offered the chance to write down a portion of their mortgage debt, but at the same time, they are required to share future appreciation gains with those who helped them out….

    For example, a homeowner unable to support payments on a house purchased for $200,000 that today is worth only $150,000 might be offered a write-down of up to $50,000. But this would not be a free lunch.

    With the SAM, once the value began appreciating above $150,000, the mortgage holders would be due their share.”

    Andrew Caplan

  6. there is no solution to someone who does not earn enough money to pay a mortgage that they knew they could not afford when they signed the dotted line saying how much a month they would pay.

    If someone gets a loan on a car and they cannot pay for it – they come take the car away.

    I do have sympathy for those …who agree to pay.. and make enough to fulfill their obligation but paid too much.

    But just like someone who paid too much for a car.. or a boat.. or anything else – you live and you learn.

    There are people out there right now.. selling their homes and using their savings to make up the difference between what they owe and what the house sold for.

    If we don’t do anything else – there ought to be some level of fairness and equity – across the board.

    If we are going to give a 50K bonus to someone who was not very responsible.. are we also going to give a 50K bonus to reimburse the guy who used his savings to repay the loan?

    arbitrage is an interesting word.

    arbitrage is what got us into this mess.

    and .. what I’m hearing is that arbitrage is how to resolve it.

    In other words, the folks who were responsible get the shaft.

  7. but I digress…

    now tell me again what giving loans to people who don’t qualify for loans has to do with wrong size homes in the wrong location?

    Looks like Fairfax has 10 times as many foreclosures as Spotsylvania.

    Of course, Fairfax also has 10 times as many people.

    So ..the actual RATE of foreclosure is virtually identical…

    but.. just about half of the homeowners in Spotsylvania are NoVa Commuters.. and even if 100% of Fairfax folks are NoVa commuters.. the average commute has got to be much less.

    so.. credit goes to Fairfax for the “right” location

    on the size issue..

    the size of a home you can buy in Spotsylvania is probably twice the size of a similar-priced home in Fairfax.

    So.. Fairfax wins again on the right location…

    .. but the foreclosure rate is virtually identical…

    perhaps he artful fan dancer will grace us with his wisdom and intellect… but more likely pompous hot air with a tinge of hellfire and damnation.


  8. this map of Virginia showing foreclosure RATES is fascinating:


    In many parts of thoroughly RoVa Virginia, the foreclosure rate is 1 in 30,000.

    well.. unless of course.. they qualify to be one of those coveted workers allowed to live in the Urban Support Regions.


    that's right – one in 30,000 and what this means is that there are many counties in Virginia with LESS than 30,000 in population and NO ..that's right – NO homes in foreclosure.

    Here's what else it means.

    That the average home price is 100K or lower.

    Here's another fact:

    The median income in many of RoVa counties is 30K or so.

    I'm not sure what EMR refers to as Urban Support Regions … i.e. are they any and all land outside of the clear edge of New Urban Regions or do the Urban support Regions themselves have "edges"?

    At any rate… if we want to have a contest about which locations in Virginia have the "right sized" homes….RoVa will win hands down as the vast, vast majority of owner-occupied dwellings in RoVa are not 3000 square feet..not even 2000 square feet; most are way less than 2000 square feet.

    These homes are also much, much closer to the coal power plants that produce electricity AND most of these homes use about 1/2 of the electricity used by most home in the New Urban Regions.

    so.. in terms of wrong-sized house in the wrong location, it would appear that RoVa has the fewest…thus.. perhaps.. rightly classified as doing a much better job of not being a dysfunctional settlement pattern.

    So.. what about RoVa and settlement patterns..???

    what would those folks have to do to improve the functionality of their settlement patterns?

    Wait… I think I know… they gotta move to NoVa and live in a 300 square foot apartment and walk to their 30K a year job – right?

  9. Memo to EMR:

    Try to understand the difference between settlement patterns and financial crisis. Hint: it has nothing to do with settlement patterns and a lot to do with leverage.

  10. Groveton Avatar


    My argument with “no recourse” loans is that this provision is often legislated (at least as I understand thing). So, the loan is a bit less than an arm’s length contract.

    Larry G:

    That was an interesting graph. Of course, it’s one month’s worth of foreclosure actions. However, I believe some of your points would hold even over a longer period. But I kind of agree with Charlie with regard to the cause. I think it has a lot more to do with financing terms than functional settlement patterns (relax EMR – I said “more to do with”, I did not say “only”). Here are they things that I think would correlate with foreclosure levels:

    1. Median income levels vs. average home values. This is a measure of how deep in debt the residents of certain areas were. I think that areas with rising income levels actually have more foreclosures than areas with stable income levels. The rising level of income can afford a false sense of wealth that is translated into inappropriate borrowing levels.

    2. Age of housing stock. The willful ignorance of proper lending standards ended about 10 years ago. All houses built in the last ten years were sold (at least once) during that period. They have a 100% chance of being financed by an inappropriate loan. Meanwhile, places with almost no new housing built in the last 10 years did not have homes subject to loans made after the lending rules were (apparently) forgotten by the banks.

    3. Transient nature of area. Essentiall same argument as 2. but for existing housing stock sold over the last 10 years.

    Finally, I think house size is quite spurious. A more detailed view of a given county does not indicate a large number of foreclosures on larger homes and a lower incidence of foreclosures on smaller homes. The data just isn’t there. In fact, the opposite appears to be true. Relative small single family residences are foreclosed at much higher rates than larger, more expensive homes. However, even this, may be a part of the loan terms. Many places legislate a “one recourse” rule – the lender can foreclose in a farily straightforward process and take back the house. Or, the lender can go through a much more complex and time consuming process to take back the house and pursue non-house assets. People who live in larger homes often have quite a bit of non-house wealth. They know that if they walk away, the lender will follow. So, they continue making payments while the house is underwater.

  11. I actually pretty much agree with Groveton’s and Bob’s analysis.

    I think it is incumbent on EMR to provide evidence to support his premise though as the data … as Bob/Groveton (and I) have observed seems to not support what EMR asserts – and, in fact, contradicts it.

    This is why I chide EMR as a fan dancer these days – as he leaves the impression that he appears (to me) to dances away from the data that appear to undercut some of his assertions about … the relationship between dumb lending practices – and settlement patterns.

    And of course.. he makes statements like “…As the Global supply chain atrophies one of the first things to come into short supply might be small batteries.”

    ….without a shred of evidence to support his underlying premise… he then moves on to talk about such things as the regional manufacture and recycling of batteries… because (apparently) we will no longer be able to get them through the world supply chain… and … apparently.. if such a thing were to happen.. it would force ..people to evolve towards more functional settlement patterns.

    When some folks express skepticism about world trade “atrophying” … EMR takes on a “we” personality to denounce those that dare question his assertions and then he proceeds to move on to the next ..unbelievable assertion.. in this case.. that the mortgage crisis … is integral to the building of wrong-size homes in the wrong-locations…

    I don’t expect his thesis to be perfect.. self-consistent..

    I do understand that it is still a work in progress…

    but I do expect him to deal with the more obvious contradictions ..directly… instead of dancing away from them…all the while dissing those who dare express some doubts…

    He can do better.. and he should.

  12. Ray Hyde Avatar

    “So, the loan is a bit less than an arm’s length contract.”

    Good point, well taken.

    Now go back and look at the history of it. It do=idn’t get that way by accident. When we have such regs it is usually because vendors over extended thmeselves in search of power and profit.

    Bank thugs who were little better than loan sharks insisting on 120% percent risk coverage brought these regulations on themselves, just as egregious labor relations brought on the labor unions.


  13. Reading about how the FDIC is dealing with Indy-Macs loans – 50% of which are ARMS.

    They look at the income levels of the mortgage holders and determine how much they can pay per month – and then they send a letter – proposing that amount.

    Some of the loans are extended to 40 years.

    this is not unlike a 50-year old signing up for a 30 year mortgage… the likelihood that the home will be sold before the mortgage is fully paid off but that it will have achieved a positive equity balance also.

    It ain’t going to work for everyone in every circumstance.

    Some folks will still not want to be on the hook for a home worth 1/2 of what they paid for it even if they are given easier payment terms.

    However.. notice.. that Indy-Mac is doing this by income level – not the size or the location of the house.

    Wrong-sized houses in the wrong-location get the same terms as ones that are right-sized in the right locations.. which to date.., I’m not even sure we know the criteria for classifying said homes,.

  14. Anonymous Avatar

    Even Suze Orman says the best thins for the banks to do is renegotiate, or short sale. Otherwise the smart thing for the owner to do is go to foreclosure.

    Whether a short sale or foreclosure the owner is walking away with nothing, and the bank has to resell anyway.

    Best thing to do is renegotiate. Maybe taking a claim on future appreciation.

    Otherwise, there are no winners.


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