36 replies to this topic

[Wavetimer]

One one of the financial channels today they were interviewing several people and I heard one Ed Leamy(??) from the UCLA think tank talking about the lending troubles. He basically said a government initiated bail out is the wrong course of action and will delay the real solution for a long period of time. His thoughts (I think) was to let those that could not pay default then the mortgage companies would have to revalue the properties, then you get to the true value the soonest. Even if the borrower is given a lock on the interest rates for 5-years, he will no doubt see the value of the property that he is struggling to pay for depreciate to the point that he will be upside down on the loan for years. Probably doesn't matter to the borrower who is planning to live in the house forever, as long as he is doing well enough in 5-years to stay current. I guess a borrower who defaulted would not be able to get another loan anytime soon in order to take advantage of the lower values. THE MORTGAGE COMPANIES WOULD TOTALLY BE AGAINST THIS METHOD. However I think it has merit.....'course my house is paid for and I don't have any ARM resetting soon.

i think home values will be lower in 5 years so i agree that this will only make the problem worse. the bailout is for "repsonsible" homeowners who are current on their payments.

if they knew the terms of their mortgage and qualified why on earth are they getting a bailout?

ed rader I totally a agree , they new what the deal was as far as rate could rise and they will for the most part make payments to keep the home and in some cases some will go for short sale , and last the ones who will walk away but they will me in a very small minority like in 1991 , THE fact is housing as in all bubbles drop till they find their level , my hope is that they drop to the norm and then grow steady at the historical norm of 4 to 7 % . So our children can all afford homes for generation to come 1980 my first house by the beach in long beach li cost 38k then our next in1992 180K and thought that was crazy and the home i have now paid only 230 in 2000 a fixer upper and put about 120k into it ! i laught when they wanted to buy my home for over 900k , said i cant i need to leave it to my kids so they can have a home and thier 12 and 11yrs , SO I say thank god it burst , otherwise it would be have and have nots and as a country we could move forward into the 21 century!!!!! ONE LAST THOUGHT I forsee the world going to one currencyin the next 10 to 20 years ,milton freidman said it best we never needed a fed for money suppy it should be basically be a grow rate of 2to 4 % to keep grow slow and inflation low !

[SemiBizz]

I'm not sure who the victim is here, the bank, the lien holder, or the borrower. I know this though, I don't trust government in there... free market should have it's own solution to these problems. I wouldn't be surprised at all to see us back to that accomodative level again, somewhere in here push comes to shove, J6P runs up against a wall of debt and payments and chokes...while your local branch of your bank closes in a big consolidation, and you have to drive 5 miles out of your way. As for the lien holders? Since it's well-distributed, it's all designed perfectly to be accounted for and move on, accept things at face value and avoid MAD - Mutually Assured Destruction better known as THE TRUTH, everyone is going to pretend this isn't REAL... just a simple accounting operation, I'm sure. Who's going to point fingers? The broker points to the rating agencies, the rating agencies point to the bankers, and the bankers? Well, they have it all in hand, just PRINT PRINT PRINT. Heck, why can't we just roll rates back and let er rip? Let's see who is first to step up and want to flip those houses... If I were living in NZ, Australia, UK, or Europe and held those currencies... I would be over here buying all the R.E. I could get my hands on for the next wave. The population isn't going to decrease, eventually the supply of anything gets used up in this society.

[*JB*]

I can't imaging that the MAJORITY of "sub prime" or even prime ARM borrowers weren't snookered with just enough weasel words and shifty and intimidating disclaimers to keep the originators from getting sued (too often). <SNIP>

I don't think that most of these loans were fairly explained or disclosed. Certainly, as an investment professional I was shocked at the utter deceptiveness. A stock broker would do time if he pulled that stuff on his clients. The bankers/loan brokers? Not so much.<SNIP>

I've got no problem with a work out deal for current borrowers. They've been responsible, but got snookered. <SNIP>
Mark

Mark --

Some of these sub prime borrowers are paying 9-12% after being "qualified" at 5%). If they are paying their mortgage, and that rate gets frozen, I don't consider it a bail out if they fix the rate. If they pay their bills, I would condsider it "fair" to refinance them to a lower fixed rate -- they've shown they are "credit worthy".

Of course these people should not have gotten these loans in the first place, in a perfect world. These loans should be considered usury.

A lot of these loans resulted from predetory lenders who "worked" these people for all it was worth...HOPING they would fail and then forclose when the LENDER thought the houses were going ot go up 50% in the next year.

In Florida -- 3-4 years ago -- all you heard all day long on the radio (talk radio) are real estate shows where they discuss 2-3% loans for the first year (when 30% fixed was around 5 3/4). That would draw people in -- they'd get hooked in --- and then the small print took over with rates of 7-8% locked in the next year.

Also, the poorer people (like in Baltimore and D.C.) were suckered in by "community activists" working for preditory lenders. Yes they got suckered...and big time -- lied to/bait and switched/etc.

Provisions of the Community Reinvestment Act (1996) -- especially when tweaked a bit by lawyers -- allowed a lot of these practices to go on. ALSO, as I said before, this act FORCED lowering of standards on lenders for a percentage of the loans.

Edited by *JB*, 06 December 2007 - 09:42 PM.

[milbank]

The time frame of Bush's program is between January 1, 2005 and July 31(?), 2007. During most of that period fixed-rates were in the lower 5% to the upper 6% area. So, using your numbers John, these borrowers would be frozen at rates at about or lower than the fixed rate for prime borrowers was during the same period.

Edited by milbank, 06 December 2007 - 09:57 PM.

[ed rader]

The time frame of Bush's program is between January 1, 2005 and July 31(?), 2007. During most of that period fixed-rates were in the lower 5% to the upper 6% area. So, using your numbers John, these borrowers would be frozen at rates at about or lower than the fixed rate for prime borrowers was during the same period.

many of these folks could have locked in a 5.25% mortgage just like i did or even a 6% mortgage but they didn't because they couldn't afford the house!

you know for the last few years some of us have been talking about the real estate crisis that was brewing and almost everyone on this board said that real estate was regional and you couldn't look at it as a whole.

doesn't look too regional now ... does it !

tell me one thing this incompetent, self-serving administration has done that hasn't been a complete disaster .....

ed rader

Edited by ed rader, 06 December 2007 - 10:08 PM.

[milbank]

Here is the monthly Average for that period on 30-year Fixed Rate Conventional Mortgages

Paulsen and Bush could have at least based the qualified mortgages on the monthly average of 30 year fixed conventional for the month the mortgage was taken although I doubt that many would even be able to pay those rates.

2005 01 5.71
2005 02 5.63
2005 03 5.93
2005 04 5.86
2005 05 5.72
2005 06 5.58
2005 07 5.70
2005 08 5.82
2005 09 5.77
2005 10 6.07
2005 11 6.33
2005 12 6.27
2006 01 6.15
2006 02 6.25
2006 03 6.32
2006 04 6.51
2006 05 6.60
2006 06 6.68
2006 07 6.76
2006 08 6.52
2006 09 6.40
2006 10 6.36
2006 11 6.24
2006 12 6.14
2007 01 6.22
2007 02 6.29
2007 03 6.16
2007 04 6.18
2007 05 6.26
2007 06 6.66
2007 07 6.70
2007 08 6.57
2007 09 6.38
2007 10 6.38
2007 11 6.21

The time frame of Bush's program is between January 1, 2005 and July 31(?), 2007. During most of that period fixed-rates were in the lower 5% to the upper 6% area. So, using your numbers John, these borrowers would be frozen at rates at about or lower than the fixed rate for prime borrowers was during the same period.

many of these folks could have locked in a 5.25% mortgage just like i did or even a 6% mortgage but they didn't because they couldn't afford the house!

you know for the last few years some of us have been talking about the real estate crisis that was brewing and almost everyone on this board said that real estate was regional and you couldn't look at it as a whole.

doesn't look too regional now ... does it !

tell me one thing this incompetent, self-serving administration has done that hasn't been a complete disaster .....

ed rader

Greenspan thought it was "regional" too. Here's part of his testimony before the Joint Economic Committee of Congress on June 9, 2005

The housing market in the United States is quite heterogeneous, and it does not have the capacity to move excesses easily from one area to another. Instead, we have a collection of only loosely connected local markets. Thus, while investors can arbitrage the price of a commodity such as aluminum between Portland, Maine, and Portland, Oregon, they cannot do that with home prices because they cannot move the houses. As a consequence, unlike the behavior of commodity prices, which varies little from place to place, the behavior of home prices varies widely across the nation.

What a clueless boob.

Edited by milbank, 06 December 2007 - 10:08 PM.

[SemiBizz]

Milbank, Those rates are a joke, and that's why they are only covering that rate and higher because they already know we're going under 5%... that's what I think. This could be the biggest swindle in history by the banks, do not underestimate them. We already know their game, the mortgage banks are history. The big banks are about to sieze control of the mortgage business, you take whatever you get, under this setup, no one will be able to match the %'s given by the gov't. Heck, if they can pump the stock market, why can't they pump the R.E. Mkt? It's only a printing operation. As for Bush and Paulson today, that's a no brainer they didn't offer us anything that wasn't going to happen ANYWAY.... So, if there's no demand for houses, there's no demand for mortgages... simple. Except refi. there's the business, so here we go, round 1 of suckers buying into this disaster step right up and set your fixed rate. I"m ready to move some cash into my mortgage if they try and get funny about this. The way things stand the banks are holding the bag. I am just glad I didn't buy into 2nd Trust Deeds at the top of this, that stuff is history in a lot of cases. At the end of the day, cash may be king.

Edited by SemiBizz, 06 December 2007 - 10:26 PM.

[*JB*]

The time frame of Bush's program is between January 1, 2005 and July 31(?), 2007. During most of that period fixed-rates were in the lower 5% to the mid 6% area. So, using your numbers John, these borrowers would be frozen at rates at about or lower than the fixed rate for prime borrowers was during the same period.

Milbank --

I'm not totally sure what figures of mine your are referring to...or from which post.

Most of these I was referring to in my last post were not ARMS tied to (say) LIBOR or some other index.

They were low first year rates and THEN went to a FIRM 7-8% the next year where I referred to Florida...a favorite of amateur flippers...until they couldn't flip anymore. This was mostly in the Miami to Ft. Lauderdale areas.

As for those qualified at 5-6% 1st year rates -- with a kick up to 9-12% in 12-24 months -- in Cities like Baltimore and D.C. were not ARMS either. The rate they had in the contract was fixed, NOT adjustable.

Also, with a lot of these in Baltimore and D.C., the loans were arranged by the sellers of houses that were inner city "empty shells" bought from the city for a $1 each -- by the blocks by so called "community organizations -- and fixed up just enough to get a C.O.

Then they were sold "cheap" at $70-90,000 when they were really only worth $30-40,000...a double wammy. ALL promoted and handled by so called "Community activists" working through churches and other community organizations -- selling out their own people -- professing they were working to get the "American Dream" for those that had been shut out. A 21st century version of the "poverty pimps" of the 1960s.

These "practices" -- and how the underwriters "qualified them" -- was the subject of many an article about predatory lending in the Balt. and D.C. local papers...for a good while.

Edited by *JB*, 06 December 2007 - 10:23 PM.

[milbank]

The time frame of Bush's program is between January 1, 2005 and July 31(?), 2007. During most of that period fixed-rates were in the lower 5% to the mid 6% area. So, using your numbers John, these borrowers would be frozen at rates at about or lower than the fixed rate for prime borrowers was during the same period.

Milbank --

I'm not totally sure what figures of mine your are referring to...or from which post.

Most of these I was referring to in my last post were not ARMS tied to (say) LIBOR or some other index.

They were low first year rates and THEN went to a FIRM 7-8% the next year where I referred to Florida...a favorite of amateur flippers...until they couldn't flip anymore. This was mostly in the Miami to Ft. Lauderdale areas.

As for those qualified at 5-6% 1st year rates -- with a kick up to 9-12% in 12-24 months -- in Cities like Baltimore and D.C. were not ARMS either. The rate they had in the contract was fixed, NOT adjustable.

Also, with a lot of these in Baltimore and D.C., the loans were arranged by the sellers of houses that were inner city "empty shells" bought from the city for a $1 each -- by the blocks by so called "community organizations -- and fixed up just enough to get a C.O.

Then they were sold "cheap" at $70-90,000 when they were really only worth $30-40,000...a double wammy. ALL promoted and handled by so called "Community activists" working through churches and other community organizations -- selling out their own people -- professing they were working to get the "American Dream" for those that had been shut out. A 21st century version of the "poverty pimps" of the 1960s.

These "practices" -- and how the underwriters "qualified them" -- was the subject of many an article about predatory lending in the Balt. and D.C. local papers...for a good while.

I was referencing this part of your post...

Some of these sub prime borrowers are paying 9-12% after being "qualified" at 5%). If they are paying their mortgage, and that rate gets frozen, I don't consider it a bail out if they fix the rate. If they pay their bills, I would condsider it "fair" to refinance them to a lower fixed rate -- they've shown they are "credit worthy".

Wow! fixed? I, of course assumed they were adjustable. And these people were not told of the jack up in rates after a year when they signed? Incredible. This is a different bird altogether. This is, of course, fraud and will end up probably as class action suits in court.

Then the question arises, who services the mortgage? (I assume the 3-card monte lenders are already out of business). Freddie? Like they aren't already in deep doo doo.

Edited by milbank, 06 December 2007 - 10:43 PM.

[NAV]

Bailout - NO FREAKIN' WAY.

Every man/woman will go bust at some point in their financial lives to learn what finacial prudence is all about. I nearly blew my account in 2000. My wife was not working. My son was born around that time. I had [bleeep] of financial commitments. There was a recession in the Silicon valley, a very painful one. No one bailed me out. I had work my butt off for 18+ hours a day for nearly 5 years to get back on track.

Before i blew up, i used to brag about how sexy my internet stocks were. Weren't those homeowners with zero-down loans doing the same thing couple of years back ?. Every social gathering, it was the same talk, as to how smart they were to buy that home on 3% ARM with zero down and how they were up big on their home values. All they were waiting was for the 2 years to cash out capital gains free. I don't presume they were innnocent. I was urging many of my well educated friends to get out of ARMS, and move into 30-year fixed when the rates were at historical lows. Their response was "No one knows about the future. All i care is about low payments today" or "I can't afford a home with a fixed loan. So i will go with ARMS" or "I don't intend to hold this house for more than 2 years. I planning to Flip after 2 years. So why bother with a fixed loan?". No no no no - these guys were not innocent - just financially irresponsible folks !. Now who all are we going to bailout ? Hedgies, Financial istitutions, Mom and pop reckless speculators....

I hear Ayn Rand muttering from her grave "Thank god, i am dead" !


What a mess !

Edited by NAV, 06 December 2007 - 10:51 PM.