joyofyoga

Recent Monthly Adjustable Mortgage Reset Values and a Look Ahead

The problem is not identifying which loans are "good" and which are "bad". If good paying borrowers cannot refinance into at least the same rate or better than they are currently paying when their rate resets they will invariably turn bad. Unfortunately the programs are gone that put the good paying borrowers into good loans. Most borrowers can't qualify as new guidelines have become prohibitive. Balance needs to be legislatured into this market. And Congress needs to increase the lending limits for Fannie, Freddie and FHA, as jumbo loans are priced out of the ballfield.

Weak Home Sales, Tightening Credit Standards = Multiple Mortgage Apps

Yep, multiple apps are on the rise because underwriting guidelines are literally changing on a daily basis. And a good loan that would be considered a lay down is suddenly subject to additional layering because everyone is now spooked. So you can get a DU approval from Fannie Mae on a 30 year fixed to take out a borrower in an ARM but the lender won't approve it because the $100,000 in retirement funds are not liquid till the borrower is no longer employed. Go figure. Of four applications you submit, only one will lender will close the loan.

Countrywide Financial: Who Didn't See It Coming?

Wow, wearegettinscrewed - I know exactly which "Retention" department you are referring to and could never figure out how they talk unsuspsecting folks out of a better loan, but now I understand the pitch to hammer them. Thanks.

Brief Foreclosure History & Mortgage Delinquency Maps

It's pompous to simplify the situation and say it's the fault of first time buyers, the slave in the food chain, when really it was those "experienced" investors who wanted a new sandbox to play in when the stock market bubble cratered. Investors, who already had owned a home were buying up Non Owner Occupied investment properties at the dozen with little or no cash down thinking they could flip it for a quick profit. But the game and the rules definitely were set at the highest level and those people in high places, particularly the hedge funds, had the most to gain and benefit the most.

Brief Foreclosure History & Mortgage Delinquency Maps

Oh come on, let's not blame this on the broker! Of the three parties involved in any transaction - the borrower, lender, and broker - it's clearly the lender that always wants the loan to close the most. New Century's offices were guilded in gold with their spiral staircase in the reception area that made the White House pale by comparison. And how about Wall Street? Don't they audit the loan files they purchase. Always blaming it on the little guy like the borrower. Greenspan clearly, very, very clearly said the best loan to utilize in the current econcomy was the 1% Option Arm. I still have his words in writing and should frame it.

Homebuilders Near a Bottom: Five Stocks to Benefit

Hey Tom - Just read that link! AMAZING! This is a great synopsis:

Posted: Wed Mar 21, 2007 12:37 am Post subject: Neg AM Recasts vs. Subprime Adjustments
The problem with Neg Am resets from loans originated in 2005 is that payment adjustments after recast can make the payment triple whereas subprime adjustments are typically around 30-35%.

Lets take a standard $350,000 loan at 75% LTV and compare a subprime 2 or 3 year fixed (interest only for first 5 years) at 6.5% to an "A" paper, prime option ARM with a 1.10% start rate, 40 year term, 5 year payment plan, 110% max increase to the principal balance.

Subprime: 350,000 at 6.5% = $ 1895., 1st adjustment: 3% to 9.5%. New payment: $2770.83. 32% increase. Interest only, no increase to balance, but decrease to value.

A paper Option ARM: $350,000 at 1.10%, 40 year: $901.64. Depending on margin, balance increases to 110% between months 28-38 (not 5 years payment schedule that is reflected on Reg Z). New balance at 110% $385,000 recast for remaining loan term per terms of note (NOW FULLY AMORTIZING) at fully indexed rate: 8.0% is fair average: new payment: $2702.00. Loan balance has increased and values have decreased. Add a piggy back second or E-line, and well... you get the picture.

The 30 year A Paper Option ARM fares a bit better. The recast occurs around the 36th month, and the payment only increases about 64%.

So, which is really worse, a stated subprime with a 32% payment increase or a stated income A paper Option ARM with trippling payment?

The Neg AM A paper loans aren't even on the radar screen. I nearly choked when Leatherface said that only 7% of their loans were subprime- when they led the pack in Neg AM financing (only they went to 90% CLTV). The only saving grace for Countrywide is that they went to 115% before recast which buys them a little more time than Downey.

This whole bubble thing is just getting started in California. Since incomes aren't rising to meet prices, prices will have to drop to meet incomes. Any economist that doesn't consider area incomes in their predictions are simply not doing the math. In the end, math always wins.

There is quite a bit of opportunity in the market. Some loans can be fixed, others can't. Some people who can hold out long enough will likely receive loan modifications with affordable payments. Some won't be so lucky.

One thing is for certain, however, is that affordability is going to be restored, and in the end, that is good math for economy and the industry.

Of course, I am curious how much this will really cost the taxpayers....
_________________
"Two things are infinite: the universe and human stupidity; and I'm not sure about the the universe." Albert Einstein

Homebuilders Near a Bottom: Five Stocks to Benefit

I'm with you Tom! My Mr. Lalijee is also trying to get out of these stocks. Why would a rationale person purchase a real estate stock?! There have to be some fundamental reason that those stocks will increase because surely there isn't a technical indication. No sane person would purchase a home today when they know the could pick it up for less in a year from now and even lower in two years. This is going to be a long, protracted real estate bear cycle. $1.5 trillion in arms are resetting this year, just THIS year, not next year. Next year there will be more. And people can't refinance at lower rate or lower payments so they are walking away from their homes. Not just individuals but block and communities of people. I see it every day in my business. Unfortunatley the media is focused on the big money, on Wall Street money, and then you can rationaize that it's only a small portion of their business. But the bottom line upshot is there is a glut of inventory on the market for sale and more becoming available every day. So that's the supply side, the inventory. Where is demand coming from? It's not like retail sales, say food. You have a big meal, you digest it, you need to eat again. How many homes can people live in at one time. The folks that already purchased are out of the market. The second home craze is a memory. There is no one to absorb the glut of inventory that is rolling down the tracks. Anyone who purchases real estate in the hope that it will go up in the near future is hallucinating.

Why I'm Buying Trump Entertainment

Yeh, there is debt: $1.3 billion compared to the $1 billion value. That is the issue.
If the debt were lower than the value, that would be a no brainer.

The Housing Crisis: Symptom or Cause of Market Volatility?

"On the other hand, if we define a RE market "crash" as a slow, gradual drip-drip erosion in nominal and/or real (inflation-adjusted) prices over several years that results in a cumulatively large drop in real value --say in the range of 30-50%-- then please count me in that kooky "housing market is going to crash camp".

Yep, I concur, this is exactly how real estate crashes. Slow and protracted so everyone second guesses themselves about what they remembered the value to be and why that thought it was that number. When you look back a year from now, you think, "Whatever was I thinking when all data indicated a value of say, $500,000, and this year the value is $400,000." And then next year it is $300,000.

The ARMS that are set to recast in 2007 are $1,500,000,000,000 ($1.5 Trillion). That's a lot of bananas that will be owned by monkeys.

Not Yet Time for Homebuilders

This is an ugly chart that is not tempting and dip is a slide that has a way to go. When real estate goes up, it is quickly! And when it declines, it for protracted periods ever so slowly but persisently. And there aren't any fundamentals that indicate this is a good time to jump into this market. There will be an increasing glut of inventory on the market as owners return the keys to banks.

The Next Home Equity Surge

Unfortunately, most people do not use equity they pull out of their home to invest in high return investments; in fact they often invest in nothing and squander the money away. Otherwise, all the equity that has been pulled out would not have resulted in desperate borrowers resulting in rampant foreclosures.