40 replies to this topic

[U.F.O.]

It doesn't all at once. Much of it will end up as rental property until buyers are found. The homebuilders and associative industries will still be under a defcon alert until time catches up with housing stock. What this refi program does is greatly increase the chances that more borrowers will stay in their homes and not add to the housing supply. Not to mention that for refied borrowers lower notes mean more disposable income. U.F.O.

[zoropb]

It doesn't all at once. Much of it will end up as rental property until buyers are found. The homebuilders and associative industries will still be under a defcon alert until time catches up with housing stock. What this refi program does is greatly increase the chances that more borrowers will stay in their homes and not add to the housing supply. Not to mention that for refied borrowers lower notes mean more disposable income.

U.F.O.

Yep that is as rosy as it gets and that still does not put a floor on price until 5 months supply is hit. Take a look at RE history price bottoms when supply hits 5 months or less. No way around this. Well unless the FED buys all the homes. Only problem is the keys for the house will cost $1000 instead of $1. Same as secular bear markets do not make lows on +9 PEs said it in 2002 here at TT and that's why we are here again and we will continue down the road somewhere even if we rally 600 SPX points! another low will be seen until ultra cheap prices and no hope is left. Hey just ask a Japanese person lol.
If it wasn't for Mr bubbles RE atm it would have cleaned the system sooner now it is way worse.

U I know we both trade short term just shooting the breeze here lol.

Z

[IYB]

The biggest problem immediately is the very severe understaffing and resource shortages within the major mortgage lenders- and the severe bottleneck that is creating. A huge chuck of the industry evaporated in the credit crunch, and the relatively small number of lenders who survived did so by trimming staff and all infrastructure to the absolute bone, then hanging on by their fingernails. Offices closed, whole departments were laid off, etc. Wells Fargo is an absolute joke to work with right now, with incompetence, mismanagement, errors, problems, etc. But it is understandable under these circimstances. The surviving lenders are being bombarded with incredible refi volume- and we've seen only the tip of the iceburg compared to what will be the case when the Fed is fully engaged--which could be just hours/days away. They are gonna hafta gear up VERY, VERY quickly, but in spite of the pain and dislocations it'll all work out one way or another, I'm sure. Feast to famine to feast again in terms of loan volume per existing lender in 24 months- no middle ground in the lending industry. Might be some very real trading opps here, btw. Interesting times indeed....

Edited by IYB, 03 January 2009 - 07:16 PM.

[zoropb]

The biggest problem immediately is the very severe understaffing and resource shortages within the major mortgage lenders- and the severe bottleneck that is creating. A huge chuck of the industry evaporated in the credit crunch, and the relatively small number of lenders who survived did so by trimming staff and all infrastructure to the absolute bone, then hanging on by their fingernails. Offices closed, whole departments were laid off, etc. Wells Fargo is an absolute joke to work with right now, with incompetence, mismanagement, errors, problems, etc. But it is understandable under these circimstances.

The surviving lenders are being bombarded with incredible refi volume- and we've seen only the tip of the iceburg compared to what will be the case when the Fed is fully engaged--which could be just hours/days away.

They are gonna hafta gear up VERY, VERY quickly, but in spite of the pain and dislocations it'll all work out one way or another, I'm sure. Feast to famine to feast again in terms of loan volume per existing lender in 24 months- no middle ground in the lending industry. Might be some very real trading opps here, btw. Interesting times indeed....

Don a good buddy of mine that sold his mortgage biz in 2006 peak who now trades with me confirms what you just said. His sources say they are way backed up and they just re=hired a bunch of brokers. Scott if your reading this we can use your in put here with Mortgage stuff and all your sources.

Z

[U.F.O.]

It's gonna be a zoo IYB. z has some great insight into just how difficult it will be to stem the leak in housing prices. If rates get low enough some number of renters and 1st time buyers will dive into the market helping the demand side of the ledger. None of this is gonna be easy, but now we at least have a chance of coming out of this meatgrinder with our pelts intact.

U.F.O.

[pedro]

I'd like to interject a word of caution here though. Maybe perceptions can lead the way out, regardless of the underlying fundamentals. But even IF the Fed steps in and does as folks speculate they might, at the same time we will likely be seeing perhaps a million or more of folks (1%?) being laid off via announcements in the weeks ahead. So, I think it makes sense to construct a balance. On the one hand, we have improved cash flow prospects and some immediate cash flow gains coming from the restructuring of these ARMs. To defuse this timebomb before it adds to the carnage down the road mostly. How many families will benefit, and what are the net cash flow benefits, and when? I have no clue on the number of families (5-10m?) times a $300-400 per month (SWAG) savings. And are these net gains for 2009 or well out there into 2010 and 2011 and beyond? Now balance that against several million being tossed out of work in the weeks ahead. At $3000-5000/mo on average. 10x the potentially savings on a monthly mortgage coupon. Can this move do anything more than just plug another leak for awhile? Roughly speaking, only if refi's benefit more than 10x the number of folks who lose their jobs does this appear to offer the chance to turn this around. The real UNDERLYING problem is NOT the housing market. The real problem is a lack of growth in employment opportunities and waning real wage growth. And that's a structural problem of immense proportions.

[U.F.O.]

"The real problem is a lack of growth in employment opportunities and waning real wage growth. And that's a structural problem of immense proportions."

It's a question of cause/effect. The two problems you mention are effects that at the very least have been greatly exacerbated by the housing crisis. Improvements made regarding the underlying cause should start giving us relief from it's consequences. At least speeding up the road to recovery.

U.F.O.

Edited by U.F.O., 03 January 2009 - 08:00 PM.

[zoropb]

"The real problem is a lack of growth in employment opportunities and waning real wage growth. And that's a structural problem of immense proportions."

It's a question of cause/effect. The two problems you mention are effects that at the very least have been greatly exacerbated by the housing crisis. Improvements made regarding the underlying cause should start giving us relief from it's consequences. At least speeding up the road to recovery.

U.F.O.

No doubt U your correct. It is what kept the house of cards a float for 5 more years and it was the lighter fluid for the barbecue.
Until RE is back on track the economy goes south.
Z

[zman]

absolutely the best thread in a long time here..way to start it mark:) ufo and all the rest thanks for all your work in this area...great great stuff

[dasein]

"The single, biggest reason for the economic crisis we have at hand is the demise of the housing market. " - NOT the single biggest reason is the derivtives market and 50+ leverage - the worst offender being housing derivatives, which were then sold to investors al over the world. I also agree that all of this will not help in the incipient unemployment crisis, as per pedro and my comments elsewhere. there are over 60 trillion in derivatives that the government is trying to keep afloat - the wil not be able to, they wil only delay the mess. there is no way to solve a situation caused by spending 20+ years of extrapolated growth rate future earnings, which is where we stand now. in that i agree, in most other times of history such bankruptcy was solved by war - we shall see.