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    • Fast and Easy Fannie [view article]
      I am surprised that at this late stage in the mortgage crisis, people can write about this subject as if they are surprised. It also surprises me how the reporters and analysts commenting from the investor viewpoint seem to be so far removed from the details of how the mortgage industry works.

      I agree with all comments posted. I would add to cromag’s post. It’s not just that loan officers abused the product guidelines. It’s that it is implicit in their job duties. It is their job. That’s part of the unwritten, unspoken rules of mortgage origination.

      If you want to see some downright weird human behavior and rationalizations ad nauseam, ask someone employed in the mortgage industry (especially management level types working for lenders) to explain and justify stated income products. Their physical demeanor actually changes and they become very defensive. I think they secretly worry that you might be working undercover for the FBI’s Mortgage Fraud Task Force and they know they’re guilty. It’s bizarre but fun.
      May 03 11:00 PM
    • Unintended Socialization of the Housing Market and Its Consequences [view article]
      I don't know if this is addressed in the bill or not, but how many times does a borrower get to do this re-negotiation / re-finance? What if 6 months to 1 year later the value of the home continues to fall and borrowers are upside down again? Can they go through the process again?

      Big assumptions are made about being able to set the right appraised value that will only stay constant or go up, with no risk of going down. Dangerous.       Apr 15 03:47 PM
    • Housing, Credit, Economy: At an Inflection Point [view article]
      Be careful on the assumption that a lower LIBOR rate will possibly lead to a lower rate, at least at first reset. Most subprime ARMs also have a floor rate that equals the start rate (or teaser rate). Fannie Mae and prime loan programs may not allow it but floor rates do exist with subprime ARMs.

      Most discussion and concern is around the rate reset after the initial fixed period. With subprime ARMs, the most you can hope for on the initial rate reset is that index + margin <= start rate. In that case, reset rate = start rate.

      Which may all be a moot point if the issues of declining home values and upside down borrowers render rate issues of secondary importance for borrrowers when deciding whether to stay in the home or walk away.
      Apr 15 10:24 AM
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