I like this:
"We would strongly caution policymakers to avoid any regulatory or legislative actions that would
impede the ability of the market to respond to changes in underlying economic conditions or
continue to be innovative in creating credit solutions for borrower needs. An important role of public
policy should be to facilitate efficient markets, as these will ultimately benefit consumers."
In other words, please don't tell us to stop pushing high fee/no qualifying loans on unsophisticated borrowers because we make a lot of money in our "efficient" markets. //end of rant
And I'm a libertarian wanting the governement to crack down. Sheesh.
Nope, the gummint shouldn't be cracking down on this stuff. Let it sort out. Howsomever.... they better not be bailing anyone out either! The more we try to 'fix' things with laws or fix outcomes we don't like, the less responsible the public at large becomes. The pain hurts, but it's better remembered and the rest of us don't have to go through the 'sympathy pains' of having to fix their mistakes.
A little off-topic; but regarding your previous posts on increases in home-ownership rate over time, I had a demographics question. If it is true that older people have a higher home-ownership rate than young people, and that the population is aging, should the home-ownership rate not show a long-term secular trend higher? I know this would not account for short-term increases, which almost certainly are a product of loose lending, but it should mean that the baseline home-ownership rate is higher now than say 20 years ago. It should be possible to estimate the magnitude of this trend by looking at the Census Bureau breakdown of the population by age now and 20 years ago, and multiplying the percent of people in each age group by the average home-ownership rate for that age group. For fun, the data could be projected into the future to estimate the home-ownership rate 20 years from now. Forgive me if this has already been addressed.
Thanks for your fantastic contribution to economic debate!
CR -- you may have already seen this, but just in case: The latest quarter loan officer survey was just released. It showed a very big swing from net loosening of residential mortgage lendings standards only a couple quarters ago to net tightening. I put a post up on my blog.
The missing ingredient in this housing bust cycle -- until very recently -- was tighter lending standards. Even after home sales topped out, price growth peaked, and inventories started building, mortgage lenders didn't start restricting credit. Indeed, they actually LOOSENED standards to keep loan volumes up.
Just look at the Federal Reserve Board's Senior Loan Officer Opinion Survey on Bank Lending Practices. The quarterly survey covers commercial and residential lending -- whether standards are loosening or tightening, whether demand for mortgage, commercial and industrial loans is rising, etc. It covers around 90 domestic banks and U.S.-based divisions of foreign banks.
The net percentage of institutions tightening standards for residential mortgages was NEGATIVE 9.4% in Q2 2006 and -9.3% in Q3 2006. In other words, once you netted out the banks that are tightening standards vs. those that are loosening them, you found that just over 9% were loosening. That was the most widespread loosening of standards recorded since late 1993.
But boy have things changed. This Fed indicator has now swung to POSITIVE 16.4%, the highest reading since Q2 1991 (22.9%). Moreover, about half of domestic banks said they expect "a worsening of the quality of their nontraditional residential mortgage loans this year; a few institutions noted that they anticipate that the quality of such loans will deteriorate substantially in 2007."
How can the stabilization process begin with all of this outstanding (perhaps the wrong word!) IO / NegAm debt still floating. We are only seeing the begining of the resets if 80% of the loans were originated since 2005 and it takes three to five years.
Also I tend to believe that the stat: 25% of loans last year were IO, is greatly misleading. I would guess they are averaging in the MidWest and other less "frothy" markets. Here in Diego something like 50% (or more I forget the exact stat) were IO.
To me this means that half of the markets in the US have already stabilized, as they were never out of whack. I think the other half of the country (Frisco to Diego, Boston to DC & Flordia) haven't event begin to feel the hurt...
I agree 100% with Mike, tightening credit this year is the difference between this and last, the long rates will be a bit lower but the stated loans have tightened up a lot with most if not all requiring 5%-10% down, that effectively eliminates a lot of the "liar" market.
So here at least no consensus on whether the credit has tightened as per new guidelines or whether the practice continues with new signs of tightening ['For Sale' referring only to the sign. Dang.]
I don't know about you (ok, not you Geoff) but I like the bar graph presentation with ** for 2006 and 2007. I'm going to use the same for getting rid of my paunch: great expectations!
Robert, it's about time Libertarians took some pause on this - thanks. Expecting the market to just 'sort itself out' has always struck me as naive, a con job, or a cop-out. There's no historical basis for the 'sort itself out' method to sort itself into anything other than something ruthless and destructive. We might hope for the best in human nature with our economic theories, but if we want those theories to work in real life, we must expect the absolute worst, and plan for it.
Libertarianism is just as flawed as Communism in this way -- both too easily corrupted and co-opted by greed and power addicts.
Our political genius in this country rests on checks and balances -- it's too bad many economic theorists can't adapt these principles to our markets. A 'free' market has only meant the bankers get to screw everyone, including their own shortsighted, addicted selves.
I'll take a fair market over that any day. Which makes me think CR, maybe that would be an interesting topic -how to create a fair market in the aftermath of this one...
"But boy have things changed. This Fed indicator has now swung to POSITIVE 16.4%, the highest reading since Q2 1991 (22.9%)."
Nice work, Mike. There seems to be a lot of disagreement on this issue, (Lending is tightening! No its not!), so this data point finally provides something concrete.
I cant tell you how happy the above thread makes me, Full Doc, and OO, subprime.. and still needs 10% down, 6 months ago that would be a slam dunk 100% purchase .
Hate to tell you this but there isn't any such thing as "fair".
Someone is going to get, for a lack of a better term, screwed due to all of this insanity and our government that youre so proud of has more then it's share of the responsibly for all of this.
It's been clear from the flow of funds for over a year now that households have been leveraging up on mortgage loans. In Q3 they borrowed over 93% of the increase in market value. I'm expecting a spike in either Q4 or the first quarter of this year. It will be interesting to watch all of this re-balance.
In Q3 they borrowed over 93% of the increase in market value. I'm expecting a spike in either Q4 or the first quarter of this year. It will be interesting to watch all of this re-balance.
I wouldn't be surprised to see borrowing go over 100% of the increase in market value... Or even if the market value 'growth' goes negative that borrowing continues.
There has been so much prior appreciation over the last few years that I would NOT be surprised to see collateralized borrowing still struggling to catch up... This will continue until it is obvious that LTVs are in dangerous territory (and not just obvious to tanta & MOM).
I bet the bulk of consumers don't even know how close they are to the edge let alone their friendly neighborhood mortgage broker knowing... or caring... as long as it closes & s/he gets commished.
But still, my guess is there is equity out there to mine so its 'HI HO, HI HO... Its off to work we go, with a shovel a pick for a walking stick, HI HO, HI HO HI HO!!!' Off to the mine to pick away at all that equity.
Okay maybe dynamite & strip mine - but you get the idea.
"I wouldn't be surprised to see borrowing go over 100% of the increase in market value... Or even if the market value 'growth' goes negative that borrowing continues."
Dryfly, I wouldn't be surprised either. The scenario seems likely at this point.
Alo,
You and libertarians both agree that there are very bad people that will use their power to take advantage of others. You both agree that those people will seek to gain more power so that they can further subjugate others.
Here is the difference. Libertarians think that you should not give those bad people the opportunity to gain coercive power above recourse to take life, liberty, and property, i.e. get elected to public office. The only way to do that is to not have public office and central governance.
The only way to do that is to not have public office and central governance.
So abolish gov't and instead GE does it to you.
That is the flaw in Libertarianism...It is that gov't is not the only coercive power. Some of these multi-nationals have way more power than all but the largest & most coercive gov'ts.
A classic Hobson's choice - big gov't or big corporatocracy. Pick your poison.
I prefer that the two monsters battle in relative parity while I scurry about underneath, trying not to get stepped on.
Kevin, pride's got nothing to do with it. I blame the government too, for giving the industry carte blanche to do whatever it wants to with the credit system - long term consequences and our nation be damned. They bowed to these junkies and we will pay the price for years to come.
If we don't wish to create means to stop the ruthless and shortsightedly greedy from gaming the market, they will make themselves (deservedly) kings of us. We'll be serfs to the con men. Might be your ideal to have a free-market stall on top of the ash heap they're going to create (by the time they 'sort it out'), but it's not mine.
Jan 2007 Fed Funds statistical supplement Mortgage Debt.
From 3rd quarter 2005 to 3rd quarter 2006, residential mortgage debt increased almost a trillion.
From 2002 thru 3rd quarter 2006 residential mortgage debt increased nearly 3.9 trillion, going from 6.86 trillion to 10.74 trillion.
Does anyone really believe that the income increases during this period can support repayment? Almost all of the increase in household debt was in mortgages, too. 1.59 gives the total increase from 2002 to 3rd quarter 2006 in household debt as slightly more than 4.1 trillion, and the increase in household debt from 3rd quarter 2005 to 3rd quarter 2006 as a bit more than 1.1 trillion.
Anyone who believes that this rate of increase in debt can be sustained is bodacious indeed! I have some sweet, juicy second and third liens for such persons to buy (they come with free crystal meth to make the prospectuses add up, per Tanta).
There's got to be a morning after
We're moving closer to the shore
I know we'll be there by tomorrow
And we'll escape the darkness
We won't be searchin' any more
If we don't wish to create means to stop the ruthless and shortsightedly greedy from gaming the market, they will make themselves (deservedly) kings of us. We'll be serfs to the con men.
Our government is a revolving door from Washington to Wall Street. Our laws are written by the lobbyist which are paid for by big business and then rubber-stamped by our elected officals.
Who do you think wrote the new bankruptcy laws? Who passed these laws? Are they "fair'?
Just who is going to make this fiasco "fair"? And just how will they decide it is "fair" for everyone involved?
"Anyone who believes that this rate of increase in debt can be sustained is bodacious indeed!"
Any idea how much of that is investment debt? A lot of little guys like me own and rent out houses. As long as the rent pays the PITA, then we can handle the occasional extraordinary expense. Of course, most of mine are pre-2000 mortgages.
So, we hold 0.0000056% of all of the mortgage debt in the United States and we are doing OK.
Robert wrote:
"Any idea how much of that is investment debt?"
Yeah, the real investors are covered, but that's because you do old-fashioned neurotic stuff like figure out cash flow BEFORE buying. But then, a lot of your types have sold rather than bought during the last 18 months, so my guess is that your types are holding less of the total mortgage debt than the normal ratio. And more of your types are being hurt by declining rents, as in spots in Texas and Florida.
As for specuvestors:
Most stats I have seen indicate between 15-20% of housing bought in 2005 as second homes. Since a lot of people lied and said they were buying homes when they were buying investment houses, a la Casey Serin, let's say 10-plus% of the increase since 2002? And many of those are financed with teaser-rate, option ARM or IO vehicles in areas where rents don't cover an amortizing payment. You can't reach a 2.7% vacancy rate without widespread speculative purchasing over years.
500-600 billion seems like a decent ballpark figure. Given the current disinclination of mortgage lenders to finance investors buying multiple properties in a year, I'd say that number is diminishing rapidly through NOD's, short sales and foreclosures.
Kevin - very good questions -- and well worth discussing. Maybe we can begin by going back to the rule structure before this mess of debt happened, when banks used to lend money to folks with good credit, who likely could pay them back. And when we as a country borrowed money on the expectation that we could pay it back.
Historically, the floor has opened up to a better debate on what a fair market can be when the practice of a 'free' market brings us to our knees. That time's coming around again. Once we get fooled twice, we ought to be more than ready to reconsider the ground rules. It would be interesting to see this group explore what those rules ought to be.
"back to normal" sounds right from their perspective...volume of loan originations. My real estate friends are seeing that kind of activty since 1/1. Doesn't mean it will fix the overhang.
Alo, I think one of the "fair market" questions we could start with is the one regarding data reporting, disclosure, and general transparency. Anyone who has been reading this blog since its inception has noticed how little the "official numbers" about the mortgage business tell you in an environment in which regulated depositories are not the only game in town. Why did Greenspan and Kennedy have to put together such a rocket-science formula for estimating MEW? Because the government does not collect data from all market participants, or even the right data from those it does collect data from. The government apparently has an interest in monitoring home price appreciation/depreciation, but the only database it mines for its calculations is the GSEs', so we all start trying to "adjust" the OFHEO numbers to make sense of markets that are nonconforming. The damned FDIC stood up in hearings in August and observed that they didn't actually know how many "exotics" were being held by regulated institutions, but it seemed like a lot.
You would think that those who do not want to see "regulatory burdens" placed on lenders would be all in favor of providing data, would you not? I mean, if the data really shows that the private sector is managing risk responsibly, then wouldn't it be smart for them to agree to cough it up? Especially since all the loan origination and servicing software these folks use were designed to meet the needs of depository as well as nondepository lenders--increases your customer base when you build it that way--and are therefore ready to do this kind of reporting out of the box? That is to say, there's hardly a huge cost burden to do, say, HMDA-style reporting when the software you use is already fully capable of generating HMDA reports.
"In addition to their use as affordability products, these products offer homeowners an innovative and flexible means to more actively manage their home equity."
Don't look back, Dr. Pangloss. The mortgage bankers are gaining on you.
Tanta, thanks - was hoping you'd chime in - right to the heart of the matter (as usual). Data transparency seems like a great platform on which to build reform. (Ever think about writing legislation?)
It seems like the second we let lenders hide their shame, they upped an monetized it on Wall St. And then everyone became a shamebroker- the buyers lying on their loan apps, the sellers lying about appraisals, the banks, again, lying to the buyers about how great these loans are.
Does this national boiler-room scam really work for us? I think my life, liberty and property would be a whole lot better off in a country that had zero tolerance for con games.
FIRST!!
I like this:
"We would strongly caution policymakers to avoid any regulatory or legislative actions that would
impede the ability of the market to respond to changes in underlying economic conditions or
continue to be innovative in creating credit solutions for borrower needs. An important role of public
policy should be to facilitate efficient markets, as these will ultimately benefit consumers."
In other words, please don't tell us to stop pushing high fee/no qualifying loans on unsophisticated borrowers because we make a lot of money in our "efficient" markets. //end of rant
And I'm a libertarian wanting the governement to crack down. Sheesh.
Nope, the gummint shouldn't be cracking down on this stuff. Let it sort out. Howsomever.... they better not be bailing anyone out either! The more we try to 'fix' things with laws or fix outcomes we don't like, the less responsible the public at large becomes. The pain hurts, but it's better remembered and the rest of us don't have to go through the 'sympathy pains' of having to fix their mistakes.
"The housing market is nearly back to normal."
I stopped reading after this sentence.
CR,
A little off-topic; but regarding your previous posts on increases in home-ownership rate over time, I had a demographics question. If it is true that older people have a higher home-ownership rate than young people, and that the population is aging, should the home-ownership rate not show a long-term secular trend higher? I know this would not account for short-term increases, which almost certainly are a product of loose lending, but it should mean that the baseline home-ownership rate is higher now than say 20 years ago. It should be possible to estimate the magnitude of this trend by looking at the Census Bureau breakdown of the population by age now and 20 years ago, and multiplying the percent of people in each age group by the average home-ownership rate for that age group. For fun, the data could be projected into the future to estimate the home-ownership rate 20 years from now. Forgive me if this has already been addressed.
Thanks for your fantastic contribution to economic debate!
CR -- you may have already seen this, but just in case: The latest quarter loan officer survey was just released. It showed a very big swing from net loosening of residential mortgage lendings standards only a couple quarters ago to net tightening. I put a post up on my blog.
Interest Rate Roundup
Here it is as well ...
The missing ingredient in this housing bust cycle -- until very recently -- was tighter lending standards. Even after home sales topped out, price growth peaked, and inventories started building, mortgage lenders didn't start restricting credit. Indeed, they actually LOOSENED standards to keep loan volumes up.
Just look at the Federal Reserve Board's Senior Loan Officer Opinion Survey on Bank Lending Practices. The quarterly survey covers commercial and residential lending -- whether standards are loosening or tightening, whether demand for mortgage, commercial and industrial loans is rising, etc. It covers around 90 domestic banks and U.S.-based divisions of foreign banks.
The net percentage of institutions tightening standards for residential mortgages was NEGATIVE 9.4% in Q2 2006 and -9.3% in Q3 2006. In other words, once you netted out the banks that are tightening standards vs. those that are loosening them, you found that just over 9% were loosening. That was the most widespread loosening of standards recorded since late 1993.
But boy have things changed. This Fed indicator has now swung to POSITIVE 16.4%, the highest reading since Q2 1991 (22.9%). Moreover, about half of domestic banks said they expect "a worsening of the quality of their nontraditional residential mortgage loans this year; a few institutions noted that they anticipate that the quality of such loans will deteriorate substantially in 2007."
You can't have your cake and eat it too!
How can the stabilization process begin with all of this outstanding (perhaps the wrong word!) IO / NegAm debt still floating. We are only seeing the begining of the resets if 80% of the loans were originated since 2005 and it takes three to five years.
Also I tend to believe that the stat: 25% of loans last year were IO, is greatly misleading. I would guess they are averaging in the MidWest and other less "frothy" markets. Here in Diego something like 50% (or more I forget the exact stat) were IO.
To me this means that half of the markets in the US have already stabilized, as they were never out of whack. I think the other half of the country (Frisco to Diego, Boston to DC & Flordia) haven't event begin to feel the hurt...
I agree 100% with Mike, tightening credit this year is the difference between this and last, the long rates will be a bit lower but the stated loans have tightened up a lot with most if not all requiring 5%-10% down, that effectively eliminates a lot of the "liar" market.
So here at least no consensus on whether the credit has tightened as per new guidelines or whether the practice continues with new signs of tightening ['For Sale' referring only to the sign. Dang.]
I don't know about you (ok, not you Geoff) but I like the bar graph presentation with ** for 2006 and 2007. I'm going to use the same for getting rid of my paunch: great expectations!
Robert, it's about time Libertarians took some pause on this - thanks. Expecting the market to just 'sort itself out' has always struck me as naive, a con job, or a cop-out. There's no historical basis for the 'sort itself out' method to sort itself into anything other than something ruthless and destructive. We might hope for the best in human nature with our economic theories, but if we want those theories to work in real life, we must expect the absolute worst, and plan for it.
Libertarianism is just as flawed as Communism in this way -- both too easily corrupted and co-opted by greed and power addicts.
Our political genius in this country rests on checks and balances -- it's too bad many economic theorists can't adapt these principles to our markets. A 'free' market has only meant the bankers get to screw everyone, including their own shortsighted, addicted selves.
I'll take a fair market over that any day. Which makes me think CR, maybe that would be an interesting topic -how to create a fair market in the aftermath of this one...
"But boy have things changed. This Fed indicator has now swung to POSITIVE 16.4%, the highest reading since Q2 1991 (22.9%)."
Nice work, Mike. There seems to be a lot of disagreement on this issue, (Lending is tightening! No its not!), so this data point finally provides something concrete.
Purchase in California
I cant tell you how happy the above thread makes me, Full Doc, and OO, subprime.. and still needs 10% down, 6 months ago that would be a slam dunk 100% purchase .
still too much inventory out there to call the market back to normal. levels have to drop further.
Alo
I'll take a fair market over that any day.
Hate to tell you this but there isn't any such thing as "fair".
Someone is going to get, for a lack of a better term, screwed due to all of this insanity and our government that youre so proud of has more then it's share of the responsibly for all of this.
I am looking forward to the next two flow of funds reports with great anticipation.
mp, welcome to the brotherhood of the nerds.
It's been clear from the flow of funds for over a year now that households have been leveraging up on mortgage loans. In Q3 they borrowed over 93% of the increase in market value. I'm expecting a spike in either Q4 or the first quarter of this year. It will be interesting to watch all of this re-balance.
Cash, baby, cash. Show me the green.
"The housing market is nearly back to normal."
I luaghed after this sentence and nearly spit all over my keyboard....
In Q3 they borrowed over 93% of the increase in market value. I'm expecting a spike in either Q4 or the first quarter of this year. It will be interesting to watch all of this re-balance.
I wouldn't be surprised to see borrowing go over 100% of the increase in market value... Or even if the market value 'growth' goes negative that borrowing continues.
There has been so much prior appreciation over the last few years that I would NOT be surprised to see collateralized borrowing still struggling to catch up... This will continue until it is obvious that LTVs are in dangerous territory (and not just obvious to tanta & MOM).
I bet the bulk of consumers don't even know how close they are to the edge let alone their friendly neighborhood mortgage broker knowing... or caring... as long as it closes & s/he gets commished.
But still, my guess is there is equity out there to mine so its 'HI HO, HI HO... Its off to work we go, with a shovel a pick for a walking stick, HI HO, HI HO HI HO!!!' Off to the mine to pick away at all that equity.
Okay maybe dynamite & strip mine - but you get the idea.
"I wouldn't be surprised to see borrowing go over 100% of the increase in market value... Or even if the market value 'growth' goes negative that borrowing continues."
Dryfly, I wouldn't be surprised either. The scenario seems likely at this point.
Alo,
You and libertarians both agree that there are very bad people that will use their power to take advantage of others. You both agree that those people will seek to gain more power so that they can further subjugate others.
Here is the difference. Libertarians think that you should not give those bad people the opportunity to gain coercive power above recourse to take life, liberty, and property, i.e. get elected to public office. The only way to do that is to not have public office and central governance.
The only way to do that is to not have public office and central governance.
So abolish gov't and instead GE does it to you.
That is the flaw in Libertarianism...It is that gov't is not the only coercive power. Some of these multi-nationals have way more power than all but the largest & most coercive gov'ts.
A classic Hobson's choice - big gov't or big corporatocracy. Pick your poison.
I prefer that the two monsters battle in relative parity while I scurry about underneath, trying not to get stepped on.
Kevin, pride's got nothing to do with it. I blame the government too, for giving the industry carte blanche to do whatever it wants to with the credit system - long term consequences and our nation be damned. They bowed to these junkies and we will pay the price for years to come.
If we don't wish to create means to stop the ruthless and shortsightedly greedy from gaming the market, they will make themselves (deservedly) kings of us. We'll be serfs to the con men. Might be your ideal to have a free-market stall on top of the ash heap they're going to create (by the time they 'sort it out'), but it's not mine.
Jan 2007 Fed Funds statistical supplement Mortgage Debt.
From 3rd quarter 2005 to 3rd quarter 2006, residential mortgage debt increased almost a trillion.
From 2002 thru 3rd quarter 2006 residential mortgage debt increased nearly 3.9 trillion, going from 6.86 trillion to 10.74 trillion.
Does anyone really believe that the income increases during this period can support repayment? Almost all of the increase in household debt was in mortgages, too. 1.59 gives the total increase from 2002 to 3rd quarter 2006 in household debt as slightly more than 4.1 trillion, and the increase in household debt from 3rd quarter 2005 to 3rd quarter 2006 as a bit more than 1.1 trillion.
Anyone who believes that this rate of increase in debt can be sustained is bodacious indeed! I have some sweet, juicy second and third liens for such persons to buy (they come with free crystal meth to make the prospectuses add up, per Tanta).
There's got to be a morning after
We're moving closer to the shore
I know we'll be there by tomorrow
And we'll escape the darkness
We won't be searchin' any more
Thanks for that Maxo.
The private lenders (3/4 the way down) look like the ones who are inforit from that Table.
Alo
If we don't wish to create means to stop the ruthless and shortsightedly greedy from gaming the market, they will make themselves (deservedly) kings of us. We'll be serfs to the con men.
Our government is a revolving door from Washington to Wall Street. Our laws are written by the lobbyist which are paid for by big business and then rubber-stamped by our elected officals.
Who do you think wrote the new bankruptcy laws? Who passed these laws? Are they "fair'?
Just who is going to make this fiasco "fair"? And just how will they decide it is "fair" for everyone involved?
Anyone who believes that this rate of increase in debt can be sustained is bodacious indeed!
LOL. I wonder where 'bodacious' is today. I need my fix.
Libertarianism = Anarchy for rich people.
"Anyone who believes that this rate of increase in debt can be sustained is bodacious indeed!"
Any idea how much of that is investment debt? A lot of little guys like me own and rent out houses. As long as the rent pays the PITA, then we can handle the occasional extraordinary expense. Of course, most of mine are pre-2000 mortgages.
So, we hold 0.0000056% of all of the mortgage debt in the United States and we are doing OK.
Robert wrote:
"Any idea how much of that is investment debt?"
Yeah, the real investors are covered, but that's because you do old-fashioned neurotic stuff like figure out cash flow BEFORE buying. But then, a lot of your types have sold rather than bought during the last 18 months, so my guess is that your types are holding less of the total mortgage debt than the normal ratio. And more of your types are being hurt by declining rents, as in spots in Texas and Florida.
As for specuvestors:
Most stats I have seen indicate between 15-20% of housing bought in 2005 as second homes. Since a lot of people lied and said they were buying homes when they were buying investment houses, a la Casey Serin, let's say 10-plus% of the increase since 2002? And many of those are financed with teaser-rate, option ARM or IO vehicles in areas where rents don't cover an amortizing payment. You can't reach a 2.7% vacancy rate without widespread speculative purchasing over years.
500-600 billion seems like a decent ballpark figure. Given the current disinclination of mortgage lenders to finance investors buying multiple properties in a year, I'd say that number is diminishing rapidly through NOD's, short sales and foreclosures.
Mike,Bulimics have their cake,and eat it too...
Kevin - very good questions -- and well worth discussing. Maybe we can begin by going back to the rule structure before this mess of debt happened, when banks used to lend money to folks with good credit, who likely could pay them back. And when we as a country borrowed money on the expectation that we could pay it back.
Historically, the floor has opened up to a better debate on what a fair market can be when the practice of a 'free' market brings us to our knees. That time's coming around again. Once we get fooled twice, we ought to be more than ready to reconsider the ground rules. It would be interesting to see this group explore what those rules ought to be.
"back to normal" sounds right from their perspective...volume of loan originations. My real estate friends are seeing that kind of activty since 1/1. Doesn't mean it will fix the overhang.
Alo, I think one of the "fair market" questions we could start with is the one regarding data reporting, disclosure, and general transparency. Anyone who has been reading this blog since its inception has noticed how little the "official numbers" about the mortgage business tell you in an environment in which regulated depositories are not the only game in town. Why did Greenspan and Kennedy have to put together such a rocket-science formula for estimating MEW? Because the government does not collect data from all market participants, or even the right data from those it does collect data from. The government apparently has an interest in monitoring home price appreciation/depreciation, but the only database it mines for its calculations is the GSEs', so we all start trying to "adjust" the OFHEO numbers to make sense of markets that are nonconforming. The damned FDIC stood up in hearings in August and observed that they didn't actually know how many "exotics" were being held by regulated institutions, but it seemed like a lot.
You would think that those who do not want to see "regulatory burdens" placed on lenders would be all in favor of providing data, would you not? I mean, if the data really shows that the private sector is managing risk responsibly, then wouldn't it be smart for them to agree to cough it up? Especially since all the loan origination and servicing software these folks use were designed to meet the needs of depository as well as nondepository lenders--increases your customer base when you build it that way--and are therefore ready to do this kind of reporting out of the box? That is to say, there's hardly a huge cost burden to do, say, HMDA-style reporting when the software you use is already fully capable of generating HMDA reports.
Gee, Tanta, I know you wern't talking to me but you just took that warm fuzzy feeling I had...away. Can I sell me short?
Data mining needs to be updated into the '90s, at least.
Touché !
"In addition to their use as affordability products, these products offer homeowners an innovative and flexible means to more actively manage their home equity."
Don't look back, Dr. Pangloss. The mortgage bankers are gaining on you.
Tanta, thanks - was hoping you'd chime in - right to the heart of the matter (as usual). Data transparency seems like a great platform on which to build reform. (Ever think about writing legislation?)
It seems like the second we let lenders hide their shame, they upped an monetized it on Wall St. And then everyone became a shamebroker- the buyers lying on their loan apps, the sellers lying about appraisals, the banks, again, lying to the buyers about how great these loans are.
Does this national boiler-room scam really work for us? I think my life, liberty and property would be a whole lot better off in a country that had zero tolerance for con games.
i heard that in iran they dont have mortgages, you buy a house when you have the money, till then you rent