Herb Greenberg has a lengthy repost of an email from a mortgage industry veteran who says that the troubles in the mortgage industry are only beginning:

Sub-prime aren’t the only kind of loans imploding. Second mortgages, hybrid intermediate-term ARMS, and the soon-to-be infamous Pay Option ARM are also feeling substantial pressure. The latter three loan types mostly were considered ‘prime’ so they are being overlooked, but will haunt the financial markets for years to come. Versions of these loans were made available to sub-prime borrowers of course, but the vast majority were considered ‘prime’ or Alt-A. The caveat is that the differentiation between Prime and ALT-A got smaller and smaller over the years until finally in late 2005/2006 there was virtually no difference in program type or rate.

This is definitely one of those “read the whole post” items.

The vicious cycle that has driven the housing industry is reversing upon itself. It probably started with lower lending standards. More people could get approved for mortgages, so demand for housing rose. That caused house prices to go up, which created a market for more exotic mortgages that allowed people to buy houses without putting down money or eating the monthly payment on a standard fixed-rate mortgage. These exotic mortgages enabled people to buy more house than they could with a traditional fixed rate mortgage, and enabled people with less money to buy houses in expensive areas. That in turn drove demand and caused houses to rise even more. The catch was that as long as houses were appreciating, people could keep refinancing to keep the interest rates on their loans from resetting.

Now we’re seeing the inevitable reversal. When houses stopped appreciating so rapidly, people started seeing their loans reset to rates they couldn’t afford in the first place, and now they’re seeing foreclosures. That hurts the banks, who in turn tighten up their lending standards, and that results in less homes getting sold, and thus less appreciation and even drops in home prices in some areas. The cycle that caused home prices to spiral upward sure looks like it’s going to cause them to spiral downward. Here’s what Greenberg’s correspondent says:

One final thought. How can any of this get repaired unless home values stabilize? And how will that happen? In Northern California, a household income of $90,000 per year could legitimately pay the minimum monthly payment on an Option ARM on a million home for the past several years. Most Option ARMs allowed zero to 5% down. Therefore, given the average income of the Bay Area, most families could buy that million dollar home. A home seller had a vast pool of available buyers.

Now, with all the exotic programs gone, a household income of $175,000 is needed to buy that same home, which is about 10% of the Bay Area households. And, inventories are up 500%. So, in a nutshell we have 90% fewer qualified buyers for five-times the number of homes. To get housing moving again in Northern California, either all the exotic programs must come back, everyone must get a 100% raise or home prices have to fall 50%. None, except the last sound remotely possible.

I think we’re in for a lot more pain.

And I don’t understand how people with a household income of $175,000 can afford a million dollar home. If you buy a million dollar home and put only 5% down, your payments on a 30 year mortgage at 7% are about $6,300 a month. Mortgage lenders will tell you that your mortgage payment shouldn’t be more than 35% of your take home income, which means for a $6,300 payment you need to be taking home roughly $18,000 a month. That means you need to be taking home $216,000 annually, after taxes, health insurance, and all the other stuff that gets deducted from your paycheck.

Looks like William Saletan is still doing his thing at Slate. I notice he’s off the topic of IQ and race.

Google has struck a deal with AOL that allowed them to add AIM support to Gmail. You can now access AIM from the Gmail Web site (if you’re running the new version of Gmail). I was hoping the announcement meant interoperability between the two networks, but that goal seems more distant all the time.

William Saletan is Slate’s resident science writer, and his long time hobby has been chiding liberals for what he’d probably call elitism. He’s not a conservative writer, rather he’s one of these people who seeks to demonstrate his wisdom by widening his perspective and trying to argue that people on all sides commit the same sins. He’s spent a lot of time writing about abortion in exactly this way.

A couple of weeks ago, Saletan started a new series discussing the idea that there really are hereditary differences in IQ that correlate with race and that liberals who refuse to accept it are just like creationists, dismissing science that doesn’t fit their belief system. Never mind that his comparison was completely fallacious. There is plenty of legitimate scientific research out there which contradicts his claims on IQ and race. His bigger problem is that the “facts” on which he relies are the product of junk science being pushed by white supremacists.

Today Slate runs a piece by Stephen Metcalf which utterly demolishes Saletan’s claims, and exposes the studies he cites as the pseudoscientific, racist tracts that they are. I don’t think that Saletan needs to be hung in the public square, but his eagerness to service his ongoing conceit trumped his duty to investigate and report the facts, and it’s time for him to go.

Looks like publications that review games play fast and loose with the ethical standards espoused (if not embodied) by most journalists. ArsTechnica explains how game companies manipulate their press coverage:

While gaming may look like a huge, scary industry from the outside, it can be a surprisingly cozy place once you know that world a bit. It’s easy to make enemies, and since public relations staffers change on an almost monthly basis, you never know who is holding a grudge at what company. If you anger one publisher or the wrong PR person, you could find yourself out of luck for information, interviews, or even invitations to trade shows for a long time to come. For sites that need fresh, exclusive news to function, it’s the kiss of death. Even without lording advertising dollars over your head, they know how to hurt you.

Of course, publishers also want to help you. Microsoft doesn’t send people gigantic bags filled with systems, games, and hardware because they really like you. They want to get products reviewed, and they’d also like you to think of Microsoft as the cool company that gives you free stuff. One gaming company even sent a few members of the gaming press onto a zero-g flight to promote its game. The trip would have cost thousands of dollars if purchased, and one writer who went gushed about how the gaming company made his dreams come true. Again, it’s not paying for a review or positive coverage, it’s just a very expensive gift. When you hear writers say things like “they cannot thank so-and-so enough” for a gift like that, you know it’s a lie. There is a very specific way to thank them. That is why the money was spent.

Let’s say your company was hiring new developers, and the HR department was pre-screening candidates before passing them off to the technical team for interviews. Assuming the résumé passes muster, what’s the one question you’d have the HR person ask to find out whether a developer should move on to the next step in the process? The HR person isn’t technical, so they need to be able to ask the question and evaluate the answer.

I have some ideas, but I’m going to post them after I see what you guys think.

All of the big papers today report that the most recent National Intelligence Estimate says that Iran froze its nuclear weapons program in 2003. The assessment is the consensus view of 16 US intelligence agencies. I don’t think that the war party clamoring for an attack on Iran will be discouraged at all by this news.

Fred Kaplan says this means that the US is not going to war with Iran while President Bush is in office.

I’m not one to gloat, but a month ago I wrote this about what I’m looking for in our next President:

Someone who is willing to engage with Iran and is willing to seek a solution that serves both our national interest and theirs. I don’t believe we live in a world where everything good for Iran is bad for America and vice versa.

Here’s what the National Intelligence Estimate says:

This, in turn, suggests that some combination of threats of intensified international scrutiny and pressure, along with opportunities for Iran to achieve its security, prestige, and goals for regional influence in other ways, might—if perceived by Iran’s leaders as credible—prompt Tehran to extend the current halt to its nuclear weapons program.

Here’s a horror story from the BBC technology department:

The BBC’s infrastructure is shockingly outdated, having changed only by fractions over the past decade. Over-priced Sun Enterprise servers running Solaris and Apache provide the front-end layer. This is round-robin load balanced, there’s no management of session state, no load-based connection pool. The front-end servers proxy to the application layer, which is a handful of Solaris machines running Perl 5.6 – a language that was superseded with the release of Perl 5.8 over five and a half years ago. Part of the reason for this is the bizarre insistence that any native modules or anything that can call code of any kind must be removed from the standard libraries and replaced with a neutered version of that library by a Siemens engineer.

A huge portion of the development disasters that I encounter and read about are the result of having to shoehorn applications into infrastructure that just doesn’t quite work and that was imposed by people outside the team that’s building the application.

I recently encountered a project where the developers were not allowed to use any open source libraries at all, even JavaScript libraries. They were also required to use a specific implementation of the Java Server Faces standard. When they got a mandate to make their applications cross-browser compliant, they were looking at a huge development effort, mainly because they were handcuffed by technology choices that were externally imposed. (They wound up getting the policy on which libraries they were allowed to use loosened.)

Some analyst group should do a study estimating the amount of money spent each year coding around bad technology choices imposed by business partnerships and outsourcing. The inefficiencies probably account for 1/3 of the IT jobs world wide.

This one’s short. CNET fired Gamespot editor Jeff Gerstmann (a 10 year employee) because he wrote a bad review of a heavily advertised game. I never read CNET anyway, but now neither should anyone else. (via Daring Fireball)

Check out this blog post from Wired editor Chris Anderson. It doesn’t come as a surprise that all of the stuff you see on subscription offers from magazines is totally dishonest, but seeing it all laid out really is impressive.