The Stupidest Plan Ever
Readers suggest a topic on the conforming loan proposals. “How about the bundling of the Fannie Mae’s and Freddie Mac’s conforming loan amount raise? Isn’t it just going to delay the inevitable decline to reasonable prices by the year it’s supposed to be in place? I’ve been thinking 2010, maybe now 2011-2012 for jumping back in…”
One said, “Just because Fannie/Freddie can doesn’t mean they will take on those mortgages. They can’t be forced to, can they? Jeeze… one would hope their management has learned something from this whole mess.”
Another, “After thinking about it, I’ve come to the conclusion that the conforming loan extension – while it won’t help many people – is needed in order to prices to get back to a reasonable level. This assumes that Fannie/Freddie won’t touch a toxic loan for this amount but insist on reasonable underwriting standards.”
“I’m not dumb enough to believe that no one will default on one of these things, but if the underwriting standards require anything reasonable (PITI not exceeding 29 percent of take home, for example, along with fully documented income) the net effect should be to restore some order to the high end market, and as it comes down it will hasten the decline of the non-jumbo properties as well.”
Another added, “Other than qualifying another generation of knifecatchers to bring liquidity to the moribund resale market and reprice the comps at the next leg down, I don’t see this raising of the GSE limit as having much effect on demand.”
“Prices were driven through the roof in large part by making loans to unqualified buyers, and that in turn was only made possible by ignoring prudent lending practices like income verification. With 100+ subprime lenders gone for good, demand is far more dependent at this point on fundamental considerations like household income and credit history.”
“NAR President Richard Gaylord, said that raising the loan limit on conventional financing is urgently needed.”
“‘The most effective way to stimulate housing and minimize the potential for a recession is for lawmakers to raise the limit on conforming mortgages to $625,000, which would open safe and affordable financing to buyers in high-cost areas,’ he said.”
“NAR projects the higher loan limit would increase annual home sales by nearly 350,000, reduce foreclosures by 140,000 to 210,000 and increase economic activity by $44 billion.”
“‘What’s more, this would come at no cost to taxpayers — it’s a policy change that could really boost the economy,’ Gaylord said.”
The Tribune. “Local analysts say San Luis Obispo County residents with homes in the $600,000 to $900,000 range — and those looking to buy or refinance them—could see benefits. That bracket represents more than 500 houses now for sale in the county, said Matt Colonell, mortgage broker in San Luis Obispo.”
“‘Because the proposed change would make their houses more affordable to buyers, their houses might sell more quickly and for a higher price,’ he said. ‘(It’s money) for real estate agents, title companies, mortgage lenders, home improvement contractors and hardware stores.’”
The Union Tribune. “‘This would be absolutely, phenomenally excellent news for home buyers and sellers because it will help so many more people to qualify for loans that they can afford,’ said Lori Staehling, president of the San Diego Association of Realtors.”
“‘We say hallelujah!’ said Sherm Harmer, incoming president of the San Diego County Building Industry Association. ‘We’ve been waiting for it for years.’”
“Jim Bliesner, director of the San Diego Reinvestment Task Force, said federally backed loans dried up in the county in recent years because prices outstripped the conforming cap.”
“‘Some people didn’t have any choice but the subprime market – and they were getting steered away by mortgage lenders,’ Bliesner said. ‘I think it’s a fine thing for them (to loosen the restrictions).’”
“Bob Tepedino at Century 21-Horizon said owners who bought at the peak of the real estate market and have lost equity will not be able to refinance into the new loans. He also said buyers hoping for easier credit terms will not be helped.”
“‘A lot of people are clutching at straws because the majority of people I know who are extraordinarily interested in refinancing don’t have the equity or are upside down (owing more than the property is worth), in which case refinancing is probably not an option,’ he said.”
“‘It’s not going to help the lower rung of the market,’ said Kelly Cunningham, economist at the San Diego Institute for Policy Research. ‘And in San Diego’s case, that’s where the foreclosures and bankruptcies are taking place.’”
The LA Times. “‘It’s the single most effective step they could take to stabilize the housing and mortgage market,’ said Rick Simon, a spokesman for Calabasas-based Countrywide Financial Corp., the nation’s largest home lender, which had led the lobbying to raise the loan limits.”
“Lobbying for an increase, the National Assn. of Realtors had estimated that increasing the conforming loan limit to $625,000 would strengthen current home prices by 2% to 3%.”
“‘This is a very positive development for California’s lenders and homeowners,’ said Susan DeMars, executive director of the California Mortgage Bankers Assn.”
“Among those sounding skeptical notes was UCLA economist Edward E. Leamer, who said higher loan limits ‘are not going to matter much now’ because the housing markets are still destabilized by bubble-era home prices that must continue to fall.”
“The proposed new conforming loan limit is far beyond the reach of most people, Leamer said. ‘Most Americans can’t afford a $700,000 house,’ he added. ‘They don’t have the down payment; they don’t have the income.’”
The Press Democrat. “(Some) are skeptical the changes will do anything more than help a small number of high-income buyers afford larger homes, doing little for the vast majority of homeowners struggling to hold onto their houses.”
“‘This is the stupidest plan ever,’ said Chris Thornberg, founding partner with Beacon Economics. ‘You’re making it cheap for high-income people to borrow more money. Great!’”
“Thornberg, formerly with the UCLA Anderson Forecast, was one of the first economists to warn of a housing bubble in California and the consequences of a real estate slump. Despite the recent drop in home values, Thornberg said prices remain too high for most people to afford.”
“Sonoma County prices have dropped 24 percent since peaking at $619,000 in August 2005. In December, the slowest month on record, the median home price was $466,500.”
“Raising the lending limit won’t help people refinance if they bought at the peak in 2005 and now owe more on their loans than their homes are worth, said John LeCave, owner of Fountain Grove Mortgage of Santa Rosa.”
From Business Week. “Fannie and Freddie…still haven’t fully rebounded from the big accounting scandals that first came to light in 2003. With substantially thinner profit margins and tighter regulatory constraints, they have limited financial freedom to bail out others’ bad investments.”
“‘The real issue is that home prices are overvalued, and it gets uglier by the day. This might help on the margin, but it’s not going to stop home prices from falling,’ says mortgage analyst Paul Miller of Friedman, Billings, Ramsey (FBR). ‘It’s not going to solve the problem, but it’s a way for [Democrats] to get something through that they’ve wanted for a very long time.’”
“‘It is timely, it is targeted, and it is temporary. And it was done in record time,’ House Speaker Nancy Pelosi (D-Calif.) said in announcing the deal on Jan. 24 with Treasury Secretary Henry Paulson.”
“In the frenzy, the Administration surrendered its opposition to lifting the limits on Fannie and Freddie. ‘I got run down by a bipartisan steamroller,’ Paulson said in explaining the about-face. ‘I was somewhat skeptical that, without this, we wouldn’t get the reform. So now I’ve got to be an optimist.’”
“Loans from California alone accounted for nearly half of the market for jumbo securities during the first half of 2007. ‘Of course, many of the jumbo loans are in places where house prices are falling, so there are collateral risks in those areas,’ says Douglas Duncan, chief economist for the Mortgage Bankers Assn.”
“OFHEO also will have a say. Director James Lockhart opposes raising their loan caps without additional oversight.”
“‘We just don’t think it would be good to divert resources and manpower of these two firms from doing what they do best, which is supporting the conforming loan market,’ Lockhart told BusinessWeek in a recent interview. ‘They’ve never bought jumbo loans. They don’t have pricing models, they don’t have risk management models. So it would be a new world.’”
“Duncan estimates it will take Fannie and Freddie at least three to six months to assess the new risk and ramp up their systems to process jumbo mortgages. To offset that risk, Fannie and Freddie will have to charge higher fees for jumbo loans. So the interest rates won’t be much better than today’s pricing, according to Duncan and a separate analysis by OFHEO.”
“The companies are also hamstrung by a regulatory order that keeps a tight leash on their operations, requires extra capital, and limits their growth.”
“‘While Freddie Mac will continue to do what it can to assist borrowers and help restore liquidity to the market, this additional responsibility would create a significant challenge for Freddie Mac as we continue to operate under severe capital constraints,’ said Freddie Mac spokesperson Sharon McHale.”
‘Because the proposed change would make their houses more affordable to buyers, their houses might sell more quickly and for a higher price,’ he said. ‘(It’s money) for real estate agents, title companies, mortgage lenders, home improvement contractors and hardware stores’
‘This would be absolutely, phenomenally excellent news for home buyers and sellers because it will help so many more people to qualify for loans that they can afford,’ said Lori Staehling, president of the San Diego Association of Realtors.’
So we’re back to the ‘affordability loan,’ huh NAR? You haven’t learned a thing, and IMO these people have sunk to a new low. Using a sea of FBs to push reckless policy they have drooled over for years.
Guess, what? If this thing passes, I’m going to make sure that as the inevitable blowback comes, you guys will be reminded of your support. And when it proves futile, I’ll point out the parade of people who became further FBs because they held on to the hope that you were going to keep their dreams of riches alive.
And I won’t forget the MBA, congress, Paulson, the builders groups, either. I have a long memory and plenty of hard drive space.
I think I hear something………
http://www.youtube.com/watch?v=st1lH8zcIuQ
“And when it proves futile, I’ll point out the parade of people who became further FBs because they held on to the hope that you were going to keep their dreams of riches alive.”
Ben — I am hoping your record keeping can serve as the basis for future class action lawsuits against the NAR.
I see a massive wave of fraud coming. If you are a hungry slimeball broker and see oppportunity to make the payments for your excessive lifetyle - this is your last hope.
Also, instead of 200 lenders going bust because of the first wave of massive fraud - this time the fraud will be on the balance sheet of FNM and FRE with the implied guarantee of the US taxpayers (yes I know you guys disagree). And, if their is no lending fraud, then raising the loan limit will fail!
‘ A federal proposal to increase the size limit on loans eligible for purchase by mortgage finance giants Fannie Mae and Freddie Mac has unsettled traders in the $4.5 trillion market for bonds backed by the “conforming” mortgages.’
‘Increasing the eligible loans to $729,750 from $417,000 would change the characteristics of mortgage-backed securities, leading traders to exact a premium for increased interest-rate risk.’
‘Borrowers with large, jumbo loans are more likely to refinance since their savings are greater for each incremental drop in rates than for a smaller loan. The loans will taint the bonds since traders don’t initially know the make-up of the securities known as ‘agency’ MBS.’
‘ Potential damage to the “to-be-delivered” (TBA) market — the most actively traded agency mortgage market where investors can buy bonds before they are actually created — prompted Wall Street dealers to call a special meeting with the Securities Industry and Financial Markets Association at 3:30 p.m. Friday, market sources said. A SIFMA spokeswoman would only say the group is in ongoing discussions with its members.
“The amount of money that investors are willing to pay for agency mortgages (bonds) could be lower if these loans are TBA deliverable and so mortgage spreads could widen,” said Ajay Rajadhyaksha, co-head of U.S. fixed income strategy at Barclays Capital’
On Wednesday the 24th, while Treasuries were setting new highs, MBS started rallying then huge MBS sell orders hit the street which caused large sell orders of USt’s. The US Ts had a reversal and were offered 1.5pts off the high (40bps).
For an interesting look at the T’s
CBOT
USH 30 min interval
The sell orders swamped the pit and the electronic trading until orders were canceled.
http://tinyurl.com/yt8wve
IMHO wait til the TIC data, I suspect large net foreign selling of US Treasuries.
So, Hoz, what do I do with my 401(k) money that has been parked in treasuries as the only safe option??? Cash or big cap value stocks?
I looked at the fund choices available
Your treasury fund is up about 2.3% so far this yr. That is a huge move! Take the profits. Can you trade between funds or are you stuck quarterly/semi annually?
of the other funds the best of the lot
is Europac A
EuroPac A (down about 13% for the year - but in good position for the Asian rebound)
It has more exposure to European markets than I would like, but it is well run (avg annual return 22%) and has excellent positions in Asia. (I am biased against Europe, I am short the Euro and short European stocks. IMHO the Euro is the most overvalued currency in the world).
this move in the 10yr was noticed by many, and I think this dovetails nicely with the bond fund thats short the Treasury market, you alluded to earlier in the week.
The perception of this event is signalling loss of control of the longer end of the curve, that area in particular is coming to grips with the stimulus and inflation returning to the States all while deflationary forces are attacking the emotional and defining goods of American Institutions. It may not be long for a 400 bps spread in the Treasuries to manifest.
Baltic Dry continues in depth depth analysis of how far down the commodity complex must go. I still sense panic and forced selling.
Hoz, thanks for the advice.
I can move at will, but it takes a couple days for the trades to complete.
I’m thinking of diversifying a touch. How does 20% cash. 20% US large cap value, and 60% into the AsiaPac you mention.
I assume you think the dollar has much further to fall against Asia currencies. Or, is it purely that you think the AisaPac stocks will recover?
My wife’s account, which actually has about double mine, is in U.S. government which has treasuries and GSE bonds. She has a lot more options than I do. I think I’ll do a similar distro on her funds. And maybe play with a few thousand, taking advantage of her having short funds. Maybe moving into and out short funds whenever we have a big spike up/fall.
It is a pretty well set pattern now. Government makes a big move, and market is up… until another hundred billion in losses, then another big down.
Since there is such a big delay in order to execution, I won’t play with more than 5% of the balance.
Hoz, do you think the Euro is more overvalued than the Pound? I have been considering going short a bit of each, but haven’t decided on the ratio. Also I have not found a way to easily short the pound, while the Euro can be shorted through an ETF as I recall.
60% AsiaPac is suicidal…
Just one stupid question from me: How does raising loan limits make housing “more affordable”??
Wasn’t it the mission of FNMA to help promote housing affordability??
Keeping the limits as low as possible forces the price down, if other means of finance are not readily available.
For NAR, it’s all about transactions. Legal, Illegal, fake or real, just turn the pump and spit out commissions.
Jumbo loans at 5.5% and non-jumbo at 5%. Raise the limit and a lot of the loans that would be at the higher rate MAY be able to get the lower.
But, wat if the GSE bond buyers decide that the larger loans are higher risk of refi (thus lowering the total retun on the bond). Well, then maybe everyone gets 5.25%… actually reducing the affordability on houses that were under the old limit.
I’m with you on this!!!!! Let’s throw all the IDIOTS out! Lets never use a realtor again. You do not need them. What service do they ver do?
Ben, can I preorder your book?
The Union Tribune. “‘This would be absolutely, phenomenally excellent news for home buyers and sellers because it will help so many more people to qualify for loans that they can afford,’ said Lori Staehling, president of the San Diego Association of Realtors.”
As opposed to those loans people couldn’t afford that your mtg broker buddies were pushing like crazy for the last fives years?
Euuuuhhhch, these people disgust me!
“…if the underwriting standards require anything reasonable (PITI not exceeding 29 percent of take home, for example, along with fully documented income) …”
My personal subjective belief is that the vast majority of recent entrants to the California housing market at below 29 pct of income are renters. Does anyone have statistics to document this, because I am highly interested? Just pulling a figure out of my arse, I would guess 95 pct of recent buyers in California pay over 29 pct of income on their mortgage, but I admit to having no hard numbers on which to base this conjecture.
California has an epic appointment with the JT.
I travel to CA frequently (family). The amount of fraud, overbuilding, rows and rows of empty “condos” is not to be believed.
And most of them are on neg-am loans, and most have never seen a recession in their lives. They are all on the GOOG-AAPL band-brigade which will end predictably.
I’ve seen no hard numbers either, but certainly here in the Alt-A Bay Area I would say that “95 pct of recent buyers… pay over 29 pct of income on their mortgage” - but only if their mortgage were a 30 year fixed.
Otherwise, all the creative products used in recent have allowed one to pay less than such a level.
raise the loan limit to 2million.. it’s a rich get richer thing.. most of my good clients with money in the bank and equity will jump to refi.. the poor suckers reseting or with out equity will have nothing available.. Just slowing down the train wreck.. nothing more nothing less..
the only thing that will help the economy and housing market is to flush this out as quick as possible and move on.. lesson learned for some, money made or lost for others..
I recall I read an article here at HB. A couple bought, got into trouble, refi’d to a 30 year mortgage, and still couldn’t make the payments. Eventually foreclosed.
Why is it that people seem to think getting out of an ARM to a 30 year mortage will save the day. Do they know that their payments are much higher? OR if they did get another ARM, they are just paying more interest than the principle. Or that they are only funding a depreciating asset?
I don’t really care if the loan limits go to 10 million. Houses at this time is a depreciating asset. Anyone stupid enough to purchase a pig and pay 80 percent of their income to keep up with the jones can rot if I care.
As for investors, “got a down?” NO!? good luck. If you did get a loan, then I don’t feel sorry for ya. I’ll read an article about how you are a victim in 6 months.
As for California, I can see people so far stretched that it is crazy. If they can live like that for the rest of their lives, so be it.
It goes to show how far apart data and reality is to the government. Governments rely on data but nevr really understand how people live in the US. They look at $150B to stimulate the economy but in reality the $800 given to tax paying individuals is a drop in the bucket. If they want a great stimulus plan, cut our tax rate in half.
“NAR President Richard Gaylord, said that raising the loan limit on conventional financing is urgently needed.”
“‘The most effective way to stimulate housing and minimize the potential for a recession is for lawmakers to raise the limit on conforming mortgages to $625,000, which would open safe and affordable financing to buyers in high-cost areas,’ he said.”
I was under the impression that solicitation under the guise of prostitution, was illegal.
I was going to seriously consider all the different sides to the loan limit argument, carefully and reasonably evaluating all the different pros and cons, and arrive at a reasonable position after much careful consideration.
But why bother with all that. If NAR is for it, I am 100% against, without even having to give it any thought.
“If NAR is for it, I am 100% against, without even having to give it any thought.”
That is a good shortcut, indeed.
If these people are such high-income earners, why do they have to get such large mortgages? Haven’t these people bothered saving up?
US policy is truly retarded… I remember when the latin american economies blew up, the US government said “don’t try to save your stock markets or your housing prices through artificial short-term means.” And this is exactly what is happening in an ad-hoc, ham-handed way. God Bless America - you’ll need it!
Yes, it is retarded. I thought the purpose of the FHA was to make houses affordable to the middle class. $700,000 is not middle-class affordability, even with a government-backed loan.
It has the scent of a politician who might, for instance, have a stake in shoring up the real estate market in a very expensive area, like say, San Francisco.
The name I’m thinking of begins with “Pel” and ends with “osi”.
Oh, I thought you might mean Schumer or Clinton. Or Boxer or Feinstein. The Senate has not weighed in yet, and there are a few Senators in flyover states that are making rumbling noises about this deal. it ain’t a done deal until it’s a done deal.
The Senate was designed to be the more “deliberative” body, wasn’t it? I don’t think we can depend on any of the above-named, but fortunately they still count only 2 votes per state — we can still hope that cooler heads will prevail.
The Senate was designed to be the more “deliberative” body, wasn’t it?
And I believe, at one time, before we became a superpower, it was the ultimate political office, not the presidency. In a democracy, a senatorship should be the ultimate goal.
Why every other senator wants to be president these days is a bit of mystery, other than getting use of the pretty swank plane and house.
Speaking of senators there, Vermonter, let’s hope Fat Cat Pat and Brooklyn Bernie don’t go along with their usual cohorts and shoot this thing down!
Just wait until we send all our worth less dollars to Canada! Eat moose rumps, eh.
All together sing,
“Let’s go to Victoria on the Princess Marguerite.”
–
According to William Ford, former Fedster, Fannie and Freddie are incompetently managed and should be reigned down. Their CEOs, of course, want more business but at whose expense? Let these Crooks put all of their own family money in the Scams of the companies and let us see how they behave then. Thru most of history vast majority of businessmen had most of their family wealth in their own businesses. Now, we have “an agency society,” as per John Boggle, and the agents are corrupt and looking for each other rather than the real owners, including the taxpayers in some case.
Jas
And another point. The GSEs need to attract capital to expand their business, while FHA has pretty much limitless expansion (actually, there is some sort of limit on how much business FHA can do annually set in statute, but it’s way higher than current volumes, and can you imagine Congress denying a request for an increase in this environment????)
The software seems to have eaten my first post, which makes the “And another point” intro seem a little odd!
What I had posted was
Why the concern in the MSM, Calculated Risk, and here about raising the GSE limit, while there is almost no talk about PERMANENTLY raising the FHA limit ABOVE the conventional loan limit? FHA allows lower FICO’s, higher PTIs, refinances from delinquent borrowers, 97 LTVs (officially, unofficially higher than that) than do the GSEs. And the GSEs have shareholders who want to at least try to make money, while FHA is run by political appointees concerned only with pushing the problem off for 12 months. And the GSEs have an implicit government guarantee, and some capital between them and a bailout, while FHA ha an explicit government guarantee and nothing between them and the taxpayer.
mort_fin,
So what is the FHA limit now? Given what you said, why wouldn’t someone go the FHA route instead?
The current limit for FHA is $362,000. I saw news reports saying they were raising it to over $700,000. I suspect that for the last few months lots of people under $362,000 have been going FHA. Look at the broker blogs - everything is “we do FHA” and “who has experience with FHA?” The numbers that Inside Mortgage Finance will release in the next couple of months will probably bear this out.
**raises hand**
I’ve been bringing up the FHA problem (as well as the GSEs)!!!
Definitely a big concern and where I think the govt will try to funnel our tax money.
“In the frenzy, the Administration surrendered its opposition to lifting the limits on Fannie and Freddie. ‘I got run down by a bipartisan steamroller,’ Paulson said in explaining the about-face. ‘I was somewhat skeptical that, without this, we wouldn’t get the reform. So now I’ve got to be an optimist.’”
Paulson is a member in good standing of The Axis of See no Evil, until it’s too late.
Paulson is “positioning”. He knows there are no good outcomes so he’s making sure that his nose is clean.
Paulson, the man who spent spring of 07 saying there is no bubble, the underlying economy is strong, there is a strong dollar policy, it’s all contained, it’s just subprime, the Chinese will revalue the yuan upwards, it’s all contained, it’s just subprime, it’s all good, there are no problems, it’s all contained, it’s just a small part of the market, we support a strong dollar policy, it’s all contained, contained, contained.
That Paulson??
Or, paraphrasing him at his best:
“The best economy in my business lifetime.”
Paulson should go back to the private sector but no one would take him after this fiasco.
I think I side along with ex-nvbroker (can’t remember all the letters in the middle ;)) on this one–this ain’t gonna do diddly in the long run. The liar loans are gone, they’re certainly not going to be giving out loans to folks nowadays with crap credit and where 75% of their income would be going towards the house. How many people are making enough with today’s loan standards to get a 700K loan? Not too many, all this will do is bring down the rate for those borrowing more.
I have heard on this blog that the FHA loans may become the new liar loans especially if conforming limits get raised.
Has anyone else here heard the same thing?
No because it is really really difficult to go through the FHA process.
(1) Complete documentation of income (like tax returnrs for several years, W-2s etc)
(2) Complete documentation of the source of the down payment. Have to show that it is in the bank and whereit came from - no 2nds allowed.
(3) Have to go through counseling on finanical management
(4) And the ever-present and demanding DTI requirements.
Not more than 31% of gross income for mortgage payment AND taxes AND insurance.
Not more than 41% of fross income for the house, credit cards, car payments, student loans and all other fixed debts.
(5) And don’t forget the picky home inspection doen by FHA staff.
(6) Then there is a pretty stiff PMI if the down payment is less than 10% - and that amount counts against the 31% cap.
(1) They do require complete documentation but how thoroughly do they check it?
(2) But they allow the down payment to come from third parties. And the new FHASecure does allow seconds.
(3) The “counseling” can involve reading a few web pages
(4) DTI requirements went away with automated underwriting.
(5) FHA staff don’t do home inspections. Appraisers, hired by the lender who wants to make the govt. insured loan, perform some appraisal like activities
(6) There is no PMI on an FHA loan. This makes no sense at all. FHA is government mortgage insurance for 100% of the loan balance. Why in hell would there be Private Mortgage Insurance?
(1) On checking documentation - pretty throughly. Here is the list:
7. Evidence of Social Security Number
8. Copy of Driver’s License
9. Credit Report
10. Verification of Income
11. Income Tax Affidavit (SFH 108), if applicable
12. Verification of Assets
13. Purchase Agreement/Contract to Build
14. Appraisal
15. Initial Application Affidavit, SFH 106(4/06)
16. Signed Federal Tax Returns for last 3 years, as applicable
(2) Down payment can come from a 3rd party BUT ONLY if it is gift and they can prove it. (Need a notarized statement or affadavit from the giver to that effect.) Also the giver has to be a relative or someone whith whom the borrower has a long standing relationship.
For borrowers whose income does not exceed 80% of the area median, the other option is a ’soft second’ from the housing authority of the state. (Here is is MSHDA.) It is aa down, non-amortizing loan to a maximum of $7500 that is due upon sale, refinance or transfer of the property.
FHASecure is that special program to refi out of a toxic ARM. Even there, we are seeing short-refis (same as a short sale but a refinance) because the property will not appraise and the one or both lien holders have to waive amounts owed.
FHA will consider allowing a 2nd but it has to be pre-approved on a case-by-case basis and in compliance with the guidelines. Very tough to get done.
(3) DTI are STILL in effect for FHA.
I do counseling, am on the NGO board for affordable housing matters for this county and thus spend a lot of time sorting through the FHA and state housing authority loan requirments.
Only certain lenders can originate an FHA loan. They have to follow the guidelines.
Here is a direct quote from the state housing agency loan product information for the FHA loans:
“QUALIFYING
RATIOS: Generally, the ratios should not exceed 31%/43%”
Sure looks like a DTI to me.
(4) PMI - oops. I had all the loan product lists open and it is the state housing authority loans that require the PMI for all loans with a greater than 80% LTV.
(5) Maybe FHA staff don’t come out where you are but there sure do where we are. THey drive you nuts, Whenver a real estate case came in and my assistant said it was an FHA closing, I ask her to order a bottle of scotch and a lot of aspirin.
(6) Sorry but here the FHA borrower is required to meet with the sole approved counseling group. They ONLY do the counseling in person at their offices.
And lets not forget how hard those loans are to get for non-citizens (a fairly important issue in CA.)
“When you indicate on your loan application that you hold something other than U.S. citizenship, the lender must determine your residency status from the documentation you provide. If you are a permanent resident alien, you must provide evidence of lawful permanent residency issued by the Department of Homeland Security, Bureau of Citizenship and Immigration Services (BCIS), formerly the Immigration and Naturalization Service (INS). If you are a non-permanent resident alien, you must show that you are eligible to work in the U.S. by producing an Employment Authorization Document (EAD) issued by BCIS. “
1) You’ve provided the list of the documents that must be submitted. That doesn’t prove that there is a lot (or even any) follow-up by FHA to establish their validity.
2) If gifts were limited to family and close connections, then outfits like Nehemiah could not exist. http://www.getdownpayment.com
But they do. FHA allows gifts from seller funded non-profits, who are certainly not ‘relatives or someone with whom the borrower has a close relationship.” See the GAO report on these outfits for all the painful details
http://www.gao.gov/new.items/d0624.pdf
Also, lienholders do not have to waive amounts over the limit for a refi into FHA Secure. I’d suggest you read the following text “Under certain conditions explained below, FHA will insure first mortgages where (1) the existing note holder writes off the amount of indebtedness that cannot be refinanced into the FHA insured mortgage; or (2) either the FHA-approved lender making the new mortgage or the existing note holder may take back a second lien that includes closing costs, arrearages or previous secondary financing if the indebtedness exceeds FHA prescribed LTV and maximum mortgage amount limits. ” This is from FHA Mortgagee letter 2007-11, available at http://portal.hud.gov/fha/reference/ml2007/07-11ml.doc
Lenders can do a “short refi” and take back a 2nd lien for the difference. If you keep reading that mortgagee letter, you will see that that the Combined LTV is not limited, only the LTV on the FHA 1st lien.
3) That comment may apply to FHA loans done with state HFAs, but it certainly doesn’t apply to all FHAs. If you think that, then you don’t understand the concept of a mortgage scorecard.
5). I’ve never heard of FHA staff coming out to do an inspection. Even quality control followups are contracted out. FHA inspection requirements are in Mortgagee Letter 05-48. available at http://portal.hud.gov/fha/reference/ml2005/05-48ml.doc
The document is full of references to inspection items that must be on an appraisal report, but says nothing about FHA staff inspecting anything. FHA’s older, more onerous process, which still did not include FHA staff visiting properties, is described in this GAO report
http://www.gao.gov/new.items/d04462.pdf
Just how many staff do you think FHA has, that they can send an individual out to inspect each of the hundreds of thousands of properties that pass through FHA each year????? They don’t even have enough staff to inspect their REO’s themselves!!!
6) There’s no such requirement. In fact, except in a limited number of cases, there’s no requirement for counseling at all.
FHA handbooks and mortgagee letters, along with GAO and HUD IG reports are all available on the web. If you have the slightest shred of evidence for “FHA staff performing inspections” or “face to face counseling is required” please post the links.
600K loan at 6% and 30 years gives monthly payments of about $3,600. At one third of gross income, that translates into a required annual income of about $130K. That’s roughly a top 10% income, nationally.
Don’t forget Prop Tx and Insurance. From 3600 to 4500 payments
Ypu are forgetting taxes, insurance and association dues, not to mention maintenance costs. I would put a 600K loan at over $200K required income minimum! Since there are very few in this position, who are looking for a new home along with down payments etc, I doubt it will make a whole lot of difference. UNLESS tied to “stated income” 100% financing etc. in which case they will most likely foreclose in a few years or less…
If raising the loan limits are all they have left in their quiver…
CHECKMATE
No doubt! High house prices are the problem, not loan products!
I doubt anyone knows the answer (yet). Officially all FHA underwriting is for documented income, stated income or no ratio loans are not allowed. But FHA has been terrible at spotting bad lenders or fraudulent appraisers, so maybe they’ll become the new home of forged income documentation. I’ve seen no evidence of that yet. But we probably wouldn’t until it was too late. So again, who knows?
If the powers that be have not yet purged the fraudulent agents and appraisers from the system ,what is going to stop them from using FHA?
Also, what is going to stop the powers from making the decision to reduce underwriting requirements (of course after getting the amount raised ),so as to become the new sub-prime lender on the block or the needed bag-holder .
It cracks me up when people talk about guidelines ,because all loans during the boom had guidelines also and they were violated by fraud .Do you really think that all those pretty packages that were passed on to the secondary markets during the boom didn’t look like good packages ?
I can’t see any other reason for sitting up these government directed programs of high loan amounts other than some form of a bail out for bad paper . In truth ,in a declining market it’s not intelligent to loan unless you have a hefty down payment and a accurate appraisal .
Today we have economists predicting 20 to more than 50% declines in housing prices in the cards . That would put every loans in a risk position that FHA would makes until the market actually bottoms out.That’s all well and good if FHA makes sure the people qualify for the payment ,but the people will walk if the property price crashes or they can’t sell if they get a job transfer .
The better course of action is to not try to hold the prices of real estate up and let them crash hard and fast (as they should ). Than and only than can lending start on a basis of the appraisal being solid ,which is the only security for the loan that the lender really has in the final analysis .
So, I say,” NO” to the powers raising the loan limits because we are dealing with a defaulting and declining housing market (with excess supply and foreclosures ) following a fake real estate run up in large part due to fraud and faulty lending practice ,better know as a bubble .
I think we can all agree that when they hold these hearings with Congress and the Senate ,the questions never address the main issues or the truth of the reasons why prices are crashing .
‘Most Americans can’t afford a $700,000 house,’ he added. ‘They don’t have the down payment; they don’t have the income.’
Whatever! Clearly this guy doesn’t have any friends that pick strawberries!
LOL! That’s the anecdote (was it Watsonville? Gilroy?) I share most often when telling people why I haven’t bought yet. Somebody else here noted that it’s this bubble’s version of the shoeshine boy handing out stock tips.
“Most Americans can’t afford a $700,000 house,’ he added. ‘They don’t have the down payment; they don’t have the income.’”
$700K?? Under conventional lending standards, most Americans can’t afford a $300K house.
700K house = Strawberry Fields Forever (picking them, that is)
Am I missing something? All this talk of an “Affordable Mortgage” has me scratching my head. By far, the cheapest mortgage is the one I took: 15-year fixed with 20% down (so no PMI payments).
An adjustable or I/O mortgage is a useful tool only if you have the cash to simply pay it off it it goes out of favor for you. It would be “in favor” only if :
- You can be sure that you’ll never need to sell the house in a hurry
- You bet correctly that the house will appreciate faster in value than any other investment you may have (risky! You may be lucky and catch a wave, but it’s not something to bet the farm on.)
Other than that, I/O and other funny loans should only be used by the wealthy, if the need to temporarily relocate to a place that meets their privacy or security needs outweighs the risk of a declining asset.
The whole concept of an “Affordability Loan” is nonsense. If you’re a strawberry picker, nothing magic will happen that will let you afford that $1M home–including ever increasing property values.
All every increasing property values do is prolong the amount of time the strawberry picker can stay in the home she can’t afford. Eventually the piper has to be paid. And the more she borrows, the less likely that is to happen.
This whole thing is a FRAUD meant to drain America of its prosperity so a very few people can make money. And there’s no hope of change. Because the majority of Americans pay no taxes and have no savings, we’ll keep seeing elected officials who will stack the deck against us.
You bring up an interesting point. Somewhere in an article or soundbite I got the impression that the income limits (phase out starting at $75k single, $150k joint) for the stimulus package check included a very large percentage of taxpayers. There was also a figure stating that a very large number pay a very small amount of income tax. Anyone have some details or a breakdown on these numbers?
You can go find the original numbers from the US, Government, but various sites have summarized it:
http://www.taxfoundation.org/blog/show/341.html
Basically, the top 5% of taxpayers (by income) pay over 50% of the taxes. The top 50% pays 96% of Federal Income Tax. The top 1% (over about 300K/year) pays 20% of the taxes.
It’s a myth that high-income people don’t pay taxes. Of course, I’d bet that the top 1% of the top 1% pays less taxes, as a percentage, than I do! But the bulk of the hard-working businessmen making between $200K and 1$M year and who aren’t in any strange business that lets them play tax games probably have a total tax burden (Fed, State, Local, Sales, and SS tax) of 50%.
Of course it’s a little slippery because it’s talking about Federal Income Tax and not Social Security tax which hits lower-income workers. (But bear in mind that lower-income folks collect a disproportionate amount of SS payments, esp. SSDI. I think half women of child-bearing age in Florida live on SSDI, and sell their medicare pain pills to Rush Limbaugh for an even greater windfall!)
Thanks. Don’t quite understand your statement of SS tax hitting lower-income folks.
Employee OASDI taxes 6.2% to SS Wage Base of $102,000 for 2008. 1.45% Medicare taxes on all earnings (no max). x2 including employer portion.
Employee Wage Base, linked to a national average wage index, went from $97.5k in 2007 to $102.0k in 2008, a 4.62% increase. My salary went up by
SS tax is a FLAT tax. While for all those who make below the point at which it is no longer with held, all are paying that 7.65%.
Now there is a minimum amount of money needed to survive. Food, rent and all things are not priced as a % of one’s income.
Do the math.
Person A makes $20,000 a year and pays $1530 in SS. That leaves $18470 for everything else - food, housing etc.
Person B makes $60,000 a year and pays in $4590 in SS. That leaves $55410 for everything else (and he is 3 times better off than A.)
Person C makes $120,000, only pays SS on $102,000 and that would be $7803. That leaves C with $112,197 - and and effective rate of 6.5% rather than 7.65%.
Thing is the lowest wage earners have to pay a minimum amount for the necessities. Their ability to buy such things is reduced to a much larger extent than that of those who earn more. The 7.65% can represent the difference between paying the rent or not for any kind of housing for the low wage earner. It really won’t make that kind of difference for the person making $60000.
Well said, Ann.
All the arguments about the top earners paying 50% (or whatever number) of taxes shows not that the lower-income folks are getting a free ride, but that the wealth divide is so great.
Any kind of a “flat tax” is regressive, because of the reasons you stated above.
The distinction in who pays taxes has a lot to do with how they make money. If they get paid through a company’s payroll, like myself, and not someone who has a small business or some other way to hide money, then they pay taxes in a big way. I made over $250k in ‘07 and my federal taxes totaled $57k after AMT and any AMT acceptable deductions.
So, those of us with money do pay. I’m fine with that but what bugs me is my father-in-law who has his own business and makes a good $150k or a year but finds a way to hide all that income through tax strategies. So, he pays nothing. That’s where the BS in the system is.
I agree. The government really needs to stop taxing income. If I thought it would fly, I would totally support property and consumption taxes only, which would make most taxes voluntary.
Again, these would be regressive taxes.
I say tax income only, make it progressive and eliminate all write-offs except certain allowable charities (donations cannot benefit the donor or friends/family).
And what those silly ideological sites fail to observe is the fact that there is a reason the wealthy pay more….. Because they have the majority income. Every try to squeeze blood out of a rock?
Yeah, that’s the issue with taxing poor people: riots and low return.
The 5% of pay 50% of the taxes has to be balanced against what percentage of income the 5% take in compared to the other 95%. I don’t have the stats handy but the top 5%-10% of households in the US have some enormous chunk of the country’s wealth. I guess what I’m saying is that I don’t lose sleep over the % of support Bill Gates pays to the rest of the country.
THAT’S THE PROBLEM
The top 1% MAKES 16.5% of all income but PAYS 33.7% of all Fnderal Income Tax.
The bottom 50% makes 13.9% of all income but pays only 3% of federal income tax.
http://www.taxfoundation.org/blog/show/341.html
Why not extend it to food. When buying a loaf of bread, if you make $100K the price is $8. If you make $60K, the price is $3. And if you make $20K, the price is $1.
Sound fair?
Am I missing something? All this talk of an “Affordable Mortgage” has me scratching my head. By far, the cheapest mortgage is the one I took: 15-year fixed with 20% down (so no PMI payments).
That’s the same mortgage we took out except we had 35% down. We paid it off in 13 1/2 yrs and right about now, I’m so glad we did. I’m not sure I’d want to be worrying about housing for next 5 yrs or so. I think this is going to be a long haul.
‘You’re making it cheap for high-income people to borrow more money. Great!’”
Funny, I’m not an economist, and “making it cheap for high income people to borrow money” makes perfect sense to me! They’re the only ones who will pay it back.
The higher the risk, the more expensive the loan should be. DUH!
That’s fine, but the wealthy should not have subsidized loans.
If anything, it’s the people who actually pay back their debts who “subsidize” loans for people who don’t. And lower-income folks also get that mortgage interest deduction. (Which simply makes house prices higher, and doesn’t save anyone anything.)
When I had a mortgage, I had ZERO mortgage interest deduction. If you read your tax form you’ll see that most itemized deductions start to phase out–through a mechanism separate from AMT–starting at 150K.
Am I going insane? The points raised here and on other blogs is that prices on houses need to fit in with budgets of buyers first. The second point is that buyers will be willing to take a chance on a 15 or 30 year contract to put a roof over their heads. The third is that we might be getting a nasty case of the recession and have money tighten up and maybe jobs. Who knows. I only go by what I am reading here and seeing on the MSM and talking with J6P. If things could get so gray from last year then why oh why would you expect people to want to buy in a market of so much uncertainty? I am bearish on house prices but not people. The prices can stay at whatever price they will be. Too much uncertainty to make me want to take a chance perhaps on accruing a minor bit of equity 5 years from now.
Just had an interesting conversation with a real estate contractor/builder here in Napa County. Helluva nice guy. He claimed that if he had a million bucks, he would buy as much property as he possibly could after next Wednesday, when he expects an additional 50 basis point drop at the Fed. He argued that “now is the time to buy!” and that properties now listed (with 6% realtors) for $479,000 could be bought for $450,000, “easy”.
Real estate is purely an academic interest of mine, other than the 6.125% fixed on my residence. If it weren’t for this blog, tho, and a few others, I might actually be agreeing with this guy. I mentioned a couple of things to him like the new underwriting standards (10-20% down) and he grew quiet.
I can see his point: prices have come down 20% or more in some places. And if you can snag a 4% 15 year traditional mortgage, you’d have it made. But I would certainly not buy as much property as possible. I’m not interested in real estate as an investment. Also most stuck buyers never assume catastrophic health problems down the road. Even with a fixed mortgage, a severe health problem could force me to sell at a bad time. For this reason I will not borrow for a house with a price worth more than 1/6 of my net worth.
They’ve dropped maybe 10-15% in Napa so far, but the $479K house he was referring to would have to drop another $200K just to bring it back to 2001 pricing. Really. My $265K purchase (2001) went to $575K at the height of the bubble in 9/05 (and that was even with a non-shill appraiser, to the best of my knowledge). Based on historical price/income ratios, we have a long way to go down yet.
Sonoma and Napa counties have fallen much more than Mendocino and Humboldt counties farther north. It actually seems like sales have been increasing in recent weeks. But, with property values falling faster in places like San Diego (which seems to bring a large contingent of retirees to Humboldt), the party can’t last long. They come here because they’re cheap and it used to be a lot cheaper than places like San Diego, LA, SF. It isn’t much cheaper anymore, thus reducing the incentive of moving here.
“now is the time to buy!”
I am sure he says this every single day! Boom or Bust!!
“when he expects an additional 50 basis point drop at the Fed.”
This is already priced into the market. UGH!!!!
ya know, this is what they made excel for (well and also to make bill a lot of money).
plug in this 700k GSE backed thing and a 30% dti, income taxes, property taxes and insurance and you will see the the income before taxes will be 257k for a 30 year loan at 5.5%.
yeah, that’s it.
“257k is the new median”
and that’s with 20% down = 140k.
With a 257k income, how stable is it? Unless one is a physician, it’s not very stable. I earned over $200k per year the last 3 calendar years as a software engineer (and lots of overtime work), but I realistically think I may not find any software job for over $90,000 per year sometime in my future. This is why I live well below my means, as if I do earn $65,000 per year. The excess $ - I invest in stocks, precious metals, savings bonds, T-bills, and a municipal bond fund.
Just curious, how do you come up with that $65k figure?
I live the same lifestyle that I lived in the year 2000 when I earned $65k. Yeah I know there has been inflation. But the rent in that place is about the same as in 2000. I also had money left over back then to invest outside of my 401k and IRA plans at $65k annual. The best deal was that I could take the commuter bus to work. The bus stop was right outside my apartment complex.
I also think married couples should try to live on the lowest of both wages (or income potential of non-wage-earning spouse, if one is working at home raising kids, etc.).
One never knows if/when the major income earner will lose a job, have health problems, etc. It’s best to assume the family might have to live on one income.
If they did this, imagine how “affordable” everything would be — and people would actually have a pretty healthy savings account!!!
How come when the price of oil goes up it too the price isn’t described as “strenghtened”. F-ing media. Completely useless tools.
In the minds of many long term property holders:
House prices stabilization = retirement plan saved
I am being simplistic, but the message is imprinted from generations of price increases and social feedback.
LOL
How come when gold has a minor rally of 20%, it is called a bubble by the same people that could not recognize a stock market bubble or housing market bubble?
Time to review buying a $500k house, vs. buying a ounce of Gold
Until about this time last year, you could “buy” a $500k house for nothing down, lie about your income, whatever it takes…
Now let’s examine buying 1 Troy Ounce of Gold, anytime:
Pay in entirety, in cash or check, and receive your Gold. There is no other way.
Clearly, you have never speculated in gold futures.
Computer blip Gold might as well be Fool’s Gold, as far i’m concerned.
Why the J6P Bernanke-fellaters might never own a home… http://articles.moneycentral.msn.com/Investing/HomeMortgageSavings/WhyYouWillNeverOwnAHome.aspx
(Apologies if this was posted earlier. Just popping in for a quick browse.)
awesome article. The psychology is almost totally flipped. Maybe a home ISN’T such a great thing after all.
More stories in the media like this and it REALL won’t matter what ineffectual “solutions” our legislators try to slap on housing’s spurting femoral artery.
I’ll GLADLY forfiet my $600 check I don’t need, what I need is more affordable housing here in San Diego, raising the loan limits will not do that. It will just keep me and other hard working, smart saving individuals who are responsible from purchasing an affordable home to raise my famiily and keep employers here in San Diego.
http://money.cnn.com/2008/01/25/real_estate/OFHEO_opposes_cap_lifts/index.htm?section=money_latest
doesn’t Fannie Mae/Freddie Mac require a conforming loan
to have 80% equity? And doesn’t Freddie/Fannie require real documentation? W-2’s, 1040’s, bank records, etc ?
raising this limit won’t help much, the FB’s are all upside down,
are all faking income and DTI?
80% equity!!!! Nobody requires 80% equity. And they do allow stated income, stated asset, but it isn’t a big part of the business.
Stated income, stated asset is about to be a BIG part of their business…..whether they want it to be or not….Congress will see to that…..
I doubt it. They have way too much political muscle to get forced into much business that they don’t want to do.
Are you saying that debauchery of GSE lending standards is part of the Congressional stimulus package?
That would be my guess, unfortunately.
Try 3% down.
“‘This would be absolutely, phenomenally excellent news for home buyers and sellers because it will help so many more people to qualify for loans that they can afford,’ said Lori Staehling, president of the San Diego Association of Realtors.”
NONESENSE! No doc option loan products with low teaser rateas for the first few years are what is needed to help people quality for loans at all. As far as affordability? That would take lower house prices. The foreclosures we see today are in large part about people borrowing far more than they can afford to repay, regardless of the terms. There are just so few who will benefit from this garbage that it is almost not worth thinking about. It will absolutely not help those who are already behind and under water.
That dreaded sub-prime………..
FRANKFURT, Jan 26 (Reuters) - Four German state banks have a combined exposure of almost 80 billion euros ($117.2 billion) to risky assets and the state bank of Bavaria, BayernLB, could need an over 2 billion euro write-down, FOCUS magazine reported.
Germany’s Landesbanks are financial institutions owned by regional government and local community savings banks.
http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSL2651648120080126
The Gala Casino Grand Re-Opening…
“‘This would be absolutely, phenomenally excellent news for home buyers and sellers because it will help so many more people to qualify for loans that they can afford,’ said Lori Staehling, president of the San Diego Association of Realtors.”
“‘We say hallelujah!’ said Sherm Harmer, incoming president of the San Diego County Building Industry Association. ‘We’ve been waiting for it for years.’”
Test post for Ben, please ignore
If the realtors and builders and politicians and mortgage brokers all love this idea, it cannot be any good for the person at the bottom of the food chain.
Someone please explain something to me. Almost every politician and economist agrees that loose lending is what got us into the mess we are in. But their only solution is to loosen lending as much as they can. I just don’t get it.
Rate of change.
We’re like a heroine addict, but our drug is debt. Take it away all at once and we’ll be hurting BAD. We need to be weaned off slowly using large, then smaller and smaller doses of methadone.
They obviously don’t get it either…
It has been suggested that the raising of the limit is not a solution to the present crisis at all (although it will *look* good to many FBs) — it is simply a little prize the REI (notably in CA) has been lobbying for for some time. This is a good opportunity to distribute political favors without facing the usual scrutiny.
After 9/11 the airlines got huge govt. loan guarantees. Their lobbyists were working the halls of Congress on 9/12. A giveaway they had been trying to get for years suddenly become patriotic. A decade of loan guarantees for a week or so of shutdown. It didn’t really have much to do with terrorism, but the lobbyists were ready and managed to make the connection. Why should any of us think this crisis would be more public-spirited?
Let your congress people know you are against this:
http://www.financialpetition.org
and write to your senators. this is not a done deal!
Can someone explain who, exactly would be subsidizing these lower interest high-end loans under this proposal?
If the “market rate” for a jumbo loan is 5.5% and for a conforming loan it is 5%, then someone somewhere must be subsidizing this lower rate. Is this ultimately a taxpayer subsidy? If so, how? The mortgage market isn’t remotely a monopoly so even the market for jumbo loans should be a competitive market
I was under the impression that Fannie/Freddie weren’t subsidized.
I have the feeling that I’m missing something really obvious here but can’t put my finger on it.
Could it be that you are thinking that all loans, regardless of risk, should be sold at the same price? That’s what a flat rate implies.
An increased rate for jumbos implies a greater chance of loss by the lender.
“‘It’s not going to help the lower rung of the market,’ said Kelly Cunningham, economist at the San Diego Institute for Policy Research. ‘And in San Diego’s case, that’s where the foreclosures and bankruptcies are taking place.’”
What’s worse, the lower end of the market is also where new entry demand comes from, and with the possible exception of fast trackers into top management, the vast majority of these folks are not qualified to buy in the price range which requires a loan in excess of the current $417,000 cap. Furthermore, eveyone I know who is in the upper end of the market is already comfortably housed, and the net migration flow of folks at this end of the housing market has been out of the San Diego area in recent years to more affordable parts of the country. Other than a trickle of new entrants to the San Diego area at the high end of the market, I don’t know where all this fantasy demand the Realtors like to dream about is going to come from.
The fact that the loan limit increase isn’t going to help the real market
is the very reason why I’m thinking that this increase is designed to help re-work loans that have already been made .
Didn’t they say that this loan limit increase is temporary ? Why would the powers come up with a temporary loan program unless the intent is to solve a current problem ? The current problem is loan defaults due the faulty lending practice ,along with crashing prices that prevents refinancing and borrowers being able to really qualify .
There is no reason to allow 3% down loans in a declining price market with excess foreclosures and excess regular supply .
Why doesn’t anybody ask where this “new loan” demand is going to come from given the current prices . The demand will be in refinancing or the altering or re-working of current bad loans on the books .
Just mark my words ,they have to do something to re-write loan paper on appraisals that don’t hit with borrowers that don’t qualify .
Wiz,
IMO, this has EVERYTHING to do with the govt taking on the risks made by Wall Street & friends.
It will only hold up prices to the extent that foreclosures will slow…for a brief period of time. By the time the foreclosure flood happens again, perhaps the election will be over and the pols can claim a short-term victory over the “foreclosure crisis”.
I just wrote to both my senators. I urge all HBBers (who are American citizens) to do the same.