Author Archives: Bone Fish

Gold Likely To Soon Be Lifted By Rising De-Dollarization Surge

Summary:
  • What the gold buying strategies of major countries have in common is a desire to escape from dollar hegemony and the imposition of dollar-based sanctions.
  • The practical implication for gold investors is a firm floor under gold prices since these players can be relied upon to buy any dips. Downside is limited.
  • The technical charts are starting to sing the same tune with lyrics such as “Reverse Head & Shoulders”, “Cup & Handle” and “Bullish Ascending Triangle”.
  • All of this leaves us currently at critical overhead resistance levels, which if broken will likely take gold denominated in US dollar towards previous highs.

The reaction to the “Weaponization” of the US dollar via US sanctions has accelerated the ongoing global de-dollarization efforts. We outlined the rapidly unfolding developments earlier this year in our 151 page Annual Thesis paper entitled, De-Dollarization. Documented de-dollarization efforts are now underway in China, Russia, Venezuela, Iran, India, Turkey, Syria, Qatar, Pakistan, Lebanon, Libya, Egypt, Philippines and more.

Situational Analysis

The real power of the dollar is its relationship with sanctions programs. Legislation such as the International Emergency Economic Powers Act, The Trading With the Enemy Act and The Patriot Act have allowed Washington to weaponize payment flows. The proposed Defending Elections From Threats by Establishing Redlines Act and Defending American Security From Kremlin Aggression Act would extend that armory.

When combined with access it gained to data from Swift, the Society for Worldwide Interbank Financial Telecommunication’s global messaging system, the U.S. exerts unprecedented control over global economic activity. Sanctions target persons, entities, organizations, a regime or an entire country. Secondary curbs restrict foreign corporations, financial institutions and individuals from doing business with sanctioned entities. Any dollar payment flowing through a U.S. bank or the American payments system provides the necessary nexus for the U.S. to prosecute the offender or act against its American assets. This gives the nation extraterritorial reach over non-Americans trading with or financing a sanctioned party. The mere threat of prosecution can destabilize finances, trade and currency markets, effectively disrupting the activities of non-Americans.

The countries cited above are aggressively reacting to this. Gold is non-digital and does not move through electronic payments systems, so it is impossible for the U.S. to freeze on interdict.

Central banks are stocking up on gold. According to the World Gold Council, net buying by central banks reached 145.5 tons in the first quarter of 2019. That’s a 68% increase over last year. And it’s the most gold central banks have bought in the first quarter since 2013.

High Probability Market Ramifications

Soon both the buying of gold by major players such as Russia, China, India, Iran and Turkey, along with an emerging gold backed cryptocurrency for international settlements, will take gold towards testing prior 2011 highs.

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Major investors such as Paul Tudor Jones recently went on record as saying:

“The best trade is going to be gold. If I have to pick my favorite for the next 12-24 months it probably would be gold. I think gold goes beyond $1,400… it goes to $1,700 rather quickly. It has everything going for it in a world where rates are conceivably going to zero in the United States.”

“Remember we’ve had 75 years of expanding globalization and trade, and we built the machine around the believe that’s the way the world’s going to be. Now all of a sudden it’s stopped, and we are reversing that. When you break something like that, the consequences won’t be seen at first, it might be seen one year, two years, three years later. That would make one think that it’s possible that we go into a recession. That would make one think that rates in the US go back toward the zero bound and in the course of that situation, gold is going to scream.

Of course, we have heard this sort of talk ever since gold hit its prior high in 2011.

Technical Support

However, this time the technical charts are starting to sing the same tune with lyrics such as “Reverse Head & Shoulders”, “Cup & Handle” and “Bullish Ascending Triangle”.

All of this leaves us currently at critical overhead resistance levels, which if broken will likely take gold denominated in US dollar towards previous highs.

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What the gold buying strategies of Russia, China, India, Iran, Turkey et al. have in common is a desire to escape from dollar hegemony and the imposition of dollar-based sanctions by the U.S. The practical implication for gold investors is a firm floor under gold prices since these players can be relied upon to buy any dips.

Downside Is Limited – Upside Is Good

According to James Rickards:

The primary factor that has been keeping a lid on gold prices is the strong dollar. The dollar itself has been propped up by the Fed’s policy of raising interest rates and reducing money supply, so-called “quantitative tightening” or QT. These tight money policies have amplified disinflationary trends and pushed the Fed further away from its 2% inflation goal.

However, the Fed reversed course on rate hikes last December and has announced it will end QT next September. These actions will make gold more attractive to dollar investors and lead to a dollar devaluation when measured in gold.

The price of gold in euros, yen and yuan could go even higher since the ECB, Bank of Japan and People’s Bank of China will still be trying to devalue against the dollar as part of the ongoing currency wars. The only way all major currencies can devalue at the same time is against gold, since they cannot simultaneously devalue against each other.

A situation in which there is a solid floor on the dollar price of gold and a need to devalue the dollar means only one thing – higher dollar prices for gold. A breakout to the upside is the next move for gold.


Source: by Gordon Long | Seeking Alpha

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Hunting For Ranches Like Penthouses Means Perks, Or Forget It

Source: T. Boone Pickens Family Office

(Bloomberg) — Buyers looking for the perfect luxury ranch, that billionaire’s take on American rural life, may have to hold out to get what they want.

Whether it’s sky-high in New York or in the Big Sky country of Montana, high-end properties seem to be hitting a soft patch: they’re harder to sell unless they come with an exclusivity where price matter less. But that means paying a premium for that perfect combination: from mountain views at sunset to proximity to well-stocked towns to wildlife or the cachet of neighbors.

While six of 38 ranches listed for sale at more than $10 million have been marked down in the past 90 days, there’s a limited supply of properties that cover the full range of features, according to Billings, Montana-based broker Hall and Hall.

“When you get all of those things working together, if you really want that, you have to pay up if it comes available,” said Hall and Hall managing director B Elfland, who goes by his first-name initial without a period.

That has some sellers betting that bigger is better. Morton Fleischer, chairman and co-founder of Store Capital Corp., is marketing his Arizona and Montana ranches together for $50 million. One selling point, he said by phone, is the millions poured into the area by GoDaddy Inc.’s billionaire founder Bob Parsons.

Private Jet, Horses

“If I was younger, I wouldn’t sell that ranch,” Fleischer, 82, said of his Scottsdale home. “It’s a good investment for someone.”

“I got out of the pressure cooker and could get on my horses,” he said. “Perhaps someone running a hedge fund who’s in their 40s and wants to live a lifestyle out west and has enough money to have a jet plane to get back and forth could do the same.’’

Nearly doubling the price to attract a buyer may seem counterintuitive. Take West Creek Ranch in Colorado, with no buyer since John Hendricks listed it for $149 million in 2017. Now the Discovery Channel founder is combining the offer with his guest resort and car museum down the road for $279 million, according to Sotheby’s International Realty.

Also on the market in Colorado for $46 million is Henry Kravis’s Westlands Ranch. Kravis has a net worth of $6.2 billion, according to the Bloomberg Billionaires index. Private-equity executive Charlie Gallagher is asking $36 million for his Elk Island Ranch.

Exclusive Market

That’s a far cry from what NFL and Premier League team owner Stan Kroenke paid in 2016 when he bought the W.T. Waggoner Estate Ranch in Texas listed for $725 million, which is bigger than New York city and Los Angeles combined. Kroenke has a net worth of $8 billion, according to the Bloomberg Billionaires index.

In Montana, “In each 2016 and 2017, there were only four sales $10 million and above,’’ said Hall and Hall broker David Johnson. “The next year, there were eight. It wasn’t a double in demand. It was a double in supply.”

Hall and Hall sold 16 ranches for more than $10 million in 2018, compared to six so far in 2019. While that may suggest a slowdown, ranch sales can’t be compared to the frenzy of big cities.

“Our market doesn’t have the dramatic swings that New York and California residential markets have,” said Elfland.

Owning a rural slice of heaven runs deep in the psyche of even the biggest victors of capitalism. Shining examples of the American Dream are the country’s biggest individual landowners, John Malone, who has a net worth of $8.6 billion, according to the Bloomberg Billionaires index, and Ted Turner, founder of CNN.

Life Timing

Buying a ranch can be a matter of timing, of having a job on autopilot and kids out of the house who want to visit.

“The clock is running, so if they’re going to enjoy it, it’s an incentive to pay a premium,” said Johnson.

When the kids stop visiting, it can be sad.

“We sold one last year that had been on the market for 10 years,’’ he said. “The price had come down by two thirds to where the buyer would pick it up.’’

Source: by Hailey Waller | Bloomberg News

Bitcoin Soars Above $9K, And This Time Is Different: “It’s Mostly Institutions Now”

The recent surge in bitcoin, and the entire cryptocurrency space accelerated over the weekend, coinciding with the latest massive protest in Hong Kong which may be among the catalysts for the aggressive buying, and sending bitcoin above $9,000 for the first time since May 10, 2018, a price that is almost triple where bitcoin traded at the start of the year, making it the best performing major asset class of 2019, with a market cap of $163 billion.

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And as the price of bitcoin surge, naturally so does its volatility, which has quadrupled from its near all-time lows hit at the start of April to 95 for the 30-day historical vol, in the process making it once again a favorite of traders desperate for highly-volatile assets.

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It’s not just Bitcoin’s volatility that has returned: so have volumes as what appears to be the latest reflation of the bitcoin bubble is drawing in investors from around the globe, hoping to make a quick profit. Only this time there is one major difference as JPMorgan explains.

According to JPMorgan’s Nikolaos Panigirtzoglou writes, there has been a sharp increase in reported trading volumes of Bitcoin and other cryptocurrencies  over the past few months, with Bitcoin trading volumes on crypto exchanges increasing to $445bn in April from a 1Q19 average of $220bn per month, and in May volumes increased further to around $725bn. This compares to previous peak volumes in Dec17 and Jan18 of $420bn. Curiously, for the three largest three cryptocurrencies by market capitalization, Bitcoin, Ethereum and Ripple, the combined volumes for May stand at above $1tr compared to a previous peak in Jan18 of around $685bn, suggesting that all else equal, there is an even greater interest in the crypto space .

Meanwhile, this development comes at a time when the market value of outstanding bitcoins is around half of its Dec17 high, and the combined market value of all crypto currencies is around a third of its previous high. While a substantial part of the increase in volumes in dollar terms reflects an increase in the market value of bitcoin and other crypto currencies, the volumes in bitcoin terms are also significantly above their previous peaks.

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But there is more here than meets the eye.

As JPM explains, taken at face value, this volume surge would suggest a dramatic increase in cryptocurrency activity. But over the past year or so, concerns have increasingly been expressed over how authentic the reported volumes really are. To wit:

…  recently published work by Bitwise, a cryptocurrency asset manager, to the SEC as part of an application for a bitcoin ETF suggests that bitcoin trading volumes on many cryptocurrency exchanges are significantly overstated by ‘fake’ trading, e.g. exchanges reporting volume of trades that never took place or via wash trades, and that genuine trading volumes could be around 5% of the reported total. Similarly, the Blockchain Transparency Institute publish monthly market surveillance reports, and estimated in April 2019 that less than 1% of reported volume for some exchanges represented real trades.

If these estimates of the proportion of real trades are correct, i.e. “that only around 5% of trading is genuine,” that would imply that the genuine volumes of Bitcoin trading on cryptocurrency exchanges in May were around $36bn, rather than $725bn.

If this sharp revision in actual trading volumes is accurate, a critical implication, beyond the fact that the actual market size is markedly lower than reported numbers would suggest, is that as JPM notes, “the importance of the listed futures market has been significantly understated.” According to the Bitwise report, traded futures are credited as an important development in allowing short exposures that enabled arbitrageurs in properly engaging in arbitrage (and also resulted in a massive squeeze at the start of April that sent bitcoin breaking out again, and which we discussed previously), and that the futures share of spot bitcoin volumes increased sharply in April/May.

Indeed, when looking at aggregate volumes on both the CME and CBOE futures contracts (shown below), JPM estimates around $12bn of traded volume on these two futures exchanges in May. Indeed, the $12bn of bitcoin futures trading volume in May also represented a significant increase on the April’s $5.5bn and a 1Q19 monthly average of $1.8bn, suggesting that some rise in trading volume was genuine, even if the total volumes on cryptocurrency exchanges was  likely vastly overstated.

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The conclusion to this overstatement of trading volumes by cryptocurrency exchanges, and by implication theunderstatement of the importance of listed futures, suggests that in the two years since bitcoin’s last major spike in 2017 the “market structure has likely changed considerably… with a greater influence from institutional investors.”

This also means that whereas bitcoin’s historic surge to its all time high of $20,000 in December 2017 was largely retail driven, and thus extremely fickle as the subsequent crash showed, this time it is largely the result of institutional buying, which is far more stable and far less prone to sudden, painful shifts in sentiment and volatility.

In other words, “this time may be different” for bitcoin in a good way: because with institutions now piling into the crypto space, this is precisely the investor group that bitcoin bulls wanted from the beginning as it creates a far more stable price base for the future. Add to this the potential return of retail buying from east Asian (or even US) retail clients, and it is possible that what we predicted in early April, namely that the 3rd bitcoin bubble is starting…

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… may soon be confirmed, and that the next bitcoin bubble peak will be somewhere between $60,000 and $100,000.

Source: ZeroHedge

Business Conditions Are At Their Worst Since 2008 Financial Crisis, Says Morgan Stanley

The business environment is deteriorating — fast.

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That is according to a gauge of business conditions tracked by Morgan Stanley, which said in a recent note that its proprietary Business Conditions Index, or MSBCI, fell 32 points last month, marking its sharpest collapse since the metric was formulated. The gauge touched its lowest point since the 2007-08 financial crisis. A separate composite business-condition index also fell by the most since 2008 and hit its lowest level since February of 2016.

Morgan Stanley’s report comes as stocks in June have mostly drifted higher in turbulent trading, with the Nasdaq Composite Index COMP, -0.52% entering correction territory on June 3, but gaining 6.3% since that point as of Friday morning trade, according to FactSet data.

Swirling anxiety around the U.S.’s trade relationship with China and other major international counterparts has hurt the confidence of business leaders because the unresolved tariff battles have made it difficult for corporate chieftains to develop business strategies and forced many companies to alter their supply chains.

Morgan Stanley said that its index also reflects an apparent slowdown in domestic jobs growth. Economists for the report, led by Ellen Zentner, wrote that the fall in business conditions is “consistent with the slowdown in gross hirings reflected in the latest employment report for May, and raising the risk that weakness in labor demand persists into next month’s report.”

Indeed, the U.S. created just 75,000 new jobs in May, well off consensus forecast for some 185,000 jobs created on the month, and potentially marking a significant change of momentum in what has been a pillar of strength in the domestic economy.

Morgan Stanley said that taken with other metrics that drill down deeper into financial conditions, “these indicators point to business expansion coming to a near halt in June.”

On Friday, the Dow Jones Industrial Average DJIA, -0.07% the S&P 500 index SPX, -0.16% and the Nasdaq Composite Index COMP, -0.52% were headed lower as Broadcom AVGO, -5.57% lowered its guidance for the rest of the year after reporting second-quarter earnings Thursday afternoon. Other chip-sector stocks were lower on the news as well.

Source: by Mark Decambre| Market Watch

Ivanka Trump and Jared Kushner Report $135 Million in 2018 Income

In their second year of government service, Ivanka Trump and Jared Kushner reported income from their companies and investments of as much as $135 million, according to their annual financial disclosure reports made public on Friday.

Ivanka Trump and Jared Kushner reported an income range of $29 million to $135 million for 2018, down from a range of $82 million to $222 million in 2017.CreditCreditToby Melville/Agence France-Presse — Getty Images

All told, the couple’s real estate holdings and other investments were worth as much as $786 million, down slightly from 2017. Their total annual income was between $29 million and $135 million, a range that was lower than what they reported in 2017.

Mr. Kushner’s partial ownership of his family-run real estate business, Kushner Companies, has drawn criticism from ethics experts, particularly as the firm has solicited investments from foreign sources, including in the Middle East, where Mr. Kushner is a top White House liaison.

Although Mr. Kushner held on to the bulk of his stake in the company, which he once ran, he sold some of his assets to a trust controlled by his mother.

One of those divested assets was his share in Kushner Companies’ flagship property at 666 Fifth Avenue in Manhattan. Last year, Kushner Companies struck a deal with Brookfield Asset Management for a roughly $1 billion bailout of the troubled property. Brookfield’s property arm is partly owned by the Qatari government.

Ms. Trump reported 2018 income totaling between $6.7 million and $10.7 million. She has resigned from her leadership roles at her fashion business and her family’s real estate and branding company since her father became president, but she retained stakes in some of those businesses.

Ms. Trump earned just under $4 million from the Trump International Hotel in Washington, which has become a magnet for visiting executives and foreign officials with interests before the federal government.

Ms. Trump reported another portion of an advance from Penguin Random House, for her book “Women Who Work,” this time totaling $263,500. She also reported donating it to the Ivanka M. Trump Charitable Fund. In 2017, she received about $289,000 from that advance.

The couple’s total income was between $29 million and $135 million in 2018, compared with a range of $82 million to $222 million in 2017.

The drop was due, in part, to their divestment of several assets that previously generated tens of millions of dollars in income for the couple, including the stake in 666 Fifth Avenue.

Last year, The New York Times reported that Mr. Kushner apparently had paid almost no federal income taxes for several years running.

Source: by Jesse Drucker and Agustin Armendariz | The New York Times

Fed Up Homeowner Sticks It To His HOA And Gets The Most Epic Revenge

Have you ever had a problem with a Homeowners Association? After having enough of his HOA, this homeowner took matters into his own hands.

It may come as no surprise, but Homeowners Associations have a bit of a bad reputation. While there are good HOAs out in the wild, you typically only read about the worst offenders, and it’s usually for a good reason.

Just ask Alec, whose friend, Hal, inherited his grandparents’ house in a neighborhood with a tenacious HOA helmed by a group of power hungry, greedy busy bodies who made it their mission in life to get the entire neighborhood under their control.

When Hal first moved into the house his late grandparents’ built and lived in for decades, the HOA assumed they could take advantage of a seemingly young and inexperienced first-time homeowner.

But the group would soon find out that not only did Hal not have any intention of joining their association, he also wasn’t going to go down without a fight.

So buckle up and prepare for one wild ride…

There Was The First Encounter

It didn’t take long for the HOA board members to show up and start pestering Hal with lists of demands, rules, and random searches.

Shortly after he moved in, Hal received a knock at the door, and when he opened it, he was greeted by a group of the HOA members shoving papers in his face, demanding he sign them right away.

If that wasn’t bad enough, one of the board members demanded that he be allowed entry into Hal’s garage to see “if everything there is in order.”

This essentially meant that the HOA had the “right to do this bi-weekly,” and denying any of the members access would result in a fine.

Hall was appalled by the “audacity” of the HOA for thinking that they had any right forcefully entering people’s homes to randomly dig through their property.

Having enough of the HOA, Hal promptly kicked them out of his garage and off his property, refusing to sign the membership papers in the process.

It seemed like the HOA was banking on the idea that since Hal was young and naive, he would probably back down.

Little did they know, Hal’s grandfather had written his grandson a letter detailing the years of abuse by the HOA, preparing him for the fight that would be coming his way.

“It turns out they were wrong on both accounts, since his grandpa left him a letter pointing out what his rights exactly were, what they would possibly try, what else they might try, how hard it is to fight what, when he needs to react and how, so he prepared him really well for this,” Alec wrote.

Then Came The List Of Demands

With the HOA gone, Hal looked through the HOAs list of guidelines, which sounded more like a list of demands from an occupying force than a neighborhood association.

“They had, for example, a right to visit your home bi-weekly to check things like that you do not use the garage for storage or don’t have gasoline in containers in your garage,” Alec wrote.

“You had to mow your lawn every week, snow had to be shoveled every two hours when it snowed (starting at 5 o’clock in the morning).

You could not park more than one car on your grounds (except inside the garage).”

Three days went by and Hal still hadn’t signed the contract, so the group came back by like some geriatric mafia trying to get him to comply with their rules.

When the group said they wanted to check Hal’s garage again, he said no and kicked them off his property.

“To them, that meant war,” Alec wrote.

Within a week of the confrontation, Hal received received fines upwards of $1,000 for simply not allowing them to enter his home.

Hal was neither impressed nor intimidated and used the “stupid letters to help fire his grill.”

But this only fanned the flames of discontent…

But Then It Went Too Far

Hal went on with his life, but would you be shocked to hear that the HOA board wasn’t so willing to forgive and forget?

Because they did neither.

One day, Hal came home to find one of the HOA members had broken into his his garage, writing down things on a notepad.

It didn’t take long for Hal to realize the zealous HOA board was willing to take any step necessary to keep tabs on him, even if that meant using bolt cutters to bust up a lock on the garage door.

Hal quickly called out the intruder, but he soon realized that the intrusion was just part of the HOA’s plan.

As he was trying to figure out what the man was doing breaking into his home and prying through his personal belongings, he heard what sounded like demolition of some sort coming from his front yard.

In front of his house stood two oak trees that his grandparent’s planted with seeds from their home country when they first built the home all those years ago, and now a tree removal company was in the process of tearing them down.

Those trees had stood there for decades, serving as a reminder of where they had come from, a reminder of their heritage, and a reminder of their love.

Hal stood there in disbelief as something that had meant so much to his family was being ripped away.

“They had called a professional crew for this,” Alec wrote.

“One was already so damaged (basically all twigs were already down, it was just a stump that was left).

The other one they had just started with.”

It only got worse when Hal was informed that the HOA told the crew that Alec had given them permission to cut down the trees because they were in violation of HOA rules.

But what kind of rule would give an HOA member the right to walk onto someone’s property and cut down decades-old trees?

It All Came Crashing Down

Hal would find out that there was a rule (which he didn’t sign off on) where if a garden produces more than a 40-liter sack of leaves within two weeks, the garden owner needs to take down the “offending trees” within two weeks of the violation.

Having had enough of the HOA, its members, and its rules, Hal decided it was time to get back at the people who had made his first weeks of being a homeowner a living nightmare.

He struck up a deal with the tree crew where he would overlook the trespassing if they would agree to be witnesses if he filed charges against the HOA.

Having the crew’s word that they would back him up, Hal did what he had to do.

“Then he called the cops on the board members for trespassing, breaking and entering (they actually had used a bolt cutter to get into the garage; he had it always closed with a big bike lock after they had tried to get in it twice before),” Alec wrote.

And believe it or not, this thing actually went to trial…

That’s When This Thing Went To Court And Got A Lot More Real

Alec didn’t provide details on the ins and outs of the criminal trial, but he said it must have been “glorious,” because not only did the HOA have to repay Hal for the broken lock and damage to the trees (which ended up being close to $50,000), they also fought the charges which cost them another $15,000 in legal fees.

“All in all, this trial must have cost them over $120,000,” Alec recalled.

But it didn’t end there. Not having enough of his revenge, Hal decided to take the HOA and its members to civil court where he sued them for “emotional damage.”

You might be asking, “but what’s this business about ’emotional damage?'”

Well, Hal laid it on as thick as he could when he was pleading his case.

“He told them how much these trees meant to him, since his grandparents had planted them, with seeds from the home country,” Alec wrote.

“Plus, he felt threatened by the HOA, and can hardly sleep because he always fears they try to get into his house.”

Neither of which were lies, and so the court bought Hal’s story and ordered the HOA to pay $500,000 plus the cost of a state of the art home alarm system so he could “feel safe again in his own home.”

But that wasn’t all…

What It Cost

The HOA’s actions ended up costing the board around $750,000 before everything was said and done, but it would only get worse for some of the board members.

“They had to file for bankruptcy and get a person to check the books so my friend would get his money,” Alec wrote.

“But the best for last… The mediator found out that these three pricks had been defrauding the HOA for well over 10 years and were giving out as many fines as they possibly could so they could use it to bolster their income.”

Through their research, the mediator discovered that the HOA methodically tried to get rid of the people that they did not want there, and then they would buy their houses on the cheap.

The HOA would use the fines from their ridiculous rules to create enough money for the down payment on these homes.

With that being said, everyone wanted a piece of these crooks.

And that’s not even the best part…

Now That They’re Gone…

Due to the astronomical settlement, the three board members who had been waging a private war on Hal were left with no choice but to sell their homes in order to pay Hal’s settlement.

And with the three leaders of the HOA out of the neighborhood, Hal became somewhat of a local hero after freeing his neighbors from the abuse and extortion of the HOA board members.

“You see, most people never wanted the HOA in the first place, but the board member practically forced them to sign the contract, claiming it would not be optional, and if they did not sign before moving in it would be a $500 fine,” Alec recalled.

“Only six of the 50 members actually wanted this HOA (and people think they did get part of the action, as reward for spying on their neighbors to find violations).”

With his newfound fame, Hal found himself constantly being invited over to his neighbors’ for parties and BBQ’s while the former HOA board became nothing but a distant memory.

A Lesson To Be Learned

And so that concludes our story about the young homeowner who had enough of a tyrannical HOA and its board members and decided to get his own form of revenge.

It wasn’t pretty and it wasn’t sweet, but Hal did what had to be done. He couldn’t stand on the sidelines and watch as the group of extortionists and petty crooks continued to reign over a neighborhood who wanted no part in being subjected to the rules of a neighborhood association.

Hal did what so many before him had failed to do…

he stood up, he made a stand, and he got his voice heard.

While the HOA’s former leaders are selling their homes, draining their bank accounts, and looking for any possible way to pay back one of their victims, Hal and the rest of his neighbors are enjoying the sweet taste of freedom and some of that BBQ his new friends keep offering him.

Source: by Philip Sledge | OOLA

USA Today Investigates Reverse Mortgage Foreclosures, Evictions

A recent in-depth investigation on foreclosure actions related to reverse mortgages published late Tuesday by USA Today paints a bleak picture surrounding the activities and practices of the reverse mortgage industry, but also relates some questionable and out-of-date information in key areas highlighted by the investigation, according to industry participants who spoke with RMD.

The investigative piece was the first in a new series of articles released by the outlet, touching on subjects including “questions to ask before getting a reverse mortgage,” ways to “fix” the reverse mortgage program, and details on how reverse mortgages work.

Referring to a wave of reverse mortgage foreclosures that predominantly affected urban African-American neighborhoods as a “stealth aftershock of the Great Recession,” the investigative article focuses on nearly 100,000 foreclosed reverse mortgages as having “failed,” and affecting the financial futures of the borrowers, negatively impacting the property values in the neighborhoods that surround the foreclosed properties.

In a related article, the publication details the various sources from which it drew information and the methodologies used to reach their conclusions, including some of the challenges involved in such an analysis.

The article authors detailed the ways in which they went about their information gathering, which included inquiries of the Department of Housing and Urban Development (HUD). However, some of the interpretations based on that data are largely out of date, according to sources who spoke with RMD about the coverage.

Non-borrowing spouses

A major component of the USA Today investigation revolved around a non-borrowing spouse who was taken off of the liened property’s title in order to allow for the couple’s access to a higher level of proceeds in 2010. When the borrowing husband passed away in 2016, the lender instituted a foreclosure action that has resulted in the non-borrowing wife having to vacate the property.

“Even when both husband and wife are old enough to qualify, reverse mortgage lenders often advise them to remove the younger spouse from loans and titles,” the article reads. The article does not address protections implemented in 2015 to address non-borrowing spouse issues.

In 2015, the Federal Housing Administration (FHA) released a series of guidelines that were designed to strengthen protection for non-borrowing spouses in reverse mortgage transactions. In the revised guidelines, lenders were allowed to defer foreclosure for certain eligible non-borrowing spouses for HECM case numbers assigned before or after August 4, 2014.

Lenders are also allowed to proceed with submitting claims on HECMs with eligible surviving non-borrowing spouses by assigning the affected HECM to HUD upon the death of the last surviving borrower, where the HECM would not otherwise be assignable to FHA as part of a Mortgagee Optional Election Assignment (MOE).

A lender may also proceed by allowing claim payment following the sale of the property by heirs or the borrower’s estate, or by foreclosing in accordance with the terms of the mortgage and filing an insurance claim under the FHA insurance contract as endorsed.

Foreclosure vs. eviction

“A foreclosure is a failure, no matter the trigger,” said one of the article’s sources.

Multiple sources who wished to remain unnamed told RMD that positioning a foreclosure as a “failure” of the reverse mortgage is itself misleading particularly when taking a borrower’s specific circumstances into account, and that the article appears to, at times, conflate the terms “foreclosure” and “eviction.” One of the USA Today article’s own sources also added a perspective on a perceived incongruity between the use of the terms.

“There is a difference between foreclosure and eviction that isn’t really explained in the article,” said Dr. Stephanie Moulton, associate professor of public policy at Ohio State University in an email to RMD. “We would need to know the proportion of foreclosed loans that ended because of death of the borrower, versus other reasons for being called due and payable (including tax and insurance default).”

HECM evolution since the Great Recession

One of the factual issues underlying some of the ideas of the article is that it presents older problems of the HECM program in a modern context, without addressing many of the most relevant changes that have been made to the program in the years since many of the profiled loans were originated, particularly during a volatile period for the American housing market: the Great Recession.

This was observed by both industry participants, as well as Moulton.

“The other thing to keep in mind about this particular time period is the collapse of home values underlying HECMs that exacerbated crossover risk—which would increase the rate of both types of foreclosures,” Moulton said. “And, this was prior to many of the changes that have been made to protect borrowers and shore up the program, including limits on upfront draws, second appraisal rules, and financial assessment of borrowers.”

This includes the aforementioned protections instituted for non-borrowing spouses, in addition to changes including the addition of a financial assessment (FA) regulation designed to reduce persistent defaults, especially those related to tax-and-insurance defaults that regularly afflicted the HECM program in years prior to its implementation. These newer protections received only cursory mention in the USA Today article.

Industry response

The National Reverse Mortgage Lenders Association (NRMLA) is preparing an industry response to the ideas and conclusions presented by USA Today, according to a statement made to RMD.

“A reverse mortgage is one potential and essential component for many Americans seeking to fund retirement,” said Steve Irwin, executive vice president of NRMLA in a call with RMD. “NRMLA and its members are committed to working with all stakeholders to continually improve the HECM program. NRMLA is developing a response to the piece.”

Read the full investigative article at USA Today.

Source: Reverse Mortgage Daily