May 21, 2007

There Are No Buyers Around

Some housing bubble news from Wall Street and Washington. “Retailer Lowe’s Cos. reported a lower-than-expected first-quarter profit on Monday as the slower U.S. housing market pressured sales and cut its full-year earnings forecast. In a statement, Lowe’s said a difficult U.S. housing market, tough comparisons to hurricane rebuilding efforts and falling lumber prices pressured results.”

“Last week, industry leader Home Depot Inc. posted a 30 percent decline in first-quarter profit as its retail store sales fell.”

For Reuters. “Troubles in the U.S. housing market will weigh on economic growth this year even more than earlier estimated, according to a forecast of economists released on Monday.”

“The survey of 48 economists taken between April 19 and May 8, found that housing market troubles, particularly those in the risky subprime mortgage lending market, will drag out through this year. ‘Residential investment remains a dominant force dampening growth in 2007,’ NABE wrote.”

From MarketWatch. “The spring housing market is turning out to be something of a dud, dashing hopes of a turnaround. ‘The housing market is struggling to get back on its feet,’ according to economist Sal Guatieri.”

“‘The spring-selling season is coming well below expectations,’ agreed Mario Ricchio, a housing analysts with Zacks.com.”

“Many factors are at work. Buyers are hesitant to buy a home if they think prices are falling. Sellers have pulled homes off the market, waiting for prices to rebound. In addition, tightening lending standards are hurting home buyers. At the same time, speculators are fleeing the market, Ricchio pointed out.”

“Countrywide Financial Corp. CEO Angelo Mozilo said on Monday that proposed regulation in the subprime mortgage industry would help crooks while hurting legitimate lenders and the housing market.”

“Mozilo said current guidelines proposed by regulators would exacerbate problems in the housing market. ‘The reason why people can’t sell their houses is there are no buyers around,’ Mozilo said. ‘And there are no buyers around because they can’t get the financing.’”

“Kieren Quinn, chairman-elect of the MBA, acknowledged in the Mortgage Bankers Association conference’s opening remarks that subprime woes had given the entire mortgage industry a black eye.”

“Quinn also drew comparisons to Major League Baseball’s steroids scandal. He said the industry needed to continue to scrub the industry, ‘or we’ll get ugly, ugly regulation.’”

The San Francisco Business Times. “Subprime mortgage lending’s deep freeze has sent a chill over the rest of the mortgage industry as layoffs spread to those who lend to the more creditworthy.”

“GreenPoint Mortgage, a unit of Richmond, Va.-based Capital One, laid off 70 employees. The company makes so-called ‘Alt A’ mortgages, which go to borrowers that fall between prime and subprime. A big part of GreenPoint’s business is making jumbo loans, those that exceed Freddie Mac and Fannie Mae’s loan limit of $417,000.”

“Another broker hard hit by the downturn is Lending Tree, which funnels loan applications to lenders across the nation. The Charlotte, N.C., company said this month it will lay off 440 workers, or 20 percent of its staff.”

“San Rafael mortgage broker Paul Financial let go of 36 employees this month. Peter Paul, president of Paul Financial, said the company won’t make money this quarter given the drop-off in lending and the decision to set aside reserves for loans that might go bad down the road.”

“Looser lending in the Alt A and other segments of the mortgage market is now taking its toll. ‘Some lenders were really making Alt B loans,’ Paul joked.”

National Mortgage News. “The Illinois Association of Mortgage Brokers has sent out an alert to its members, warning that if a new proposed amendment passes bankers and brokers will not be able to originate any ’stated-income’ or ‘non-income-verification’ loans. The trade group fears that if the language passes, loan offices will be held ‘personally responsible’ for their actions and could have their personal assets attached by the state attorney general.”

“A large hard-money lender is on the verge of closing its correspondent division, according to one industry source who has played in that market. The source, requesting anonymity, said the lender also is entertaining buyout offers from two groups.”

“Are non-depository subprime funders beginning to see some relief in the secondary market? ‘If we get 101 for a loan we consider ourselves fortunate,’ said the president of one West Coast-based B&C shop. ‘If we get 101.5 we consider that a fortune.’”

“Prices offered for nonperforming second liens that were part of 80/20 combos are still at rock bottom, in the range of $0.08 to $0.10 on the dollar.”




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174 Comments »

Comment by Ben Jones
2007-05-21 08:52:24

‘As he explained to the Wall Street investment community last November why Hovnanian Enterprises would eventually take fourth-quarter land write-downs of more than $300 million against 2006 earnings, president and CEO Ara Hovnanian said, ‘We found it primarily on–the majority of it, really, coincides to properties where the contract was signed and/or closed in 2005. I mean, that was the challenging year in hindsight, and I wish I went on a long vacation in 2005. But we didn’t. We’ve been in the market. And you have to be in the market. But there are times when the market hiccups and you find yourself with some land at a cost basis that you wish wasn’t there, and we just have to deal with it.’

‘Ivy Zelman, senior analyst for Credit Suisse, wasn’t dreaming when she made the following observation based on a trip to Orlando, Fla., in January 2005: ‘On the tip of everyone’s tongue was the increasing presence of real estate investor/speculators in the market. … It appears that cheap money and the lure of real estate riches has created an unusual interest from second-home buyers not using the home as a primary residence. In most cases, the public builders have instituted contractual clauses to discourage investment buying; however, few went as far as to say they would not sell to an investor.’

Comment by Lionel
2007-05-21 09:47:09

So naturally HB stocks are up today.

2007-05-21 10:47:09

Nothing’s going to go down, we have too much funny money to funnel and fold into all asset classes that are excluded from the CPI and PPI

Comment by kcdallas
2007-05-21 12:14:49

It looks that way in the market today. The housing slump driven consumer spending slowdown effect is still out there. Upcoming durable goods and home sales numbers out this week http://biz.yahoo.com/c/e.html

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Comment by Housing Wizard
2007-05-21 12:54:13

What use to keep down investment buying was the higher costs and low loan to value that lenders would go on investor loans .Its not so much the builder refusing to sell to a investor as much as the lending standards keeping the % of investors borrowing low .But if a builder has it in the CCR’s that the project will be a owner occupied project or has restrictions to begin with at least ,some screening is required by the lender .

 
 
Comment by SMF
2007-05-21 08:58:15

“Many factors are at work. Buyers are hesitant to buy a home if they think prices are falling. Sellers have pulled homes off the market, waiting for prices to rebound. In addition, tightening lending standards are hurting home buyers. At the same time, speculators are fleeing the market, Ricchio pointed out.”

What about prices?? Sorry, but when MOST people cannot afford your product, they CANNOT buy it!! At least not in a standard way.

‘The reason why people can’t sell their houses is there are no buyers around,’ Mozilo said. ‘And there are no buyers around because they can’t get the financing.’”

There are no buyers around because the industry overbuilt by anywhere from 30% to 50%. And no one can make these buyers appear, since they don’t exist in the first place.

Plus, what is so wrong about getting financing for a house that you CANNOT pay for in the long term?

Comment by In Colorado
2007-05-21 09:18:05

Now we know the reason behind the sudden emergence of an immigration “reform” bill. They want to import buyers. Problem is that the people they want to import are poor. Most are balking at the proposed $5000 “fine”, even though studies have shown that legal US residence has a NPV of 100K even for an unskilled laborer.

Comment by spike66
2007-05-21 09:26:36

That 5000 dollar “fine” is to cover back taxes..no matter how long they’ve been here or how much they made. And, it was put in the bill at the insistence of Kennedy. Bush folks wanted no back taxes paid.
How many citizens would like to settle up with the IRS for 5k for all outstanding monies due? This whole amnesty bill is such an outright scam, and the victims are US citizens.

Comment by shadash
2007-05-21 09:40:44

H1 visas numbers are also increased in the immigration “reform” scam. This means US computer/tech workers will have to compete with even more immigrants from other countries.

H1 visas are like slave endentureship permission slips. The foriegn workers earn less than a local US employee and can’t transfer their skills to another company. It’s a win win for employers you get to pay someone less and they can’t complain about it or maket their skills to another company to try and get a better pay.

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Comment by Steve
2007-05-21 10:58:17

I work on an H1B here in the US (I’m Canadian) and generally, the employer has to prove your salary is at least equivalent to the prevailing wage but I agree it does really tie you down to one employer. I think people should be more worried about companies outsourcing the jobs to foreign countries rather than the number of H1Bs - I’ve seen entire divisions shut down and moved overseas in the five years I’ve lived here.

 
Comment by observer
2007-05-21 12:02:23

I agree…many H1Bs went to Canadians, like us, but that was only due to the skill shortages which were variable.

OUTSOURCING is the real culprit here as the wages drift downward toward the lowest common denominator.

 
Comment by Skip
2007-05-21 12:14:38

Actually, the tech companies are complaining very loudly right now about the new law as it does not allow employer sponsorship of H1Bs. Once a person has an H1B, they are allowed to work at any company legally. So, the company that pays the most, would get the most H1Bs. They would lose any cost benefit.

 
Comment by Skip
2007-05-21 12:15:21

 
Comment by In Colorado
2007-05-21 18:40:26

I was under the impression that Canadians could get in using special NAFTA visas.

 
 
Comment by Observer
2007-05-21 10:06:15

Plus, why would business now want to hire the new “legalized” workers when now they’ll probably have to pay higher wages and payroll and other taxes? Better just to import more illegals so you can continue to pay low wages and no taxes.

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Comment by In Colorado
2007-05-21 10:17:12

Exactly. All that will happen is that the new “citizens” will move up the food chain (displacing Americans in the process) and their old jobs will be filled by new illegals. This is exactly what happened the last time we had an amnesty.

 
 
 
Comment by In Colorado
2007-05-21 10:22:17

I really do believe that the powers that be see this as a quick fix for the economy. Big 3 sales down? Hey, immigrants love “trocas”. WalMart sales flat? Add a few million new inhabitants and voila! Sales are up.

Of course there is a fip side to the coin: crowded schools and roads, increaded demands on social services, increased crime, etc. Of course if you are rich these are “someone else’s problem”.

Comment by MMG
2007-05-21 14:24:42

Colorado, I dont see your point, they are already here consuming like americans (drunken sailors –LOL), so I dont see how they are going to afford cars, houses or what ever.

Actually what they will do is drain the system from all the entitlements they will be eligible for? what do you think?.

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Comment by In Colorado
2007-05-21 18:41:26

Thats why you bring in even more of them.

 
 
 
Comment by VaBeyatch in Virginia Beach
2007-05-21 10:31:26

I think the 14 million illegals ordeal is pretty funny.

So you have employers that don’t want to pay legal wages, and you are going to turn the hired help into legal citizens. So these legal citizens can now qualify for social programs, that will most likely pay better than many of these jobs that the illegals have been working at. So why bother working when you can potentially make more money by accepting gov’t money?

As far as Wal*Mart and the like, I already see them in there. I watched as a manager took over for a normal employee to do the drawer change. This “foreign worker” had a cart STACKED full of loads of eggs, milk, rice and other food. Enough to feed alot of people. When it was time to pay, he kept handing the cashier (who was a manager) $100 bills until she said something. She got pretty upset, cause he handed her $300 when the bill was $140ish. Dude couldn’t speak english, just a hopeless stare to all questions asked.

I can see where a dishonest cashier at WalMart could earn some nice tips.

Comment by grubner
2007-05-21 12:14:49

“Dude couldn’t speak english, just a hopeless stare to all questions asked.”

I’ve been to plenty of countries where I didn’t speak a lick of the local lingo but I could still read the numbers on the currency and cash registers.

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Comment by Bill in Phoenix
2007-05-21 11:41:02

Now we know the reason behind the sudden emergence of an immigration “reform” bill. They want to import buyers. Problem is that the people they want to import are poor.

No problem. The libs will move them to Manhattan Beach still and turn it into a barrio.

 
 
Comment by az_lender
2007-05-21 10:49:11

“tightening lending standards are hurting home buyers” … nope, they are saving would-be buyers. The people they are hurting are would-be sellers.

 
Comment by Potential Buyer
2007-05-21 11:26:22

‘The reason why people can’t sell their houses is there are no buyers around,’ Mozilo said. ‘And there are no buyers around because they can’t get the financing.’”

I’m a buyer, I can qualify with my FICO of 820. I won’t though. Drop the price to 2001, factor in normal appreciation YOY at 3% - then I’ll buy.

Comment by FED Up
2007-05-21 11:43:27

Prices were already up in my neck of the woods in 2001 - give me ‘96-’97 prices with 2% YOY and then MAYBE I’ll think about buying.

Comment by CA renter
2007-05-22 02:56:00

Agree, FED Up!!!

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Comment by yogurt
2007-05-21 09:02:05

‘The reason why people can’t sell their houses is there are no buyers around,’ Mozilo said. ‘And there are no buyers around because they can’t get the financing.’”

You missed the last part Angelo: “And they can’t get the financing because nobody will buy our trash any more”.

 
Comment by aladinsane
2007-05-21 09:08:56

Today’s Master Of The Obvious (MOTO)

“Mozilo said current guidelines proposed by regulators would exacerbate problems in the housing market. ‘The reason why people can’t sell their houses is there are no buyers around,’ Mozilo said. ‘And there are no buyers around because they can’t get the financing.’”

Comment by Groundhogday
2007-05-21 09:13:35

And they can’t get the financing because no one (anymore) wants to lend money that won’t be paid back. And it won’t be paid back because home prices are too high relative to incomes!!! Ding! Ding! Ding!

Comment by lazarus
2007-05-21 09:59:41

Credit crunch! The tectonic plates have shifted and the tsunami is racing towards the beach where the sellers are still playing with their peebles. Be afraid. Be very afraid.

 
 
Comment by wmbz
2007-05-21 09:15:46

So he’s saying that the only buyers were sub-prime liar loan house flippers? Sounds like somebody may have peed in his corn flakes this morning. Get over it, the best is yet to come… For us sideliners that is.

 
Comment by arroyogrande
2007-05-21 09:18:23

“And there are no buyers around because they can’t get the financing.”

Uh, yeah, just us “bitter renters” with down payments in the bank, waiting for a sensible time to buy. About the only people that currently can’t get financing are those that are high-risk (ie CAN’T REALLY AFFORD THE HOUSE TO BEGIN WITH). This is the head of Countrywide?

Comment by Lisa
2007-05-21 09:55:49

“And there are no buyers around because they can’t get the financing.”

What % of these folks should NEVER have been given a mortgage in the first place? Let alone loans to buy multiple houses.

That portion of the buying pool isn’t coming back. Period. They’ve either fled the market (if they’re lucky) or they are drowning in debt.

Smart money is earning interest and waiting…..if Countrywide is saying there are no buyers now (and it’s only Spring 2007) just wait until 2008/2009.

Comment by Bill
2007-05-21 12:06:38

Yes, I don’t understand why so many economists seem to be predicting that housing will get better next year. So far, prices are down very little and inventory in most markets is high and rising. Are there any economists being surveyed who predict that housing will be a drag into 2009?

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Comment by travanx
2007-05-21 12:39:55

what is the reasoning for only 2007 to be a bad year and it will come back after???

 
 
 
Comment by jag
2007-05-21 10:15:16

“no buyers around”

That’s what happens in a bubble. Everyone who could get “in” got ALL in by 2005. No one’s left to buy. They’ve all been consumed….and then some considering all the spec, second home and “investment” buying.

 
 
Comment by SFC
2007-05-21 10:25:50

I was just thinking about a Summer about 20 years ago when I sold Chevrolets. There’s a type of buyer we called a “laydown”, because they would come in and agree to buy any car at sticker or higher price, within a few minutes. Of course 99% of these people had crappy credit and no downpayment, so they were just a waste of time. Back then noone got car financing with bad credit and no money down.
So what was happening in the past 5 years or so is that the “laydown” people were buying houses, and would pay any price if they could get financed. And they could!

 
Comment by joe momma
2007-05-21 11:06:55

Just look at the comments from this dipshit. Mozillo, the problem is prices. Lower prices fix the problem of financing.

Is everyone quoted in the media an idiot?

 
 
Comment by bubbleglum
2007-05-21 09:13:08

“CEO Angelo Mozilo said on Monday that proposed regulation in the subprime mortgage industry would help crooks while hurting legitimate lenders and the housing market.”

Crooks, what crooks, Angelo? Are you suggesting you’re one of the few legitimate lenders around?

Comment by tcm_guy
2007-05-21 11:31:05

Angelo Mozilo’s executive compensation:

http://www.forbes.com/lists/2006/12/7G33.html

$69 million per year. Who is the crook here?

Got 10% down?

Comment by Housing Wizard
2007-05-21 13:29:28

I don’t get how proposed regulations would help crooks .

 
 
 
Comment by arroyogrande
2007-05-21 09:15:48

Countrywide Financial Corp. (CFC.N: Quote, Profile , Research) Chief Executive Angelo Mozilo said on Monday…”Regulation, in my opinion, has caused part of the problem. When they attacked the pay option and interest-only loans, that really put a dent in a lot of the product, which is perfectly good product.”"

No matter if you are in favor of regulation or not, I find it funny that the head of Country Wide is saying this:

“The reason we are having a raging hangover is that you’ve taken the whiskey away. If you give us back the whiskey, we can use that to get rid of the hangover.”

Comment by joe momma
2007-05-21 11:08:49

This idiot is exactly why we DO need regulation. They will never stop this BS unless they are forced to.

It is the same in almost every industry.

Comment by CA renter
2007-05-22 02:59:44

Exactly, Joe!!!

 
 
 
Comment by txchick57
2007-05-21 09:18:43

I wouldn’t even pay 8 cents on the dollar for a non-performing second lien given the ridiculous prices of the past few years. I think that’s a generous bid myself.

Comment by az_lender
2007-05-21 10:51:34

Absolutely. I think half-a-cent on the dollar would be reasonable.

 
Comment by emcee
2007-05-21 11:37:38

It depends on
(a) whether the borrower is subject to litigation
(b) whether the borrower has any assets to take

This could be a “growth industry” for some lawyers, especially for targeting monied specuvestors that default on their obligations.

Comment by Carlsbad Renter
2007-05-21 12:02:49

Yeah, no kidding. If the specuvestor makes over the median wage and tries to declare bankruptcy, the holder of the second lien is going to, at least, get a little cash out of the person by way of Chapter 13.

 
 
 
Comment by aNYCdj
2007-05-21 09:19:47

WOO-HOO ………THIS IS WHAT I AM WAITING FOR…..

People who write the loans are personally responsible if they fail..(say in a year or two)…like a warranty on any other item we buy!

========
National Mortgage News. “The Illinois Association of Mortgage Brokers has sent out an alert to its members, warning that if a new proposed amendment passes bankers and brokers will not be able to originate any ’stated-income’ or ‘non-income-verification’ loans. The trade group fears that if the language passes, loan offices will be held ‘personally responsible’ for their actions and could have their personal assets attached by the state attorney general.”

Comment by az_lender
2007-05-21 10:53:31

Aha. Putting all those Loon Originators into my ball park, where it’s their own money that’s at risk. Not that they choose to lend.

 
2007-05-21 10:55:31

I’d like the state to investigate the people who received these loans too. There are times I think they are the more culpable party.

Comment by Potential Buyer
2007-05-21 11:36:38

I’d like to see Appraisers get their come uppance. They did their part to grossly inflate these prices.

2007-05-21 11:42:21

excellent point

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Comment by GetStucco
2007-05-21 09:24:14

‘The trade group fears that if the language passes, loan offices will be held ‘personally responsible’ for their actions and could have their personal assets attached by the state attorney general.”’

Personal responsibility? What a concept! This type of “language” could potentially fix the bubble once-and-for-all in short order. Because if anything, the bubble was about irresponsibility which enriched one party to the detriment of others.

Comment by Mike in Miami
2007-05-21 09:32:43

Personal assets are easily moved of shore and the origination gravy train is under full steam again. I still think regulation is a bad idea. If there are fools out there biting off more than they can chew and other fools willing to throw good mnoey at them, fine. No regulation and no bailouts….let God(free market) sort them out. Once investors & borrowers lost their butt on bad loans they’ll be more careful next time around.

Comment by GetStucco
2007-05-21 10:20:11

I agree with your idea in principle, but I suspect our govt will intervene to muck up the works…

 
Comment by joe momma
2007-05-21 11:59:38

Why is regulation a bad idea? What is so bad about it? Seems to me that a few rules (i.e. regulations) would have made all the difference in the world. I am sure we could come up with a few reasonable rules. For instance:

- Ban stated income / no doc loans.
- Make lenders and brokers personally responsible
- Have basic means tests to ensure loan can be paid back
- Ban the BS charities homebuilders set up to give bogus down payments
- Make appraisers personally responsible for bogus appraisals.

These alone would have eliminated most of the bubble. And they all make complete sense. Actually to think most do not exist is ludicrous.

Comment by DrChaos
2007-05-21 12:27:43

I agree. Too many people are buying the insane right wing propaganda. At least in the USSR, people KNEW when they were being fed propaganda. They didn’t know what was happening in the world, but they did know that whatever Pravda (”"”truth”"”) said, it was a lie.

Here people seem to believe the propaganda.

Yes, it is banking REGULATIONS from the 1930’s which greatly cleaned up the industry and resulted in decades of stable conservative yet appropriate lending, economic growth, and general home affordability. The regulation (SEC) on the securities industry, also from 1930’s means that stockbroking is much more honest than it used to be.

Let’s take the steroid scandal in baseball that tanmaster Mozilo talks about. Why is that a ’scandal’ and what is MLB doing about it?

Yup. REGULATION: mandatory drug tests. You think that without steroid regulation, the baseball players would have “”"solved”"” the steroid problem in itself? “Just say no to drugs” armbands on grotesquely hypertrophied biceps?

No.

Regulations work: crime and punishment.

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Comment by Housing Wizard
2007-05-21 13:45:21

Maybe more disclosures would help . Also ,alot of the recent crimes are just plain fraud and that law is already on the books .I don’t want them to take product away but it was stupid to put sub-prime borrowers on low down loans .If your going to make a low down loan that borrower has to be the cream of the crop ,not the opposite ,and you should have PMI insurance on these low down loans .To have stated income on low/no down loans is just foolish .
As you can see with this lending during the boom ,the people were willing to overpay because of no skin in the game and no income to prove .The people felt by the time their teaser rate went up they would be ahead Because of the RE appreciation game .People would not of gone along with loans like this without the belief that they would come out ahead with this gamble .

 
Comment by joe momma
2007-05-21 14:52:06

DrChaos I could not agree more. This right-wing propaganda about regulation being bad was cooked up by the very businesses that benefit from no regulation. Just look at Enron. Ken Lay was the biggest advocate of deregulation for over a decade. How many people were hurt by deregulation?

Honestly, I cannot even comprehend why we are even debating regulation in this country. WTF will it take for people to see through the propaganda and understand what is happening to them in broad daylight?

When people chime in with “regulation is bad” I just shake my head. Do these people even know what they are saying?

Rules for business? Come on! Who needs those!

Unbelievable.

 
Comment by Housing Wizard
2007-05-21 17:45:30

Its a fine line when you talk about regulations . If the regulations are to harsh than nobody will qualify and you get into a credit crunch tight money market . I think the lenders should of prevented fraud /liar loans /hit the mark appraisals and that would of taken away a good portion of the faulty loans that caused the false demand .
I also think when you have risk ratings that are BS you need to change that part of the market . Really , the only way to handle higher risk loans is by requiring more down payment and charging more has never worked in lowering the risk on sub-prime buyers .
All these loans had guidleines for underwriting that were not followed , (same with appraisals ),and of course the borrowers submitted what it took to get the loan by .

In a mania market ,even if you had greater disclosures ,these fraudulent loan agents and gambling borrowers would of signed on the line anyway in most cases . The fact is that this investment scheme that was marketed by the REIC helped fuel borrowers willingness to go on toxic loans that seem right for a short term investment .

So , I say you have to regulate what investment claims the REIC can make about real estate along with more disclosures on the actual loans ,and more rules regarding appraisals .

What you need to do is prevent investment manias and that would be done by capping out appraisals for any given 6 month period . If a areas appreciation rates went sky-high in one year you would /should make the sellers or buyers justify that sort of increase in one year or make them pay for the higher risk .

 
Comment by yogurt
2007-05-21 22:44:01

If the regulations are to harsh than nobody will qualify and you get into a credit crunch tight money market

Bring on the credit crunch! Prices will fall until until the ordinary person can qualify with sane financing and 10% d.p. Got a problem with that?

 
Comment by Housing Wizard
2007-05-21 23:49:14

Prices will fall, but alot of the increases were due to faulty/fraud lending and exceptance of sky-high appreciation rates in one year.
I’m just saying that most the regulations that people are calling for were already in place . It looks like the industry needs to be policed .

 
Comment by CA renter
2007-05-22 03:06:35

How about the simple regulation that a lender has to ensure the borrower is able to pay off the loan **over the life of the loan** based on the initial loan agreement (caps, ratios, etc.)?

Also, send out the message — loud and clear — that anyone committing fraud will be held **personally liable** and that ALL of their assets can be confiscated and used to pay off the “victims” (lenders & to pay for legal expenses & prison expenses).

Sounds like reasonable regulation to me. :)

 
 
 
 
 
Comment by GetStucco
2007-05-21 09:25:17

“Quinn also drew comparisons to Major League Baseball’s steroids scandal. He said the industry needed to continue to scrub the industry, ‘or we’ll get ugly, ugly regulation.’”

Subprime lending = mortgages on steroids ;-)

 
Comment by GetStucco
2007-05-21 09:29:36

‘The San Francisco Business Times. “Subprime mortgage lending’s deep freeze has sent a chill over the rest of the mortgage industry as layoffs spread to those who lend to the more creditworthy.”’

Is subprime still contained?

Comment by P'cola Popper
2007-05-21 10:25:03

Layoffs? What layoffs? Did you say layoffs?

Comment by Reluctant Relocator
2007-05-21 10:56:30

ROFL … Nice hustle :)

 
 
 
Comment by aladinsane
2007-05-21 09:31:38

The not so amazing Quinn…

“Kieren Quinn, chairman-elect of the MBA, acknowledged in the Mortgage Bankers Association conference’s opening remarks that subprime woes had given the entire mortgage industry a black eye.”

“Quinn also drew comparisons to Major League Baseball’s steroids scandal. He said the industry needed to continue to scrub the industry, ‘or we’ll get ugly, ugly regulation.’”

Anabolic Loans?

We’ll send them to the lab for extensive testing.

Comment by Arizona Slim
2007-05-21 09:43:59

And then, when they’re caught, they’ll fight like Floyd Landis.

 
 
Comment by WT Economist
2007-05-21 09:38:26

(CEO Angelo Mozilo believes that within two years just two lender/servicers — CFC and Wells Fargo — will control 40% of the mortgage market.)

Well, that’s what’s keeping stock prices up — the belief that in five or ten years the survivors among homebuilders and mortgage servicers will be moneyspinners. But first you have to survive. And next, no one else — perhaps other financial services firms untained by this whole disaster — has to rush in to the market.

Comment by Brad
2007-05-21 10:09:27

as a Wells Fargo stockholder, I say bring it on…

Comment by P'cola Popper
2007-05-21 10:27:41

Careful. The last guy that said that got it “brought on” and is still trying to clean the stains out of his underwear.

Comment by DenverLowBaller
2007-05-21 10:42:13

As Wells Fargo CEO Richard Kovacevich said in December about the subprime market: “I am not a forecaster of the future; I’m a historian. And history says this will blow up. It always has. And there will be some blood on the street.” Whose blood exactly was he referring to? Shareholder or borrower? Bet it wasn’t his own.

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Comment by aladinsane
2007-05-21 10:52:25

Financial Fright Stalker

 
 
 
Comment by BubbleWatcher
2007-05-21 11:15:57

> as a Wells Fargo stockholder, I say bring it on…

What do you think of Wells Fargo’s $60 bil in junior residential liens?

 
Comment by the_voz
2007-05-21 11:41:45

I cannot stand wells fargo, worst of the bunch…..
m**th## f##ker$$$

Comment by Jerry F
2007-05-21 12:09:12

Also Wells Fargo owns on of the largest chain of “quick loan” centers in the counrty only you won’t see their name out front. They want the 35% and up interest on advance pay checks the lower wage workers as they try to juggle their money week to week, etc. Guess there is a need for this but you can be assured its a great “money maker for Wells Fargo”. The street always needs the whore of financing and they fit the bill perfectly for their shareholders. I doubt they even know they are in this business.

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Comment by PDXrenter
2007-05-21 09:38:46

I think there’s going to be a bunch of good movies coming out of this mess. A movie on starving Realtors should be even better than Glengarry Glenross. Perhaps with Rosie O’Donnell as the lead realtor character…

Comment by SFC
2007-05-21 10:30:33

Rosie would have to lose about 100 pounds to get to the “starving” stage. Maybe she could eat the weaker ones.

2007-05-21 10:57:47

She’s to busy going off the deep end over 9/11

Comment by BubbleViewer
2007-05-21 14:06:53

According to a Zogby poll last year, only 16 percent of Americans believe the “official” conspiracy theory. So doubting the official story is hardly going off the deep end. Seventy (70%) percent of the questions submitted to the 9/11 Commission were never even addressed. The 911 Family Steering Committee has been among the most vocal critics of the official story. Again, hardly “the deep end.”
The View will have a special on May 24 on WTC 7, with the Loose Change crew, Professor Steven Jones, and others.
Everybody has to learn some time. The 911 Truth movement is going viral at this point. Witness Marine Johnny Wave and his group Marines for 9/11 Truth. When you have active duty Marines questioning 9/11 and holding 9/11 Truth signs in public, you have a problem that has spread to the shallow end, my friend.

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2007-05-22 06:43:54

Enjoy your time on the deep end

 
 
 
 
Comment by Bill in Phoenix
2007-05-22 08:01:49

I think there’s going to be a bunch of good movies coming out of this mess. A movie on starving Realtors should be even better than Glengarry Glenross. Perhaps with Rosie O’Donnell as the lead realtor character…

I still laugh at the real estate agent housewife who had an affair with an equally phoney real estate agent in “American Beauty.” That came out in 1999 I think. Whenever I see realtors, I think of them. I place them on an equal trustworthiness as a televangelist and used car salesman.

 
 
Comment by flatffplan
2007-05-21 09:43:04

anyone have an update on the FORECLOSURE time out states ?
can you get a loan there or did the courts kill these bills ?

Comment by az_lender
2007-05-21 11:05:40

In the Massachusetts case, I believe all that happened was, the governor directed that persons who filed a complaint with the Division of Banks be given 60 days to try to work out a re-fi. A published memo from Goodwin Procter & Hoar expresses the attitude that “nothing has happened” to force lenders to behave any differently than they ordinarily do. In the Ohio case, Gov. Strickland made a lot of NOISE but I don’t think anything happened at all.

 
 
Comment by MaxedOutMama
2007-05-21 09:51:57

Paul Financial laying off!!! That was the outfit that was offering option ARMs with a beginning payment of 1/4 of one percent interest on principal!!!!

And he has the nerve to talk about some people making “Alt B” loans. Snort.

Comment by flatffplan
2007-05-21 10:12:09

are layoffs the back room workers
I thought lots of brokers are 1099 ,so they just make less and hang arouind, work retail etc like RE agents

 
 
Comment by jay
2007-05-21 09:56:23

Home builders are way up on any bad news, incredible

Comment by hd74man
2007-05-21 10:20:43

I say the bloggers here who are sayin’ the current situation relative to the market is a once in a lifetime shorting opportunity are right on the money.

Just a matter of watching for the (in)significant event that trips the wire.

 
 
Comment by LILLL
2007-05-21 10:06:15

Stated income loans should NOT be banished altogether!!! Zero down should be banished whether it’s stated income or not! Self-employed people (like moi) need stated as our income varies greatly from year to year. Feast or Famine. Last year was a very bad year, while this year is looking excellent. The difference is ….
I have 25% down and excellent credit.

Comment by flatffplan
2007-05-21 10:14:11

congrats, most biz are looking shty this year
you must be far removed from REIC

Comment by DenverLowBaller
2007-05-21 10:33:29

Amen. Plus those of us that run wide swinging variable expenses thru small business for tax purposes. I can either afford a home and go work for “The Man” again (W2) or own a business and fight like hell to own a house. There was a time when yopu could do both in the country.

Comment by az_lender
2007-05-21 11:07:30

You still can. Buy the house for cash.

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Comment by az_lender
2007-05-21 11:07:30

You still can. Buy the house for cash.

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Comment by tcm_guy
2007-05-21 12:14:49

Exactly. I am in LILLL’s same position, feast or famine on any given year. I also have good credit and plenty of liquid assets. I can easily pay cash for a dang buidling, if I wanted it bad enough.

The bottom line is this: If the industry can not police itself and abuses the no-doc instrument to create chaos in the housing sector, then the fraction of one percent that traditionally would benefit from this mortgage can do without.

Now if, for example, I did not have sufficient assets to allow me to pay 100% cash then I would have no choice. My hand would be forced, but what is so wrong about renting at a time like this? Besides, when I get to where I can’t stand the neighbor’s dog anymore then I will simply give him my 30 days notice. And now the building and the repairs and the taxes and the big bad barking dog is his problem, not mine. Good luck finding a renter who prefers living next to morons.

Got 10% down?

 
 
 
 
Comment by Brad
2007-05-21 10:17:49

I agree, I am self employed, my mortgage is stated income, 15 year fixed at 5.5%. 20% down, which was required in 1999.

 
Comment by Mike_in_Fl
2007-05-21 10:47:09

Stated income loans are a legitimate lending tool … if used properly (meaning, by borrowers who cannot prove income in the traditional sense, but actually MAKE good money and have good credit). Think of a chainsaw — you can use it to chop down a tree to make firewood, or you can use it like that guy did in Scarface.

During the boom, stated income loans were used as “affordability products.” That’s a nice way of saying lenders used them to put borrowers into houses they couldn’t afford with their “real” income. Shame, eh?

 
Comment by WT Economist
2007-05-21 11:11:59

Can you show income on your tax returns for several years? If so, what’s wrong with “average income” loans instead of “stated income loans?”

Comment by HARM
2007-05-21 11:50:46

Thank you. I agree there has to be loan products for the self-employed, or people who get a large % of the incomes from bonuses (IBs), but there is a good reason why no-docs are called “liar loans”. You should still have to prove a history of verifiable income to be able to get a mortgage –and provide a sizeable down payment.

Comment by DenverLowBaller
2007-05-21 11:59:12

I can agree with that. Will a broker take into consideration 7 years worth of income, with the last 2 years being low due to starting a business and year three 2007 getting a substancial ROI on sacrificed income? I heard last two years period, stated-income, better have saved for a down payment when you where working for “The Man”. (Which I have.)

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Comment by Housing Wizard
2007-05-21 13:51:30

Lilll -25% down with good credit on a stated loan is not a high loan risk for a lender ,so I agree with you that all stated loans should not be removed .

Comment by tj & the bear
2007-05-21 23:04:45

Given a high enough downpayment all they should need is a friggin’ signature (given a normal market and realistic appraisal, of course).

 
 
Comment by joe momma
2007-05-21 15:02:32

I still don’t see the need for a stated income loan. If your income swings from year to year it can be averaged. Now if you cannot document your income because you are ripped off the government avoiding taxes…

And that is the problem. How do we know who is who?

Agree down payments should be required. No argument. But if you cannot document and prove your income (averaged or otherwise) what exactly do we base your ability to repay the loan on?

Everyone should have to prove their income and considerations should be given to your type of situation.

Comment by CA renter
2007-05-22 03:13:00

Just following you down this thread, Joe, & agreeing whole-heartedly will all you’ve said! :)

 
Comment by LILLL
2007-05-22 10:26:58

Joe Momma says… what exactly do we base your ability to repay the loan on?
Your credit score. If I put 20% down it is not high risk for the lender….Some folks with lots of money don’t pay their bills and some folks with a little money pay ALL their bills. Credit score is everything if you are putting at least 20% down. I’d finance that loan myself.

 
 
 
Comment by aladinsane
2007-05-21 10:07:07

No Buyers Aloud?

 
Comment by aladinsane
2007-05-21 10:10:29

Sadly, Mary was amongst the 36 let go…

“San Rafael mortgage broker Paul Financial let go of 36 employees this month. Peter Paul, president of Paul Financial, said the company won’t make money this quarter given the drop-off in lending and the decision to set aside reserves for loans that might go bad down the road.”

Comment by Christian
2007-05-21 10:23:24

Wow that’s a great name to have for this industry!!! Peter Paul.

I guess that the people who were stupid enough to take out no-doc liar loans for way more than they should ahve bought, are going to have to rob Peter, to pay Paul….Mr. Paul, that is!

Comment by P'cola Popper
2007-05-21 10:38:10

Almond Joy or Mounds?

Comment by Bill in Carolina
2007-05-21 10:53:31

Now owned by Hershey Foods.

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Comment by domi
2007-05-21 14:30:37

Would you like artificial or real?

 
 
 
 
Comment by auger-inn
2007-05-21 10:40:34

You figure they are singing “Puff, the magic income . . .” song right about now?

Comment by aladinsane
2007-05-21 10:46:40

Sometimes you feel like lowering the monthly nut, sometimes you don’t…

Comment by Bill
2007-05-21 16:27:12

That may be the funniest line I’ve read in a long time. Would have been a great ad headline for one of the F Lenders!!!!!

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Comment by az_lender
2007-05-21 11:12:56

Paul Stookey (of PP&M) lives in a pretty nice house in Blue Hill, Maine, and I daresay it’s paid for.

 
 
 
Comment by MikeG
2007-05-21 10:13:27

(duplicate post from the Craigslist topic since I’m guessing not too many people go back to read it after later topics are up)
Press Release from Fair Isaac

May 17, 2007 - (San Francisco, California, USA) - Fair Isaac Corporation (NYSE:FIC) today announced from its InterACT 07 conference that U.S. businesses have now used more than 100 billion FICO credit scores to make smart decisions about their customers and prospects. Also today, Fair Isaac announced that its researchers have added key innovations to the Classic FICO credit risk scoring model that will significantly enhance its predictive power, without changing important features such as the score range of 300-850 .

The company plans to begin delivering the new FICO score innovations starting in September.

Fair Isaac’s development tests indicate that the new Classic FICO score research model increases predictive strength by 5-15 percent, with the largest increases coming in three important consumer segments:

*Originations and new accounts
*Borrowers who pose higher risk, often referred to as subprime borrowers
*Borrowers with thin or young credit bureau files

… Anyone have ideas on how the calculations will change?

Comment by House Inspector Clouseau
2007-05-21 10:34:39

The formula that Fiar Isaacs uses is a closely held corporate secret.

Thus, we’ll never know how they changed it, since we don’t know what it is now.

the general principles will likely stay the same, just a little tweaking.

Comment by DrChaos
2007-05-21 12:37:33

It’s very likely that the formulae are continuously updated with new empirical data, as economic patterns and scam types change.

Think of it like Google’s spam filters (which are damned good). They have to continuously employ people to update the algorithms as spam probabilities change. Some of the changes might require just refitting existing methods on new data sets, and others require more sophisticated mathematical inventions.

Remember that the FICO score is given with associated calibration data to the lenders. The lenders then decide on their own how to use it. A good FICO score means that in the past you were sensible.

A good FICO score combined with an insane loan is still probably worse
in the future than a average FICO score combined with an average loan.

 
 
Comment by climber
2007-05-21 10:35:16

Some of this is self fulfilling. As more and more companies start to use the FICO scores the very ability of people to access credit is impacted by the score more than by themselves. Even insurance companies are setting rates based on these silly scores. It’s just like how an rating downgrade can send a company into default and bankrupcty.

Comment by bluto
2007-05-21 20:16:09

As someone who pays my bills on time, I like that someone noticed that we don’t generally cause insurance claims and gave us a discount. Insurance should give those who are lower risks better deals. It’s not hard to maintain a good FICO, you just pay your bills on time.
On the downgrade, the wisest words I think I’ve ever heard came on the last day of a finance class that taught us all about debt and derivatives. The prof, told us how he was able to retire at roughly 40 and had the bank president asking if he could do his thing a little longer. Anyway his closing words of advice were, I’ve seen lots of people make and lose lots if money, but no one has ever gone bankrupt without borrowing money.

Comment by yogurt
2007-05-21 22:55:02

Well, OJ Simpson did. And getting a little more relevant, medical expenses are one of the leading causes of bankruptcy in the US - I’m sure some of these unfortunates had no prior debts.

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Comment by P'cola Popper
2007-05-21 10:43:45

Will lenders re-run FICO scores on all loans given out over the past couple years based on the new system?

 
Comment by HARM
2007-05-21 11:53:29

If the CAR’s revamped “affordability” index is any guide, everyone is going to have a near-perfect FICO score very soon.

Comment by ajas
2007-05-21 12:59:21

I’ve heard that one of the changes is that having an Option ARM mortgage will ding your score!
http://www.danmelson.com/posts/1147461204.shtml
There is a high likelihood that in the near future the fact that you possess a negative amortization loan will be counted heavily against you, score-wise. The reasons this change is coming is obvious: Your payment every month is not covering your interest charges. This is not a situation that can go on indefinitely, and it is indicative of someone who is likely to be in over their head.

If that’s true, talk about being doubly screwed when you go to refi.

“I’m sorry, Mr J6P, but your principal is growing, your house depreciating, your FICO dropping, nobody’s buying, your CCs are crying. I’m afraid we can’t offer you a refinance.”

 
 
Comment by tcm_guy
2007-05-21 14:09:28

There is alot of blame to go around, but part of the blame of the housing mess has been been the traditional 350-850 scoring. The credit rating industry has to respond somehow,and my guess is that this is a lot of press-release purchased hype for zero marginal improvement of this scoring.

The problem is that a three digit “magic number” to score credit worthiness is one dimensional, and as the housing meltdown has shown us this model has broken down before our eyes.

Maybe somebody should to come up with a “z-score” (call it anything you want) that adds depth to the three digit FICO. The “z-score” would be a measure of NEW debt load an applicant can handle, and would be closely tied to their income. So while a mortgage broker and/or applicant can play games with their “income”, a z-score would be what it is as reported by a credit rating agency and could not be altered.

Now, would it be fool proof? No. I rememebr reading last year about a Dena Webster, a Realtor (TM) and mortgage broker in FL who purchased about 15 porperties and her mortgage payments where (at that time) about $50k a month. The housing insider fraudster fools with a “heads I win, tails society picks up the mess” mentality are determined and can not be stopped, they can only be slowed down a bit.

A “z-score” requirement would not do away with long term multi-year housing and credit cycles. But the point is that a “z-score” that is required on all mortgage applications could probably have prevented this housing ponzi scheme to have reached such unprecedented heights.

Got 10% down?

 
 
Comment by hd74man
2007-05-21 10:17:04

More drivel from the pundits.

Man, everybody under the sun tippy-toe’s around the main issue.

Affordability.

The verbiage relating to “financing” is all nonsensical trash talk.

Rates are @ historic lows.

However…

The $400/$500k starter home mentality is toast.

The high buck energy/prop tax glutton McMansion is toast.

The sucker pond has been fished out.

Until prices re-set prior to 1998 which will involve 40/50% valuation declines it’s essentially a dead market.

This simple fact is like a loose high tension 220 volt wire…nobody dares touch it because of what it implies.

…meaning $5 trillion in equity is toast.

Comment by GetStucco
2007-05-21 10:22:55

“Until prices re-set prior to 1998 which will involve 40/50% valuation declines it’s essentially a dead market.”

I totally agree with your post, and especially this point. But I see the prices essentially in a deep freeze — not correcting very quickly. I am wondering about what accounts for the apparent paralysis of the invisible hand? Hopefully, the condition is temporary, as otherwise, end users will be priced out forever.

Comment by gwynster
2007-05-21 11:07:08

Is there where we are headed? Only the wealth own and we go back to the landed gentry system? I really hope not because you will see domestic unrest in a bad way.

 
Comment by Groundhogday
2007-05-21 11:16:11

I’m seeing the same thing. Sellers are still very stubborn, inventory grows, sales go over a cliff, but prices creep down only slowly. People would rather die a slow death of negative cash flow for a couple of years rather than bite the bullet now and cash out of the game. I even see builders hanging on to spec homes for a year before they capitulate.

 
Comment by yogurt
2007-05-21 23:05:38

But I see the prices essentially in a deep freeze — not correcting very quickly

That’s a statistical illusion. Prices are correcting quickly. Look a same-house prices, not aggregate statistics.

Like in Laguna Beach

Which is where Warren Buffett bailed out of the market in 2005,BTW.

 
 
Comment by kthomas
2007-05-21 10:27:27

It’s called the Ownership Society. I love that one.

 
Comment by DC_Too
2007-05-21 10:43:13

“Until prices re-set prior to 1998…”

That is a wee bit over top, don’t you think? Prior to 1998 was the bottom of the last real estate recession. Prices were beaten into the ground with a sledgehammer - below trend and a tremendous value relative to rents and incomes in many, many places.

40/50% declines in most bubble markets put us back to around 2001 or 2002 - probably about right, mean wise.

Comment by JimmyB
2007-05-21 10:50:06

1998 wasn’t close to the bottom of the bubble where I live. Try 1993. 1998 represents 5 years of rapid appreciation from the bottom.

Comment by az_lender
2007-05-21 11:16:33

Eastern crash ended before western crash. You must live in the east JimmyB ?

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Comment by JimmyB
2007-05-21 11:54:13

West. Not CA.

 
 
Comment by Groundhogday
2007-05-21 11:19:23

Here in WA state, things started moving back up around ‘97. 1998 was probably still a bit below the long term mean–BUT when this crashes we will eventually see home prices below the long term mean.

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Comment by kcdallas
2007-05-21 11:57:50

The last bottom in the mid 90’s seems a little less synchronized than the top 88-89 at least in California
http://www.rntl.net/history_of_a_housing_bubble.htm

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Comment by GetStucco
2007-05-21 10:59:51

“Prices were beaten into the ground with a sledgehammer -”

That sounds like a reasonable forecast for the next several years if locally frothy markets are allowed correct w/o govt intervention to prop up unaffordable prices.

Comment by DC_Too
2007-05-21 13:43:58

In my neck of the woods, “pre-1998 prices” means about 80% below peak (summer ‘05). For that even I, the furriest housing bear in our nation’s capitol, am not holding my breath. My bet is something like 30% nominal follwed by years of stagnation - inflation will take take the rest.

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Comment by tj & the bear
2007-05-21 23:16:53

Over the top? Not at all. This is not a regional housing cycle. The downside will be absolutely breathtaking.

Comment by CA renter
2007-05-22 03:22:24

Yep.

The question isn’t the “inflation” number, it’s the wage number.

How many people are better off today than they were in 1998/1999? You must not take into consideration promotions, job changes, etc. Think only of the same positions, with the same companies, etc. Is the pay higher? Remember to consider healthcare, employer-paid pensions/retirement contributions, etc. How about job security?

Also, what’s been happening to the cost of everything else? As cost in other areas go up (healthcare, food, energy, etc.) there is less money to allocate toward housing costs. This (cost inflation without wage inflation) is **deflationary** for housing.

I agree that we will see pre-2001 prices (nominal), unless we experience some type of significant monetary inflation (happening now???).

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2007-05-21 10:51:45

“The Illinois Association of Mortgage Brokers has sent out an alert to its members, warning that if a new proposed amendment passes bankers and brokers will not be able to originate any ’stated-income’ or ‘non-income-verification’ loans. The trade group fears that if the language passes, loan offices will be held ‘personally responsible’ for their actions and could have their personal assets attached by the state attorney general.”

I hope that passes! That would bring lending to a screeching halt. The only people who would be getting loans are the deserving.

Comment by sfbubblebuyer
2007-05-21 11:11:09

Personally, I think the only law we need to add to the books is a securitization law.

In order to securitize a loan, it must :
1) Be at least 12 months old. (Seasoned)
2) Have a principal (downpayment + princ payments) balance of
a) 20% of OLV for subprime borrowers. (Original Loan Value, not current appraisal. You can’t do a no down, have 20% appreciation, and call it securitizable. The buyer needs to have paid 20% towards the original value (loan + down), as downpayment and principal payments.
b) 18% of OLV for Alt-A
c) 15% of OLV for Prime
3) Have no other leins against the residence (No seconds or HELOCs)

All of these standards would move towards responsible lending while still allowing wall street to provide liquidity.

Comment by az_lender
2007-05-21 11:20:48

I think (1) and (2) make sense. I don’t think (3) makes any sense, because the borrower can go get seconds and HELOCs any time AFTER the loan is securitized, so why not before.
But the seconds themselves should not turn into “securities,” except as txchick57 mentioned, at a few pennies on the $.

Comment by sfbubblebuyer
2007-05-21 11:31:49

Number 3 makes sense from the standpoint of keeping loan mortgagers from giving helocs to their customers to pay off enough of the primary loan to ’securitize’ the primary loan. It’s just to try and keep, say Countrywide, from gaming the system by seconding its own mortgages to get them off the books faster. Piggyback loans are not vehicles for financially stable individuals. Only really good mortgages should get securitized.

Also, anybody who puts a second or HELOC on their home themselves within a year of getting the home is probably not in the greatest financial shape, which would argue for a higher default rate for those consumers.

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Comment by Potential Buyer
2007-05-21 11:49:09

Evidently, you don’t live in the bay area. Not many have 20% down for $803,000 homes.

2007-05-21 12:26:38

I think that 20% down requirement would bring prices in line. You wouldn’t have to worry about $800,000 starter homes. I think prices would settle into a more reasonable range.

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Comment by sfbubblebuyer
2007-05-21 12:32:59

I do live in the bay area, and have saved up 20% down.

However, this wouldn’t preclude 10% down, or 5% down, or 3% down, or even 0% down. But originators would have to keep those loans on their books until they were paid down to a reasonable level. The CEO of CFC would howl like a stuck pig if he had to maintain crappy loans on his book until they failed or had actually proven out to be performing loans. That’s all this would do. Force lenders to eat their dogfood.

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Comment by MacAttack
2007-05-21 12:38:51

That’s why I moved AWAY.

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Comment by Reluctant Relocator
2007-05-21 10:54:11

As an owner (who has a signed contract to sell on his condo) I’ve come to embrace the rationality of renting in this market. It’s amazing how many people (even ones whom I respect for their fiscal knowledge) question why I’d “pay someone else’s mortgage” rather that purchase.

So I explain to them that renting is at least $1000/mo cheaper (if not more) than buying and that even after you factor in the mortgage interest deduction it’s still $750/mo more expensive to buy.

$750/mo isn’t an insignificant amount of money and yet even armed with that new knowledge they don’t immediately say, “Oh, well in that case it’s a good idea to rent.” It’s still about not building equity. Except that if I buy right now I could very well be building negative equity even in an area with the potential of Washington DC near the new ballpark.

I don’t feel bad for choosing to rent a 2BR condo for $1800/mo rather than buying one for $2800. Are we that conditioned to buy even when it hurts us financially?

Comment by az_lender
2007-05-21 11:22:42

Good luck closing on your sale.

Comment by Reluctant Relocator
2007-05-21 15:40:40

Don’t I know it … I’ll believe it when all the docs are signed.

 
 
Comment by HARM
2007-05-21 11:57:33

Are we that conditioned to buy even when it hurts us financially?

A: YES. Loan”ownership” is the Amerikan Dream™. Buying = success, renting = failure. Debt = wealth, ignorance = genius. haven’t you been paying attention?

Comment by observer
2007-05-21 12:27:00

It should be called the Debtorship Society.™

 
Comment by MGNYC
2007-05-21 12:51:13

souds like my in-laws
they are so mad i did not buy.
well screw them i am renting for 50% of what it would cost me to buy in the area we like. meanwhile we have a beautiful apartment that is huge with hardwood floors , granite counters ss appliances blah blah blah and i have all my cash and can wait it out . i like failure if this is failure
viva la renting!!

 
 
Comment by cassiopeia
2007-05-21 13:13:15

I don’t feel bad for choosing to rent a 2BR condo for $1800/mo rather than buying one for $2800.

Sounds exactly like the situation we are in, but in our case the mortgage payment would be closer to $5,000 because we live in crazy LA’s Westside. However, although it is a no-brainer from the financial point of view (I can’t even think where we would be without all the money we were able to save by keeping the housing expenses low), you are in trouble when you want to move to something a little bigger if your family grows. For us, it means paying no less than $3,500 in rent for something not so nice that has 3 bedrooms, so we end up being stuck always in the same place. It doesn’t seem right to be paying that kind of money in rent (”throwing it away”, I mean), but houses have not come down yet to a level where you could buy a decent house and pay a mortgage for that amount. So, you keep on being a bitter renter, you’re stuck. That’s the downside, although I realize it would be much worse to be trapped in an ARM…

Comment by Central Valley Guy
2007-05-21 15:42:54

Same with us Cassiopeia. A mortgage on the Westside for anything reasonable is going to be approx. $4500/month, if not more. We rent for $1500/month right now. So we’re actually saving about $36K/year. Yet we still get tsk’d about renting from our debtor friends who can’t afford coffee because they can barely cover their monthly payments.

Comment by cassiopeia
2007-05-21 16:05:01

Same here, Central Valley Guy, but the other day some friends of ours who bought in 2003 said for the first time something like “I wish I didn’t have a mortgage” . They are OK, they are not going to foreclose or anything, but coming from them it was a surprise because they kind of pitied us for not having bought (OK, I accept a little pity for not having bought in 97, but that’s it). Thank God for this blog…

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Comment by joe momma
2007-05-21 14:42:12

And please factor in the massive loss you will take buying right now, and the inability to sell if you need to. And finally, the lost opportunity to make any money off the transaction for years.

There is zero upside to buying, so prices must come down to reflect that reality.

 
 
Comment by flatffplan
2007-05-21 10:55:31

Rare Raphael portrait expected to fetch over $19M at auction

this has to be a bubble
the we can’t buy RE bubble so we buy other stupid sht

Comment by Central Valley Guy
2007-05-21 15:48:17

You obviously don’t know much about the art market. I worked for over ten years at the Getty Museum so I can tell you that $19 million for a Raphael is a looooow estimate. I’m guessing it will go for twice that amount. And it hardly qualifies as stupid or shite. Let’s all stick to McMansions when we use those adjectives.

Comment by bluto
2007-05-21 20:27:48

Saw a very interesting article about the art market the other day in the FT. Made the obvious point that essentially all assets have two means of being valuable (cash flows generated or selling it to someone later for more money). Art isn’t going to generate cash flows that approximate current value (so fundamentalists hate it) but that doesn’t mean that other people won’t pay more for it in the future.
I’d be a little concerned that too much art is being inflated by hedge fund managers trying to buy social standing (until they realize that they couldn’t buy it anyway), but a Raphael is more like a house in a good neighborhood so it’s going to retain value into the future.

 
 
 
Comment by dude
2007-05-21 10:59:32

Well, I’ve run my monthly DQ numbers and 93552 is now at 20.8 months of inventory! NODs surpassed sales for the second month in a row! The good side of town, 93551, only 24.6 months of inventory with sales almost cut in half March to April (78 vs. 42). In one month then inventory went from 11.69 to 24.6 in what is supposedly the nice end of town.
I think I here the screams of distraught flippers jumping from the top floor of the residence inn (by Marriott).

 
Comment by SoFloMoe
2007-05-21 11:37:34

There are no more buyers because they weren’t there to begin with. What you had were fools buying homes they couldn’t afford. They still can’t. And the rest of us who refused to buy overrated, overvalued, overpriced postage stamps AREN’T GOING TO BUY NOW EITHER. The only thing that is going to change the housing issue is a roll back of prices to a reasonable and fair price.

As for the “Ay-liens” the majority of Americans are still quite Ignorant as all get out. The masses have been sold a story and you all just regurgitate the message for the Corporate Man like good little Americans. Too damned easy.

Do you really think…. now please I beg you to think past your ignorance … do you really think that if there were no “Aliens” (those dirty Mexicans) in our society that Corporate Man will cut down YOUR costs? Really? You think if we deported all of them, that the price of healthcare will go down? Really? How about insurance? You think? Really? Oh, yeah and they will raise minimum wage. Of course. And gives all of our children free care! What else? They have us so fooled we fight each other instead of banning against corporate greed.

Fools. They are making you all eat the Mexicans alive while they pick your pockets.

Comment by spike66
2007-05-21 11:45:23

Clearly English is not your first language.
Illegal aliens are just that…illegal. All else is BS.

 
Comment by memphis
2007-05-21 12:20:13

Yeah, yeah - and you “band” against something, not “ban”. But there is a bit a reason beneath the pitched rhetoric.

I do wonder if any kind of immigration reform will make it through both houses before enough citizens are hosed that we do, indeed, start looking for scapegoats to persecute or prosecute in earnest. I think it would be better not to irretrievably bar the door against legal remedies (deportation, prosecution) for a perceived screwing of the American worker, by illegal labor, the corps that hire them, or whoever you like. Bar that door, and any surge of ill will is going to find its outlet in vigilantism and political extremism.

If a legion of Red, White and Blue FBers perceive that “our homes” are being “given away” to foreigners, it’s going to get even uglier. I don’t know what the tipping point might be, but I know there’s enough historical precedent.

 
Comment by Darrell_in _PHX
2007-05-21 15:46:19

Over the weekend, my Gubner was on TV saying this senate amnesty proposal is the only realistic solution.

This new proposal promises some new tech ways of locking down the job market.

So, why can’t we do that!!!! And give the amnesty to those that have hired illegals. We spend a year building these new methods of locking down the job market, and setting up a guest worker program that offers a means of becoming a citizen, assuming you learn English and can pass a GED and citizenship exam.

Once these programs are in place, we run the new database program and spit out lists of illegals and pass those to employeers. The employer then has 10 months to replace, at a rate of 10% per month, their illegals with guest workers.

WHY is this SO UNREALISTIC??????

At the end of the employeer amnesty, anyone hiring an illegal gets MASSIVE fines.

We don’t need to round up the illegals and take them back. Take away the jobs and they’ll leave on their own.

Comment by LA-Architect
2007-05-21 20:44:46

The same people complaining the LOUDEST about the proposed Amnesty bill are the same people who have illegal alien nannies, gardeners and handymen. Everybody is complicit. If there was no work then you would not have the problem. The politicians allow it because the cheap labor helps the economy. However, I would argue that the so called “cheap” labor is not cheap at all. Here in L.A. the schools, hospitals and insurance industries are all negatively impacted due to the illegal immigration. We ALL end up paying for cheap labor.

The diversity in Los Angeles is a good thing. However, there needs to be some order.

 
 
Comment by Reluctant Relocator
2007-05-21 18:20:19

“Fools. They are making you all eat the Mexicans alive while they pick your pockets.”

Uhh, what makes you think more illegals won’t just take their place. Employers hire illegals to cut costs … Legal “aliens” = payroll taxes.

Did I miss something?

 
Comment by CA renter
2007-05-22 03:42:29

do you really think that if there were no “Aliens” (those dirty Mexicans) in our society that Corporate Man will cut down YOUR costs? Really? You think if we deported all of them, that the price of healthcare will go down? Really? How about insurance? You think? Really? Oh, yeah and they will raise minimum wage. Of course. And gives all of our children free care! What else? They have us so fooled we fight each other instead of banning against corporate greed.
——————————–
I’m trying to see past my ignorance here, but if getting into the insurance business becomes very profitable (assuming lower costs if illegals are deported & those costs are not passed on to customers), there will be more entrants into the isurance business. At some point, serious competition would ensue and the prices would drop — assuming there is a “free market”.

We do not need to “raise minimum wage” but if there are fewer people willing to do a job at $XX, then the employer will have to automate, scale-down, outsource, go out of business or offer wages for which qualified, capable, intelligent, **Americans** would be willing to work.

Just an anecdote…back in the mid-late 80s, I dated a fellow who was a journeyman carpenter and ironworker (both). Very talented, and earned between $22-$28/hr. ***in the 80s***. How much do you think that position pays today? (understanding that the unions have taken a severe beating in the meantime)

Has the quality of workmanship improved? HAS THE PRICE OF HOUSING (OR COMMERCIAL BUILDINGS) COME DOWN TO REFLECT THE LOWER WAGES??? (a pet peeve of mine)

Contrary to the hype about illegals giving us “lower costs”, the truth is they compete with us for the same resources (houses, infrastructure, food, energy, water, etc.), effectively increasing costs to us. Additionally, our wages have gone DOWN, while the cost of things that matter have increased exponentially.

I have yet to see an argument favoring illegal immigration that can stand up to even minimal scrutiny. It’s all emotional hype, and doesn’t address the fact that the problem lies in MEXICO — and their refusal to combat corruption & foster healthy growth in their own country.

 
 
Comment by SMathis
2007-05-21 11:53:07

“A big part of GreenPoint’s business is making jumbo loans, those that exceed Freddie Mac and Fannie Mae’s loan limit of $417,000.”

Remember olden times, when a “jumbo loan” was anything in excess of $200K?

Considering the US’s median annual household income is around $46K, it seems to me that should still be the definition!

 
Comment by SoFloMoe
2007-05-21 12:31:19

Memphis, that’s thinking. I agree with you. We are being squeezed. My point is that this is a tactic which alwasy works. Pit one party against the other while each is being used and abused. Even while our politicos are strategerizing how this immigration issue can make them look good. Wake up sheeple!

 
Comment by memphis
2007-05-21 15:35:00

I don’t want to make any kneejerk assumption about your leanings, but there’s no evidence of agreement here, beyond you and I agreeing that politicians are manipulative and cynical. I’ll defer here to anyone who likes to dissect the ideological arguments, but I’m kind of interested in the practical ramifications of what seems to be coming down the pike (effective amnesty for many, continued disenfrachisement of large segments of *US Born* society) - should the housing market and economy reverse as viciously as most here think it will.

 
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