Marcus Aurelius

Liar Loan Securitizations: A Surprising Twist

When real estate was viewed as a can't lose investment supported by the reality (albeit a reality that could not continue forever) of markets (how many times did I hear people calling in on personal finance shows saying they doubled their money in one year on certain property, it was a number of times) than what did such matter? The bank puts up the money, the buyer defaults, but what they hey, at this time next we unload the property get our principal +25% back.

The real estate bubble burst and now there is a lot of real estate on the market where banks and owners are underwater. Now, a bank can not get away with making bad loans and are twice shy.

What I find stunning is the notion that a number of loans did not make it past their first payment until they went into delinquency.

Real Estate Bottom - or Prelude to a Drop?

A few things I have been hearing for sometime and continue to hear.

The main group being foreclosed on are not families but speculators. People who decided to develop ten too many condo developments or built yet another office park. No doubt, there are families being foreclosed on but the lion share of foreclosures is on over-leveraged speculators.

I am looking to convert a loan that just transitioned from a construction to a one year ARM (I have a real heckuva rate on it too) to a 30 year fixed. So, I am talking with bankers on a regular basis (still some work to do on our project) and they tell me in our market property values are holding on okay and in fact varies in our locality (northeast WI). Of course, the couple divorcing across the road may sink your property value but that applies in good times too. I have heard starter homes are still moving well around here, that is properties with values up to $150,000 or so. I have seen more expensive houses site for years.

Of course they can go lower, but the money owed on a house is strong boundary. My uncle has an extra house in Orlando and is renting it right now rather than selling it because of market conditions.

Back in the bubble days I would hear story after story about people in the hotspots mentioned doubling their money on a property after one year of holding the property, in contrast a banker friend of mine informs me we can expect about 4% appreciation around here (and she told me back in the bubble days). Tortoise vs. hare.