14 replies to this topic

[zedor]

Total collapse in real-estate. And I am talking about at least 70%.

With no loans to be had --- only those with cash will be able to buy.

And those with cash are few. Very few.


The entire nation was speculating in real-estate like they were in stocks in the 20s. The unwinding will be ugyly.

It is difficult to imagine who could step in and fill the gap should consumer banks like Capital One or Wells Fargo exit mortgage lending operations altogether, particularly given how badly the business has suffered. Nearly 120 mortgage lenders in the past nine months have closed their doors, declared bankruptcy or been sold off to the highest bidder, including stock darlings like New Century Financial and private equity-owned businesses like Aegis. That's about three lenders a week. Not only have companies closed, thousands of layoffs now dot the country where booming economies once stood.

cnn from this article http://money.cnn.com...sion=2007082021

Edited by zedor, 21 August 2007 - 04:57 AM.

[Drano]

Will this benefit smaller banks (I mean community banks and tiny chains of several banks)?

[ogm]

Will this benefit smaller banks (I mean community banks and tiny chains of several banks)?

Absolutely.

Once all these wannabe lenders are wiped out or exit the business, the mortgage business will go back where it belongs... banks.
Banks will lend. Fed will make sure banks will lend. The lending standards will tighten up though. But in the long run its a good thing.

Edited by ogm, 21 August 2007 - 06:31 AM.

[OEXCHAOS]

Banks are NOTORIOUS for NOT knowing what's coming! They are masters of shutting the barn door after the horse is gone. Really. There's a reason why few banks are even in the investment management business (and have a track record to be proud of).

[mike123]

Will this benefit smaller banks (I mean community banks and tiny chains of several banks)?

Local banks are next to fail. Home Equity Loans with 100% loan to value. Now value down 20%. HEL is wiped out with every forclosed home.

[OEXCHAOS]

So, gainfully employed people are going to decide to default en masse on HEL's that may (or may not) be underwater? Why? Think these things out. People aren't going to stop trying to get by. Just because Joe Smith is upside down on his HEL doesn't mean he's going to default. He may not know or care, either. Meanwhile, after the Fed drops rates a few more times, folks who have been fence sitting might decide that now is the time to buy a home. M

[mike123]

So, gainfully employed people are going to decide to default en masse on HEL's that may (or may not) be underwater?

Why?

Think these things out. People aren't going to stop trying to get by. Just because Joe Smith is upside down on his HEL doesn't mean he's going to default. He may not know or care, either. Meanwhile, after the Fed drops rates a few more times, folks who have been fence sitting might decide that now is the time to buy a home.

M

Fed dropping rates will not help too much on mortgages. The demand for MBS is not there anymore even from GSEs. Banks don't like to hold mortages anymore.

So, gainfully employed people are going to decide to default en masse on HEL's that may (or may not) be underwater?

Why?

Think these things out. People aren't going to stop trying to get by. Just because Joe Smith is upside down on his HEL doesn't mean he's going to default. He may not know or care, either. Meanwhile, after the Fed drops rates a few more times, folks who have been fence sitting might decide that now is the time to buy a home.

M

Fed dropping rates will not help too much on mortgages. The demand for MBS is not there anymore even from GSEs. Banks don't like to hold mortages anymore.

Foreclosures: No relief in sight
July foreclosures nearly double from last year; industry group raises forecast for more.

http://money.cnn.com...sion=2007082108

[OEXCHAOS]

There are a lot that do hold their own paper. There will be more. I see lots of assumptions and some long extrapolations, but the logic is tenuous. Just because there are foreclosures (and likely more coming) doesn't mean that it'll have any effect upon small banks whatsoever. And HEL's? What's the default rate on those? Is it rising or falling? Is it significant? It's really easy to buy into Armageddon, but it's usually a bad idea. You have huge, powerful, and motivated forces aligned against you and it. M

[ogm]

From your article... "While 43 states experienced year-over-year increases in foreclosure activity, just five states - California, Florida, Michigan, Ohio and Georgia - accounted for more than half of the nation's total foreclosure filings," James J. Saccacio, chief executive of RealtyTrac said in a statement. Nevada, at one filing per every 199 households, had the highest rate of any state, but California where one in every eight Americans lives, had the most numerically - a total of 39,013 and one for every 333 households. That was nearly four times higher than a year ago. " ................. Ok, so foreclosure rate in Nevada is 0.5% and in California 0.3% ..... Yes, it maybe "OMG 60% higher !!!" then last year. But overall doesn't sound like its beyond normal for loan defaults. California and Florida are special cases too. Especcialy Florida with speculative activity in condo's. In the rest of the country prices never went up by that much, and default rates are much lower.

Edited by ogm, 21 August 2007 - 08:07 AM.

[ogm]

To continue on that thought... So lets say California has 0.3% loans in default. Assume the recovery rate of 50% ( Yes, there is recovery rate too) So your total loss is 0.15% What interest rates do you need to charge for new mortgage originations, if you assume foreclosures rates will TRIPLE next year, and your total loss on principal may be as high as 0.5% Can you still make money on this ? You bet you can. So they will lend, lend lend.