"She's got to ride it out and sacrifice?" This clown should be hunted-down and subjected to face ALL the many mortgage borrowers which he helped screw-over. Meanwhile, he commutes to and from his Million $ plus estate everyday lying,cheating and swindling his way around the capital markets. No bologna sandwiches for him. What an ass.
This fascination with home ownership at any cost never stops amazing me. Why did she feel she had to buy to escape her neighbourhood - why not just rent somewhere nicer? Did she take into account how much she might have to pay each month until the prepayment penalty ended, assuming interest rates should statistically return to long term averages. My guess is no. My guess is most buyers didn't. Why not? And why are we supposed to sympathise with these people?
These weepy stories of people who are now suffereing because they didn't read their loan docs, didn't understand what they were signing, didn't bother to consider whether they could really afford something, yadada yadada yadada really make me cross.
Be glad you've got bologna sandwiches and that you're not tossed into debtors prisons, which would be a good use for all those condos in Miami.
Justice will be served if Marie Antoinio-ette there is force fed his share of bologna to the point that her loan becomes reasonable again. Never heard a quote that makes a man so deserving of shared pain.
Bloomberg.com reports that Goldman Sachs' (GS) Global Alpha hedge fund fell 22.5% in August, its biggest monthly decline, on losses from currency and stock trades, according to an update sent to investors. The fund, managed by Mark Carhart and Raymond Iwanowski, has dropped by a third in 2007 and 44% from its peak in March 2006. Investors notified Goldman last month that they plan to withdraw $1.6 bln from the fund, or almost a fifth of the assets as of July 31... In a separate story, Bloomberg.com reports that Red Kite Metals, the world's largest hedge fund dedicated to metals, tumbled about 20% last month as the $2.5 bln Touradji Capital Management commodities fund gained. The decline at Red Kite, co-founded by Michael Farmer, extends its loss to 29% this year, according to three investors in the fund who declined to be identified because the information is private. Paul Touradji's largest fund, the $2 bln Touradji Global Resources, rose 2.5% last month, said two investors who declined to be identified. It's up 21-25% this year, depending on the share class.
"why not just rent somewhere nicer?"
Maybe she wanted a little garden, wanted to do a bit of remodeling, paint stuff her own colors... call the place her own.
That stuff is worth something, just not worth every penny you earn.
Of course don't walk away before extracting 12 months of free rent by stopping all payments to mortgage and
delaying the foreclosure process in any way possible. Squatters Unite!
Hmm... The very thing she tried to escape, poverty and drugs, will be the very thing she finds herself surrounded by once the blight takes over. Shakespearian irony at its finest. Her actions were all for nought.
Alot of people moved from decent neighborhoods and abandoned decent lifestyles to buy a home in some gangriddled neighborhood in hopes HPA would provide them with some kind of retirement that did not require a cat food diet.They are poorly educated financially,exhausted from working long hours and terrified of falling through the gaping cracks of society.not all of course,or we wouldn't see so many plasma tv's and suvs,but plenty.
Investors notified Goldman last month that they plan to withdraw $1.6 bln from the fund, or almost a fifth of the assets as of July 31
This is why there's so much volatility in the market. This year, you have some very successful hedge funds and many big bombs. The bombs are getting margin calls and redemption requests, which means they have to unwind highly leveraged positions. The successful hedge funds know what they have and are sitting hard on the other side of trades.
Hedge fund land is mostly a zero sum game, and there's no mercy. Like I said some time ago, its dog eat dog.
Mason Suna opines; Of course don't walk away before extracting 12 months of free rent by stopping all payments to mortgage and
delaying the foreclosure process in any way possible. Squatters Unite!
Shhhh. Think of the risk to the faith in the US financial system. Were people to even partially take your suggestion and put their own interests adhead of the investors... In this example you are suggesting Dorinda Weisman selfishly keep another $40-50k of payments that rightfuly belong to the CD depositors at the likes of Countrywide and IndyMac.
The gist seems to be that pension funds were going into company stock even as, um, certain company execs were pulling their money out.
This isn't about pension funds. It's about individual 401(k)plan participants who invested in Countrywide stock.
Nobody forces a participant to buy company stock, unless it's the way matching contributions are made. But the plan trustees are required to offer an appropriate menu of investments.
So, what's wrong with Bologna? Especially pan-fried on toast with cheddar and mustard - I mean, this honestly makes my taste buds as happy as any filet.
And, oddly enough, mortgage brokers and other salesfolk are long-term experts at selling baloney - how convenient!
It's not enough that the banks figuratively left their doors unlocked, put up 29ft blinking neon signs announcing "The Key Is Under The Mat and The Plasma TV Is Behind The Second Door On The Right!" and then hired some sign twirlers down the street to herd traffic their way. No, they now have to strut by in their three-piece suits, tapping their lips while murmuring "Tut Tut Tut, These Uneducated Slobs think they can come in and steal our baloney sandwiches and get away with it. Didn't their mamas teach them better?! " sheesh.
A small point, but Ms Weisman is mistaken in attributing the decline in her home's market value to the neighborhood going downhill after drugs came in.
The biggest problem was that she bought a small house for $353,000, in Sacramento, in 2005.
Did she take into account how much she might have to pay each month until the prepayment penalty ended, assuming interest rates should statistically return to long term averages. My guess is no. My guess is most buyers didn't. Why not?
Because many people taking out a mortgage don't know how to run an amortization schedule. There should be a requirement that any broker provide 3 schedules: best case, middle case and worst case. Put it down in black and white so the person about to sign has to be able to see how bad "BAD" could really be. That might put the fear of god (and reality) into a few buyers.
The biggest problem was that she bought a small house for $353,000, in Sacramento, in 2005... - Reepicheep
Absolutely right, and with an unsuitable mortgage she shouldn't have committed to.
gng - don't get me wrong, I'm not arguing in favor of the banks either. I think market forces should be allowed to do their work, eliminate all the rot of the last several years, and let the US move on. There will be pain ( for buyers and for banks) but the markets will be better off in the long run - IMHO.
traditional concepts of convexity are all f'ed up nowadays
Do you know, I have actually been trying for several days to write an UberNerd post for which that could be the subtitle (if my Gracious and Cool-Headed Co-Blogger allowed me to use words like "f'ed up")?
I am finding that it is hard to both explain convexity and explain why non-experts need to know about convexity in a post of a length that will not blow the server.
A small point, but Ms Weisman is mistaken in attributing the decline in her home's market value to the neighborhood going downhill after drugs came in.
The biggest problem was that she bought a small house for $353,000, in Sacramento, in 2005.
Just bad timing.
I believe she is referring to the neighbourhood in which she rented before she purchased her house.
I am finding that it is hard to both explain convexity and explain why non-experts need to know about convexity in a post of a length that will not blow the server.
Do it! Make blogspot wail and gnash its teeth--make a post so long the database column overflows and the disks shatter! I wanna know what "convexity" is!
Is it anything like the convexity in LP programming?
No, it's about how mortgages suck as an investment when all other investments also suck, but then again they suck as an investment when other investments don't suck, which makes them very reliable sucky investments.
the reason for negative savings rate in the us. When instruments get too convex, folks just rather borrow the money and have it for suvs and lcd tvs now rather than attempt to save it so that they can afford cat food later.
Blow, winds, and crack your cheeks! rage! blow!
You cataracts and hurricanoes, spout
Till you have drenched our steeples, drowned the cocks!
You sulphurous and thought-executing fires,
Vaunt-couriers to oak-cleaving thunderbolts,
Singe my white head! And thou, all-shaking thunder,
Strike flat the thick rotundity o' the world!
Crack nature's molds, all germens spill at once
That make ingrateful man!
vader - well, if that has anything linking it to whatever that dreaded inverted yield curve is threatening, then convexity may have more to do with LP programming than it might appear. If you want a solution space at all, it's should be convex, if I'm channeling my mis-spent youth correctly. But I think we need the server-cracking full details to reliably distinguish it from magic or lack of better judgement.
Another fitting metaphor of the housing boom's place in the economy: parasitic baloney vendors taking the lion's share of your disposable income. An out-sized sector of the economy that takes an out-sized share of human resources that might have been distributed more equitably...on real improvements and benefits for everyone. Instead we get this culture whose most striking feature is lack of compassion for others --those dummies.
Shhhh. Think of the risk to the faith in the US financial system. Were people to even partially take your suggestion and put their own interests adhead of the investors... In this example you are suggesting Dorinda Weisman selfishly keep another $40-50k of payments that rightfuly belong to the CD depositors at the likes of Countrywide and IndyMac.
Robert Coté
When I had a CD, savings account with Countrywide I had a contract with CFC, not with Dorinda. Don't put CFCs obligations to me onto her.
But anyway we withdrew most of the money from Countrywide so its all moot. As moot as their plan to become a bank perhaps ?
Tanta - I will never get enough of your sublime brilliance.
I must say, Mr. Cook is a rarity among mortgage brokers. I'm going to guess that mine would recommend a steady diet of prawn sandwiches and plazma televisions.
"Nobody forces a participant to buy company stock, unless it's the way matching contributions are made. But the plan trustees are required to offer an appropriate menu of investments." - rich
I think post-Enron, participants have to have the option to transfer their matching contributions in company stock into the other options.
This makes total sense, pre-payment penalties are illegal in NJ. Therefore you will no doubt see a complete absence of low intro payment teaser rate loans in the NJ mortgage market. I mean if they can't recoup their cost no one would be willing to lend the money right????
I mean the numbers no doubt prove my assumptions right. Otherwise these reasons would just be justifications for outright usury. And they wouldn't do that, would they????
I thought the mortgage broker's most shocking remark was "the adjustable ate her equity"-- equity must taste better than that baloney. Unless it was neg-am, loans don't eat equity. The article basically says that a mere twelve months after buying this house its value had dropped enough to wipe out her down payment and then some. Who did the appraisal? Who sold this women a house with inflated price? I'd be looking for someone to sue.
The article basically says that a mere twelve months after buying this house its value had dropped enough to wipe out her down payment and then some. Who did the appraisal? Who sold this women a house with inflated price? I'd be looking for someone to sue.
Wrong - the price was the market (bubble) price at the time. The price has now fallen to a new market price. It is happening all over America and it will continue to happen for another six - eight years. Get used to it. There is nobody to sue for market prices changing. Real estate prices can go up as well as down. If they go down, reverse leverage kicks in and you eats into your downpayment (assuming there was one) and then your equity.
And why assume she paid a down payment - most didn't bother it seems.
are you going to break out equations and second derivative talk?
Well, see, I was actually going to go at it from a simpler, more folksy, "here's an analogy to help you understand the concept" approach, and leave the negative of the first derivative of price function to you math PhDs.
That would then give you math PhDs something to complain about in the comments (that there are not enough equations) at the same time that it might just still sail over the heads of the liberal arts contingent. It would therefore disappoint everyone regardless: kind of like investing in negatively convex mortgage loans! The whole post would be a metaphor for its undisclosed mathematical function! Nobel Prize, here I come!
ah, a multiply unsatisfactory sucky explanation of reliably sucky investments. A post-modern textual explanation of a post-modern mathematical function. Eco would be so proud... that recursive literary style semiotic subject relationship he seems to play with advances further. Prix Goncourt is a undoubtedly a wrap too.
I agree don't pay the mortgage, put it in a personal escrow account...bank the shit out of it..and when they..the mortgage company says we have to foreclose...let them...now you have X amount of dollars to renew yourself.
This is exactly what i would do if in a similar situation...85% of my income to a box...NEVER!!!!
freaking hell, Umberto Eco gets a mention.. I remember the times when we walked around the Digital Equipment campus, book in hand and used words like semiotics as if we fully understood them.
Amongst many of his writings, one definitely worth a read is "Foucault's Pendulum"
agreed, that is a good one. I get the same buzz of whizzing semi-understood concepts from "pier loans" and "second-lien reverse-transmogrified asset-backed jumbo puts" now.
Odd that extensive media investigations have turned up so few examples of borrowers who can reasonably be said to be responsible for their present difficulties. Someone less charitable than myself might suspect an agenda is at play here. I mean, do not these droves of passive victims afford an emotive demonstration that the "market economy" is a disaster? A variation on the theme "It's all Bush's fault"?
So, We the People are to be deemed incapable of understanding what we sign, or having the sense to refuse to sign what we do not understand. Throw in the notion that it is perfectly acceptable to lie like the dickens about our finances. Where is this going to take us? I suppose we could make lenders the guarantors of future price stability, and require them to conduct an exacting inquisition into the finances of borrowers. This wouldn't keep people from getting in over their heads, though. Perhaps a benevolent despotism of some sort would be the most attractive option. Certainly no shortage here of people willing to assume such heady responsibilities. But trying to pinpoint just where the system failed, is it true that most of the problematic loans were made by mortgage companies primarily regulated by state, not federal, officials?
An appraisal is not just a confirmation of whatever the buyer offered as in "hey if someone is willing to pay it that's the value." (oh wait may be it was in real estate bubble la-la land) it is supposed to provide the lender a sound value for collateral purposes to provide comfort that if the loan goes bad the amount owed would be recoverable. otherwise why even do appraisals--hey an offer price is the market price. The lender should be equally unhappy if a mere twelve months after the loan was made the loan is underwater. The story stated that she made a small down payment. If it is not worth 353k today, it probably was not worth that a year ago, no matter what she paid.
The local (L.A.) TV station here did an extensive story on the housing woes, complete with a short Leamer interview. Much more of this and J6P should get the message, no?
I found it hard to sympathize with the featured "victim" who's ARM reset doubled her payment (from $1800 to $3600) and was taking the lender to court to prevent FC, since the spot showed her walking out of her house and climbing into her Mercedes SUV.
TJ - Your comment reminded me of the WSJ story a fews months ago. Their photo of April Williams happens to show Ms.Williams standing in front of her 9-mpg newish Lincoln Navigator parked in the driveway.
It sounds to me like she needs to adjust her income tax withholding (otherwise the 85% claim doesn't seem plausible). I bet this would give her several hundred dollars a month more, that she would otherwise get back with next year's tax return. I hope she does this rather than run up expensive credit card debt.
If 9.8 percent rate uses up 85% of her income, wouldn't the teaser rate of 4.75 percent have used up about 40 to 45% of her income. If she had refinanced even to a fix rate of say 6.5 percent, wouldn't that have taken 60% of her income?
It seems that under no circumstance could she afford this house. What did she plan? That she would refinance into another teaser rate? She seems to be a pure speculator who was dependant on a refi to keep the teaser rates going, since even a 30 year fix rate was beyond 50% of her income.
wally's ot on Mission San Tangelo: The gist seems to be that pension funds were going into company stock even as, um, certain company execs were pulling their money out.
I haven't calculated an ARM in many a year, but I think if she had a 2/28, say, the introductory payments were about $1900/mo, and the 9.8 percent interest rate would have made for payments of nearly $3000/mo., just to get an idea.
The intro rate seems like more than one would like to see a one-income household, with a child who might have some special needs and a breadwinner who has to maintain a professional profile, taking on. I wonder if there's any way to adjust the payments enough that it wouldn't make better sense for her to walk.
Like a lot of people, the adjustable ate up her equity, said her mortgage broker, Antonio Cook of Toneco Financial. Shes got to ride it out and sacrifice. I tell people, I dont care if you eat bologna sandwiches, just pay your bills on time. If she can ride it out, things start coming up good.
This is advice from HER mortgage broker. Did he tell her this before or after she signed the loan documents?
Much as I feel for her, it's time to WALK AWAY. When you are so pinched that one bad illness or injury will ruin you financially--walk away. She has a sick kid--he WILL have big medical bills, and they WILL kill her.
Sell it, see if the lender will take a short sale, or do DIL, but there is NO sense in staying there.
85% of her income to housing ouch.
Walk away, Dorinda walk away.
I kind of like bologna sandwiches, myself. Eating them has got me where I am today - full of bologna.
Love the mortgage broker telling her to 'ride it out and sacrifice'. Chutzpa!
"She's got to ride it out and sacrifice?" This clown should be hunted-down and subjected to face ALL the many mortgage borrowers which he helped screw-over. Meanwhile, he commutes to and from his Million $ plus estate everyday lying,cheating and swindling his way around the capital markets. No bologna sandwiches for him. What an ass.
Look on the bright side. At least she won't be paying much in income taxes.
I sincerely hope Antonio finds himself in the Circle of Hell where the demons administer hourly bologna sandwiches forcefeedings to the wretched.
I don't remember which circle Dante put that one in.
This fascination with home ownership at any cost never stops amazing me. Why did she feel she had to buy to escape her neighbourhood - why not just rent somewhere nicer? Did she take into account how much she might have to pay each month until the prepayment penalty ended, assuming interest rates should statistically return to long term averages. My guess is no. My guess is most buyers didn't. Why not? And why are we supposed to sympathise with these people?
These weepy stories of people who are now suffereing because they didn't read their loan docs, didn't understand what they were signing, didn't bother to consider whether they could really afford something, yadada yadada yadada really make me cross.
Be glad you've got bologna sandwiches and that you're not tossed into debtors prisons, which would be a good use for all those condos in Miami.
Justice will be served if Marie Antoinio-ette there is force fed his share of bologna to the point that her loan becomes reasonable again. Never heard a quote that makes a man so deserving of shared pain.
OT but...
Bloomberg.com reports that Goldman Sachs' (GS) Global Alpha hedge fund fell 22.5% in August, its biggest monthly decline, on losses from currency and stock trades, according to an update sent to investors. The fund, managed by Mark Carhart and Raymond Iwanowski, has dropped by a third in 2007 and 44% from its peak in March 2006. Investors notified Goldman last month that they plan to withdraw $1.6 bln from the fund, or almost a fifth of the assets as of July 31... In a separate story, Bloomberg.com reports that Red Kite Metals, the world's largest hedge fund dedicated to metals, tumbled about 20% last month as the $2.5 bln Touradji Capital Management commodities fund gained. The decline at Red Kite, co-founded by Michael Farmer, extends its loss to 29% this year, according to three investors in the fund who declined to be identified because the information is private. Paul Touradji's largest fund, the $2 bln Touradji Global Resources, rose 2.5% last month, said two investors who declined to be identified. It's up 21-25% this year, depending on the share class.
"why not just rent somewhere nicer?"
Maybe she wanted a little garden, wanted to do a bit of remodeling, paint stuff her own colors... call the place her own.
That stuff is worth something, just not worth every penny you earn.
In RE declines in the 80's I knew people fully able to pay but walked from the "poverty trap".
Same in the 90's, different people and MSRA.
sterlingerl, now you just leave those Miami condos out of this. In a few years, I'll be down there on a mission!
Of course don't walk away before extracting 12 months of free rent by stopping all payments to mortgage and
delaying the foreclosure process in any way possible. Squatters Unite!
Interesting on Countrywide:
Countrywide Sued by Workers Over Retirement Losses (Update1) - Bloomberg.com
The gist seems to be that pension funds were going into company stock even as, um, certain company execs were pulling their money out.
Hmm... The very thing she tried to escape, poverty and drugs, will be the very thing she finds herself surrounded by once the blight takes over. Shakespearian irony at its finest. Her actions were all for nought.
Alot of people moved from decent neighborhoods and abandoned decent lifestyles to buy a home in some gangriddled neighborhood in hopes HPA would provide them with some kind of retirement that did not require a cat food diet.They are poorly educated financially,exhausted from working long hours and terrified of falling through the gaping cracks of society.not all of course,or we wouldn't see so many plasma tv's and suvs,but plenty.
Middle class buyers
Eat bologna, velveeta
Don't let banks down!
This is why there's so much volatility in the market. This year, you have some very successful hedge funds and many big bombs. The bombs are getting margin calls and redemption requests, which means they have to unwind highly leveraged positions. The successful hedge funds know what they have and are sitting hard on the other side of trades.
Hedge fund land is mostly a zero sum game, and there's no mercy. Like I said some time ago, its dog eat dog.
Mason Suna opines; Of course don't walk away before extracting 12 months of free rent by stopping all payments to mortgage and
delaying the foreclosure process in any way possible. Squatters Unite!
Shhhh. Think of the risk to the faith in the US financial system. Were people to even partially take your suggestion and put their own interests adhead of the investors... In this example you are suggesting Dorinda Weisman selfishly keep another $40-50k of payments that rightfuly belong to the CD depositors at the likes of Countrywide and IndyMac.
This isn't about pension funds. It's about individual 401(k)plan participants who invested in Countrywide stock.
Nobody forces a participant to buy company stock, unless it's the way matching contributions are made. But the plan trustees are required to offer an appropriate menu of investments.
I'll look into the case further.
So, what's wrong with Bologna? Especially pan-fried on toast with cheddar and mustard - I mean, this honestly makes my taste buds as happy as any filet.
And, oddly enough, mortgage brokers and other salesfolk are long-term experts at selling baloney - how convenient!
It's not enough that the banks figuratively left their doors unlocked, put up 29ft blinking neon signs announcing "The Key Is Under The Mat and The Plasma TV Is Behind The Second Door On The Right!" and then hired some sign twirlers down the street to herd traffic their way. No, they now have to strut by in their three-piece suits, tapping their lips while murmuring "Tut Tut Tut, These Uneducated Slobs think they can come in and steal our baloney sandwiches and get away with it. Didn't their mamas teach them better?! " sheesh.
A small point, but Ms Weisman is mistaken in attributing the decline in her home's market value to the neighborhood going downhill after drugs came in.
The biggest problem was that she bought a small house for $353,000, in Sacramento, in 2005.
Just bad timing.
traditional concepts of convexity are all f'ed up nowadays. buy jumbos!
Did she take into account how much she might have to pay each month until the prepayment penalty ended, assuming interest rates should statistically return to long term averages. My guess is no. My guess is most buyers didn't. Why not?
Because many people taking out a mortgage don't know how to run an amortization schedule. There should be a requirement that any broker provide 3 schedules: best case, middle case and worst case. Put it down in black and white so the person about to sign has to be able to see how bad "BAD" could really be. That might put the fear of god (and reality) into a few buyers.
The biggest problem was that she bought a small house for $353,000, in Sacramento, in 2005... - Reepicheep
Absolutely right, and with an unsuitable mortgage she shouldn't have committed to.
gng - don't get me wrong, I'm not arguing in favor of the banks either. I think market forces should be allowed to do their work, eliminate all the rot of the last several years, and let the US move on. There will be pain ( for buyers and for banks) but the markets will be better off in the long run - IMHO.
traditional concepts of convexity are all f'ed up nowadays
Do you know, I have actually been trying for several days to write an UberNerd post for which that could be the subtitle (if my Gracious and Cool-Headed Co-Blogger allowed me to use words like "f'ed up")?
I am finding that it is hard to both explain convexity and explain why non-experts need to know about convexity in a post of a length that will not blow the server.
Sigh.
A small point, but Ms Weisman is mistaken in attributing the decline in her home's market value to the neighborhood going downhill after drugs came in.
The biggest problem was that she bought a small house for $353,000, in Sacramento, in 2005.
Just bad timing.
I believe she is referring to the neighbourhood in which she rented before she purchased her house.
And I was about to ask bacon dreamz about convexity, since I don't recognize the term except as it applies to mirrors or lenses.
I am finding that it is hard to both explain convexity and explain why non-experts need to know about convexity in a post of a length that will not blow the server.
Do it! Make blogspot wail and gnash its teeth--make a post so long the database column overflows and the disks shatter! I wanna know what "convexity" is!
Blow the server! Is it anything like the convexity in LP programming? Solution space and Non-pareto optima etc?
You were really going to ask, burnside? Does this mean if I do an excruciatingly long post on convexity I can blame it on you? Cool.
Is it anything like the convexity in LP programming?
No, it's about how mortgages suck as an investment when all other investments also suck, but then again they suck as an investment when other investments don't suck, which makes them very reliable sucky investments.
Intrigued?
I'm all about blame and guilt, Tanta. Bring it!
convexity
the reason for negative savings rate in the us. When instruments get too convex, folks just rather borrow the money and have it for suvs and lcd tvs now rather than attempt to save it so that they can afford cat food later.
Blow, winds, and crack your cheeks! rage! blow!
You cataracts and hurricanoes, spout
Till you have drenched our steeples, drowned the cocks!
You sulphurous and thought-executing fires,
Vaunt-couriers to oak-cleaving thunderbolts,
Singe my white head! And thou, all-shaking thunder,
Strike flat the thick rotundity o' the world!
Crack nature's molds, all germens spill at once
That make ingrateful man!
vader - well, if that has anything linking it to whatever that dreaded inverted yield curve is threatening, then convexity may have more to do with LP programming than it might appear. If you want a solution space at all, it's should be convex, if I'm channeling my mis-spent youth correctly. But I think we need the server-cracking full details to reliably distinguish it from magic or lack of better judgement.
"And I was about to ask bacon dreamz about convexity, since I don't recognize the term except as it applies to mirrors or lenses."
As used in common parlance it has the same relationship as smoke to mirrors and lenses.
Convexity, isn't that why we have FHA and VA loans.
Getting the lower economic groups into hmoes is not a good investment.
Developing SIV's to do what FHA does is somewhat akin to lunacy.
Negative savings rate..........
What has the 'inflate away' all our problems done to give me a reason to save.
If Fed cuts .25 I am buying that Z06!!
If that is the still the souped up vette.
Another fitting metaphor of the housing boom's place in the economy: parasitic baloney vendors taking the lion's share of your disposable income. An out-sized sector of the economy that takes an out-sized share of human resources that might have been distributed more equitably...on real improvements and benefits for everyone. Instead we get this culture whose most striking feature is lack of compassion for others --those dummies.
Shhhh. Think of the risk to the faith in the US financial system. Were people to even partially take your suggestion and put their own interests adhead of the investors... In this example you are suggesting Dorinda Weisman selfishly keep another $40-50k of payments that rightfuly belong to the CD depositors at the likes of Countrywide and IndyMac.
Robert Coté
When I had a CD, savings account with Countrywide I had a contract with CFC, not with Dorinda. Don't put CFCs obligations to me onto her.
But anyway we withdrew most of the money from Countrywide so its all moot. As moot as their plan to become a bank perhaps ?
-K
"...words of wisdom from a mortgage broker..."
Tanta - I will never get enough of your sublime brilliance.
I must say, Mr. Cook is a rarity among mortgage brokers. I'm going to guess that mine would recommend a steady diet of prawn sandwiches and plazma televisions.
"Nobody forces a participant to buy company stock, unless it's the way matching contributions are made. But the plan trustees are required to offer an appropriate menu of investments." - rich
I think post-Enron, participants have to have the option to transfer their matching contributions in company stock into the other options.
You're right Grasshopper, I misread it.
This makes total sense, pre-payment penalties are illegal in NJ. Therefore you will no doubt see a complete absence of low intro payment teaser rate loans in the NJ mortgage market. I mean if they can't recoup their cost no one would be willing to lend the money right????
I mean the numbers no doubt prove my assumptions right. Otherwise these reasons would just be justifications for outright usury. And they wouldn't do that, would they????
yummy convexity!
are you going to break out equations and second derivative talk?
I want to be able to open a bond arbitrage quant fund after your post. I am getting excited.
...see this bond reacts differently to interest rate moves because than this bond because ......
cool stuff.
I thought the mortgage broker's most shocking remark was "the adjustable ate her equity"-- equity must taste better than that baloney. Unless it was neg-am, loans don't eat equity. The article basically says that a mere twelve months after buying this house its value had dropped enough to wipe out her down payment and then some. Who did the appraisal? Who sold this women a house with inflated price? I'd be looking for someone to sue.
That home was not impossible for her with a decent interest rate ... this is an example of predatory lending.
The article basically says that a mere twelve months after buying this house its value had dropped enough to wipe out her down payment and then some. Who did the appraisal? Who sold this women a house with inflated price? I'd be looking for someone to sue.
Wrong - the price was the market (bubble) price at the time. The price has now fallen to a new market price. It is happening all over America and it will continue to happen for another six - eight years. Get used to it. There is nobody to sue for market prices changing. Real estate prices can go up as well as down. If they go down, reverse leverage kicks in and you eats into your downpayment (assuming there was one) and then your equity.
And why assume she paid a down payment - most didn't bother it seems.
If they go down, reverse leverage kicks in and you eats into your downpayment (assuming there was one) and then your equity.
Correction - then you have negative equity ie you owe the bank more than what the house is worth. We are seeing this everywhere...
are you going to break out equations and second derivative talk?
Well, see, I was actually going to go at it from a simpler, more folksy, "here's an analogy to help you understand the concept" approach, and leave the negative of the first derivative of price function to you math PhDs.
That would then give you math PhDs something to complain about in the comments (that there are not enough equations) at the same time that it might just still sail over the heads of the liberal arts contingent. It would therefore disappoint everyone regardless: kind of like investing in negatively convex mortgage loans! The whole post would be a metaphor for its undisclosed mathematical function! Nobel Prize, here I come!
ah, a multiply unsatisfactory sucky explanation of reliably sucky investments. A post-modern textual explanation of a post-modern mathematical function. Eco would be so proud... that recursive literary style semiotic subject relationship he seems to play with advances further. Prix Goncourt is a undoubtedly a wrap too.
Hopefully the crash will eliminate $60k social worker jobs as well. The welfare state is an insane asylum. Anyone who supports government is nuts.
I agree don't pay the mortgage, put it in a personal escrow account...bank the shit out of it..and when they..the mortgage company says we have to foreclose...let them...now you have X amount of dollars to renew yourself.
This is exactly what i would do if in a similar situation...85% of my income to a box...NEVER!!!!
re: scav
freaking hell, Umberto Eco gets a mention.. I remember the times when we walked around the Digital Equipment campus, book in hand and used words like semiotics as if we fully understood them.
Amongst many of his writings, one definitely worth a read is "Foucault's Pendulum"
Amazon.com: Foucault's Pendulum (9780156032971): Umberto Eco: Books
-K
agreed, that is a good one. I get the same buzz of whizzing semi-understood concepts from "pier loans" and "second-lien reverse-transmogrified asset-backed jumbo puts" now.
Odd that extensive media investigations have turned up so few examples of borrowers who can reasonably be said to be responsible for their present difficulties. Someone less charitable than myself might suspect an agenda is at play here. I mean, do not these droves of passive victims afford an emotive demonstration that the "market economy" is a disaster? A variation on the theme "It's all Bush's fault"?
So, We the People are to be deemed incapable of understanding what we sign, or having the sense to refuse to sign what we do not understand. Throw in the notion that it is perfectly acceptable to lie like the dickens about our finances. Where is this going to take us? I suppose we could make lenders the guarantors of future price stability, and require them to conduct an exacting inquisition into the finances of borrowers. This wouldn't keep people from getting in over their heads, though. Perhaps a benevolent despotism of some sort would be the most attractive option. Certainly no shortage here of people willing to assume such heady responsibilities. But trying to pinpoint just where the system failed, is it true that most of the problematic loans were made by mortgage companies primarily regulated by state, not federal, officials?
scav, I suggested we change the name of the blog to "The Name of the Rose," but CR likes "Calculated Risk" better.
True fact: that's because it's the name his friend's boat.
An appraisal is not just a confirmation of whatever the buyer offered as in "hey if someone is willing to pay it that's the value." (oh wait may be it was in real estate bubble la-la land) it is supposed to provide the lender a sound value for collateral purposes to provide comfort that if the loan goes bad the amount owed would be recoverable. otherwise why even do appraisals--hey an offer price is the market price. The lender should be equally unhappy if a mere twelve months after the loan was made the loan is underwater. The story stated that she made a small down payment. If it is not worth 353k today, it probably was not worth that a year ago, no matter what she paid.
I'd say an appraisal is the value at which one thinks one might be able to find ANOTHER buyer.
The local (L.A.) TV station here did an extensive story on the housing woes, complete with a short Leamer interview. Much more of this and J6P should get the message, no?
I found it hard to sympathize with the featured "victim" who's ARM reset doubled her payment (from $1800 to $3600) and was taking the lender to court to prevent FC, since the spot showed her walking out of her house and climbing into her Mercedes SUV.
TJ - Your comment reminded me of the WSJ story a fews months ago. Their photo of April Williams happens to show Ms.Williams standing in front of her 9-mpg newish Lincoln Navigator parked in the driveway.
'Subprime' Aftermath: Losing the Family Home - WSJ.com
click "see full presentation", then mouse over "5170 - April Williams"
And the Lincoln Navigator and the Mercedes SUV were financed by home equity you think? What a country.
It sounds to me like she needs to adjust her income tax withholding (otherwise the 85% claim doesn't seem plausible). I bet this would give her several hundred dollars a month more, that she would otherwise get back with next year's tax return. I hope she does this rather than run up expensive credit card debt.
She needs to adjust her income upwards by about $60,000.
If 9.8 percent rate uses up 85% of her income, wouldn't the teaser rate of 4.75 percent have used up about 40 to 45% of her income. If she had refinanced even to a fix rate of say 6.5 percent, wouldn't that have taken 60% of her income?
It seems that under no circumstance could she afford this house. What did she plan? That she would refinance into another teaser rate? She seems to be a pure speculator who was dependant on a refi to keep the teaser rates going, since even a 30 year fix rate was beyond 50% of her income.
wally's ot on Mission San Tangelo:
The gist seems to be that pension funds were going into company stock even as, um, certain company execs were pulling their money out.
Sounds damned enronish to me.
I haven't calculated an ARM in many a year, but I think if she had a 2/28, say, the introductory payments were about $1900/mo, and the 9.8 percent interest rate would have made for payments of nearly $3000/mo., just to get an idea.
The intro rate seems like more than one would like to see a one-income household, with a child who might have some special needs and a breadwinner who has to maintain a professional profile, taking on. I wonder if there's any way to adjust the payments enough that it wouldn't make better sense for her to walk.
Like a lot of people, the adjustable ate up her equity, said her mortgage broker, Antonio Cook of Toneco Financial. Shes got to ride it out and sacrifice. I tell people, I dont care if you eat bologna sandwiches, just pay your bills on time. If she can ride it out, things start coming up good.
This is advice from HER mortgage broker. Did he tell her this before or after she signed the loan documents?
Much as I feel for her, it's time to WALK AWAY. When you are so pinched that one bad illness or injury will ruin you financially--walk away. She has a sick kid--he WILL have big medical bills, and they WILL kill her.
Sell it, see if the lender will take a short sale, or do DIL, but there is NO sense in staying there.