Home equity decreasing? - take that trip to Tahiti or buy that dream car NOW! We offer TIPS for underwater homeowners! Only $99.99 for the complete video series "Scuba Diving in Suburbia!" /sarc
The Banks are behind the curve on this one. They can't shut off the money spigot fast enough as spending binged consumers barely can keep up with inflation. Visa, Am Ex and Mastercard are in for a wild ride. It would be interesting to get some data on IRA/401 K withdrawls as we go forward.
Other than fraudulent occupancy status & late payees, I'm surprised they can legally limit/stop the MEW / HELOC use activity after a note has been executed. Especially if the borrower has been paying on time.
I just have to say, I have a mortgage with a large lender that has been in the news a lot lately--they are in the process of being acquired by a large bank right now--and yesterday I got an offer from them to take out as much as $117,000 of equity from my home. If you added that amount to the outstanding mortgage still due, it would place my total debt at something like $267,000, which is $70-$80,000+ more than the house is worth. So it seems to me like the sales and marketing people are not coordinating with the policy people.
Chumps on CNBC clammoring for an inter-meeting 50bpts cut. We only got the last 2 cuts over the past 10 days. I think Ben ought to get the whole thing over with today with a 300bpts cut and be done with it. It's sickening to see the bozos tripping all over their dicks demanding more hits off the crack pipe.
I am so confused: See, consuming IS our eCONomy, and debt is our income since our jobs are gone. So, as we lower rates to destroy the dollar, we need more debt to pay for things... just as the HELOC's are drying up. We are soooo hosed!
Maybe a debt-scam eCONomy wasn't a good idea after all!
Oh, well. I guess fewer HELOC's violates the "right" to live beyond one's means. That has to be in that Bill of Rights somewhere... not that we use it for much of anything these days... Hmmm...
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The TAF would open the lending spigot if the banks could find anyone to lend to who was likely to pay the money back! There has been this huge awakening at the banks that their collateral is eroding rapidly.
On a related note, the bankruptcy trustees are the ones who are really going to make real estate values return to earth. When they get a roll on liquidating the reo of bankrupt banks at pennies on the dollar, home values will plummet.
Time for the FHELOCA or better known as the Federal HELOC Administration "Providing flatscreens, motorcycles and boats for those with lower than wanted incomes"
Do these mortgage companies constantly monitor the "value" of your house? How often do they recalculate how much your house is worth and how much you can borrow? Each time you tap the HELOC?
To steal a line from the LOL Cat: I can has HELOC?
But, seriously, at this point in our economic cycle, what good does lowering interest rates do? It seems like it will drive inflationary pressures and little else. Lenders are now developing an on-going strategy to manage risk.
"Other than fraudulent occupancy status & late payees, I'm surprised they can legally limit/stop the MEW / HELOC use activity after a note has been executed. Especially if the borrower has been paying on time."
There's a lot of fine print in those notes. Same with Option ARMs. We're going to see Option ARM payments go up this year because of valuation declines.
The 1st line will catch a lot of homeowners. Significant decrease in supporting property value.
Here's an example.
House Value = $500K
1st Mortgage = $250K(50%LTV)
HELOC amount = $150K(Total LTV = 80%)
Untapped Equity @HELOC opening date = $100K.
"If the customer's current untapped equity (home value minus all mortgage liens) drops by 50% or more"
In the above example, once the untapped equity falls $50K, the line will be suspended. If the house value declines 10%($50K/$500K) the line will be suspended.
Given the latest Shiller numbers, it won't be long until that 10% threshold is met by most homeowners.
Jan. 31 (Bloomberg) -- Bristol-Myers Squibb Co. narrowed its loss in the fourth quarter as surging sales of its anti- clotting pill Plavix partially offset charges for costs that include investments backed by subprime securities.
Maybe they'll come up with a drug that stiffens the users'...errr... resolve to avoid the HELOC.
People need to realize that HELOCs, like most all open lines of credit are callable. I've been warning of this for quite some time and am waiting for the next shoe to drop: that being when someone with a 1st that they want to refi, and a HELOC that they got as a stated income loan, find out they can't refi becauser they can't re-qualify for the HELOC...and they have a big outstanding balance. - This is just one more way that tightening of credit and UW will help RE values spiral lower. Homeowners with decent credit, positive equity and who make their payments on time won't be able to lower their payments as long term mortgage rates come down...(if they do come down, before the market realizes how inflationary all this "stimulus" is)
HELOC reductions will be followed by credit reduction on all finance lines. Expect your credit card, personal loan lines, etc to follow the HELOC reductions.
Jan. 31 (Bloomberg) -- Bristol-Myers Squibb Co. narrowed its loss in the fourth quarter as surging sales of its anti- clotting pill Plavix partially offset charges for costs that include investments backed by subprime securities.
Their anti-clotting pill couldn't stop the bleeding?
It would be interesting to get some data on IRA/401 K withdrawls as we go forward.
There's no such number. Not in the industry's interest to promote it.
Any retirement plan number you see will be positive (inflows net of outflows) and very old.
On a current basis, you have to look at mutual fund flows from the ICI:
U.S. equity funds had net outflows in both November -7.96 billion and December -14.58 billion. But flows into international equity funds offset most of the loss.
"You should pay me back because you OWE me the money. Just like we agreed, it was a loan that you were supposed to pay back."
I personally haven't fallen for the old "I'll pay you back, dude, I promise!" line in a long while. It's very hard now for anyone to get me to loan money to them. I think the lenders are going through the messy phase of learning the same thing.
Funny thing was, once upon a time, when I did loan money to drunks, deadbeats, etc. (in college) I was doing the worst thing possible for these people. The best thing I could do was NOT loan them money and force them to deal with it.
Maybe the best thing the lenders and banks can do to Americans is imposed austerity.
All we need are revised establishment employment figures (coming in four months) to get rid of the inane October 2007 birth/death adjustment of 103K (the household survey of total employment turned south in October 2007).
Those two, along with industrial production having fallen 0.7% in October and real disposable personal income having fallen in October, too, and I think we can be 'official' on the recession start date as October 2007.
Today show did a puff piece on refi's this morning. They missed the key point that falling property values are closing that door without regard to lower interest rates. Going to be a lot of disappointed people after they pay their fee and find loan to value is not going to allow a refi!
Curious.... I have a Countrywide mortgage (despite their shady practices, they had great rates for prime customers), and even when I log in today to my account I get this:
QUERY_TOOL, how much EXTRA CASH could you use now? With our Fastrack refinance loan program you may qualify for up to $101,198 from your home equity with little or no paperwork and faster processing. Get cash to make home improvements, pay off credit cards and more. Take just five minutes and call now, toll free, 1-800-778-0632
And I live in Alameda county, CA, which they designate as a "4" on that this sheet we saw a few days ago. Ahh, but in companies this big, one hand usually doesn't know what the other hand is doing.
I got an offer for a low fixed rate credit card so I decided to transfer my balance. They asked me if I planned to use it for cash advance an if I had taken a cash advance in the past 6 months. I haven't and don't plan to but why should they believe me?
I'm still receiving HELOC offers on a place I sold in 2005 at the peak. I rent.
On another note, anybody want to guess how much of this pullback is driven by fears of falling collateral values, and how much by plain ole' lack of capital to lend?
(Still hoping for comments from CR and Tanta on Mish's post on bank reserves, btw.)
One of the permitted reasons for lowering the credit limit or stopping cash advances under Reg Z is "The value of the dwelling that secures the plan declines significantly below the dwelling's appraised value for purposes of the plan". You can contest this if it happens to you, but the reality is that the value of many home is dropping materially.
Default in material obligations is another. Another is "The creditor reasonably believes that the consumer will be unable to fulfill the repayment obligations under the plan because of a material change in the consumer's financial circumstances."
They can pull a credit report and if it shows some significant problems, that would qualify.
At the current stage, banks that don't review their open HELOCs in many areas will take heat from the examiners for it. Reg Z, 226.5b
Query Tool's experience seems to be similar to mine--Countrywide is offering HELOCs well above house values even as they tighten HELOC rules. Does this inflate the perceived value of the homes on their books?
query_tool writes:
"Curious.... I have a Countrywide mortgage (despite their shady practices, they had great rates for prime customers), and even when I log in today to my account I get this:
"QUERY_TOOL, how much EXTRA CASH could you use now? With our Fastrack refinance loan program you may qualify for up to $101,198 from your home equity with little or no paperwork and faster processing. "
"I'm surprised they can legally limit/stop the MEW / HELOC use activity after a note has been executed."
With lines of credit there are usually stipulations as to under what conditions the line can be pulled back. Examples for this would be declining value of the posted collateral so that the existing line can plausibly be considered actually or soon unsecured, or other material conditions calling repayment performance into question (e.g. company/industry/economic outlook with business lines of credit).
Good heavens, even if they DO succeed in rounding up more capital, how in the world are these banks going to EARN anything on it??? The forthcoming financial sector layoffs will likely be MASSIVE, and I don't even see how they can delay them til the election.
So they were offering HELOCs to people without homes and we are supposed to just blame the people who took their offers?
I was recently going through some old mail from the year and found an offer Citibank sent my wife (a real estate agent) this year. They just wanted to let her know that they would loan money for people to buy vacant land with only 5% down and with no intention to build any time soon.
"The "much deeper pockets" is the government trying in vain to instill confidence in the stock market"
There is way too much short money, just sitting there, not to be swept off the table. Margin calls are squeezing the crap out of the shorts. The stock market only exists to fleece as many people as possible each and every day.
I think the HELOC restrictions are part of a larger shift in the lending industry. So many lenders in subordinate claim positions are looking at greater than 100% losses that 2nds and equity lines may become endangered species. Not extinct but increasingly rare.
CFC might even have a marketing angle. "Oooops, your payment recorded 2 days late. Your draw rights are rescinded. If you are late again the note becomes due." "That's tough, we are only the servicer after all but we do make consolidation loans in our other division. Here let me connect you." Reduce exposure to more losses and get first in line in the case of default and collect origination fees and keep the servicing account. Not bad if it works.
Home debtors have been using their HELOCs to make their mortgage payments and credit card payments and car loan payments and HELOC payments to forestall foreclosure. What "income" will they use now?
So they were offering HELOCs to people without homes and we are supposed to just blame the people who took their offers?
You shouldn't get too worked up about this... I'm sure that the mailing Markel received was an "invitation to apply", and that there was no firm offer of credit.
Some lender had a lead list, most likely based off of data from the County Recorder's office (which is public information), that told him that Marcus was a home owner. The lender probably even had an idea of how dated the information was, but the economics of direct marketing still made it worth it to send Marcus that piece of mail.
Regarding withdrawals from retirement accounts, the Investment Company Institute, ICI issues reports relating to activity in this type of account. The problems are that (a) the data are not terribly current, and (b) as an industry-operated organization they tend to report only the good data.
I have a friend that is an underwriter for HELOCs for one of the big banks in North Carolina.....
HELOCs up to 100K were essentially auto-approved.....
Last fall the underwriters had to go to training to learn which loans to say no to, but their bosses still won't allow them to deny the loans.
IMO a lot of executive/management greed to hit the numbers and make the bonus keeps the wheels spinning on this game.
I've heard the comment as far back as summer 2007 on how ridiculous the underwriting practices have become.
I can see that CFC has to pull down the HELOC lines cause they have no capital, but I wonder if the other banks are also going to get that far before they change their practices. Should be interesting to watch.
My barber related a story today about one of his customers. This person has two houses and is trying to sell one. They noticed that items seemed to be rearranged in the listed property, investigated and discovered that the real estate agent had been living in the home.
CR y Tanto,
Very Very Very wuanderful ... sorry mi inglich. I from Brazil very thanks nice nice x nice video & ImplodeAMetric lettar. Sorry, we are open for busines.
I liked this blurb on MarketWatch: "Stocks higher after troubled bond insurer MBIA assures investors in a conference call after reporting $2 billion loss. MBIA shares up 8%."
If he can't borrow against his overpriced unpaid-for house, how can J6P lay in all the extraneous gear (iPhones, LCD TVs, Chevy Suburbans, intelligent fondue systems, mammary upgrades for close personal relatives) vital for living in this world until shedding it all in the flaming rummage sale known as the Rapture?
Another thing to consider is the number of people that rely on their HELOC as a source of emergency funds. It always amazes me when I ask someone about their emergency fund and they say, "Nope, I don't have one. If I get in a jam, I'll just use my HELOC."
WAMU is rumored to be doing the same thing. They can actually call in the HELOC and force an asset sale, knowing they're toast anyway in the event of foreclosure. I have one from them--completely tapped out, and I'm keeping my fingers crossed I have enough LTV to consolidate into a new first.
I have seen a number of financial advice publications that recommend people to do just that, so they probably think of it as being a prudent well-accepted practice.
Suspend my HELOC for being 2 days over huh? No problem, then you can refund those fees I paid you, and immediately reduce the rate premium I paid to obtain line of credit because it's now a simple second, not a reveloving line of credit. This one has lawsuit written all over it. Does Countrywide even have the ability to make a quality decision anymore? They have dug themselves so far into a hole now that your run-of-the-mill trailer park resident is going to be worth more than they are. IDIOTS!!
In a small town about 50 miles to my north ( I happen to pass thru there about once a month) there is a S&L (I presume its an S&L as it has "Savings" in its name). They have one of these fancy schamnzy moving electronic (w/artwork) signs out front. For at least the past 6 months, everytime I drive by, in big huge scrolling letters.. "HELOC No Closing Costs". It was still there at 4pm today. Why does this seem odd... like they have so much money they're just dying for people to come in and borrow ? They have no concern for the ability of the borrowers to pay it back ?
A coupla years ago I had this funny idea...what if all the born-agains woke up one morning... & everyone else was gone? Thought it was a cool idea for an Ellison-type SciFi short story. I in a small town with more way more churches than bars.
I got one of those letters today; the irony is that I had just called to find out how to cancel my HELOC. I can't cancel it without paying a $350 fee. But now they are suspending it? I think we'll have a chat tomorrow about how they will waive that fee and just cancel the HELOC, as they have effectively done already. If I had known they could cancel the HELOC, I wouldn't have put as much cash equity into my home.
I have a 300K mortgage on a house I bought for 550K 2 years ago. My credit score is over 800 and I have no debt. Way to go Countrywide--I'm the kind of person who can't be trusted to have a HELOC.
Not all HELOC borrowers are irresponsible. We have a CFC HELOC to pay college tuition/R&B fees for our two children - then we pay it back down (kind of difficult to cough up $20-30K all at once every semester without access to a HELOC).
When we opened the HELOC 3.5 years ago, our home was appraised at $1.2M. Total debt on the home, including 1st mort. and CFC HELOC, was only 75%.
Our HELOC balance is currently 0, and bam! We received one of the infamous 122,000 January 25th CFC HELOC suspension letters.
We owe nothing on the HELOC, our credit scores are in the low 800s, and the home across the street sold in 4 days to a qualified buyer for $1.6M.
But, my HELOC was frozen because CFC believes (the letter's actual verbage) that my home's value has declined siginificantly (more than $400K according to a phone inquiry - what a joke!) since we opened the HELOC.
CFC refuses to provide documentation supporting their claim that my home's value has declined significantly. Apparently, they're under the impression that it's enough for them to just believe that a home's value has declined in order for them to freeze the HELOC.
They're obviously refusing to provide documentation that my home's value has declined because they can't.
This is happening to others, too. Has class action lawsuit written all over it.
BTW, I'm in a Chicago suburb that's in high demand because our public high school is one of the top nationally ranked schools.
Homes here continue to appreciate, the current value over last year is up 4%.
I could easily dispute the HELOC freeze, but the bigger point is that apparently lenders can just arbitrarily cut off your HELOC without corroborating documentation of any of the conditions under which contractual reductions or suspensions are allowed.
IOW, just because they feel like it.
Or as my suspension letter from CFC states, they believe - not actually know - the condition to exist.
How can they freeze your HELOC if your property's value hasn't declined, and none of the other conditions under which they can restrict or suspend the HELOC exist?
Did Countrywide's legal department approve the mass (122,000+) nationwide freezing of HELOCs because of a decline in value in some states, and as such not applicable to individual HELOC agreements in other areas of the country?
Or is Countrywide just making a last-ditch, though futile, effort to stem the bleeding from their jaggedly slashed jugular?
Home equity decreasing? - take that trip to Tahiti or buy that dream car NOW! We offer TIPS for underwater homeowners! Only $99.99 for the complete video series "Scuba Diving in Suburbia!" /sarc
The Banks are behind the curve on this one. They can't shut off the money spigot fast enough as spending binged consumers barely can keep up with inflation. Visa, Am Ex and Mastercard are in for a wild ride. It would be interesting to get some data on IRA/401 K withdrawls as we go forward.
I thought the TAF was going to open the lending spigot??
Ruthless lenders.
First: Make sure the horse is out.
Then: Close the barn door.
-- Hiding Out
Other than fraudulent occupancy status & late payees, I'm surprised they can legally limit/stop the MEW / HELOC use activity after a note has been executed. Especially if the borrower has been paying on time.
Wells Fargo reduced my HELOC a while ago. I am in NJ and properties around havent yet been impacted as dramatically as other areas.
Hiding in NM: Classic!
I just have to say, I have a mortgage with a large lender that has been in the news a lot lately--they are in the process of being acquired by a large bank right now--and yesterday I got an offer from them to take out as much as $117,000 of equity from my home. If you added that amount to the outstanding mortgage still due, it would place my total debt at something like $267,000, which is $70-$80,000+ more than the house is worth. So it seems to me like the sales and marketing people are not coordinating with the policy people.
Home Equity Lines of Credit may additionally be suspended in the following cases:
Chumps on CNBC clammoring for an inter-meeting 50bpts cut. We only got the last 2 cuts over the past 10 days. I think Ben ought to get the whole thing over with today with a 300bpts cut and be done with it. It's sickening to see the bozos tripping all over their dicks demanding more hits off the crack pipe.
I want to second the request for 104k loans/withdraws. Maybe tapped out persons will turn to this last source of equity.
Banks are getting nervous about tapped out consumers over their heads in debt going DEEPER into debt?
Amazing. The banks must be staffed by really smart people.
Cheers,
I am so confused: See, consuming IS our eCONomy, and debt is our income since our jobs are gone. So, as we lower rates to destroy the dollar, we need more debt to pay for things... just as the HELOC's are drying up. We are soooo hosed!
Maybe a debt-scam eCONomy wasn't a good idea after all!
Oh, well. I guess fewer HELOC's violates the "right" to live beyond one's means. That has to be in that Bill of Rights somewhere... not that we use it for much of anything these days... Hmmm...
CR -
Here's why CFC is doing this:
Moody’s: Rapid Amortization on HELOCs a Concern : HousingWire || financial news for the mortgage market
Question is how long until other large HELOC securitizers do the same thing.
best, PJ
email just recieved:
Make sure your financial situation remains intact now that the holiday season has passed. A loan from our affiliate, CitiFinancial, is a simple way to clear up your holiday debt. Their simple one-page online application makes consolidating your bills easy and fast.
If you're considering consolidating your debt and getting a good financial start this year, you can count on CitiFinancial to get you the money you need. Apply today and you could pick up your check at one of nearly 2,100 local neighborhood branches tomorrow!
The TAF would open the lending spigot if the banks could find anyone to lend to who was likely to pay the money back! There has been this huge awakening at the banks that their collateral is eroding rapidly.
On a related note, the bankruptcy trustees are the ones who are really going to make real estate values return to earth. When they get a roll on liquidating the reo of bankrupt banks at pennies on the dollar, home values will plummet.
barely writes:
...It's sickening to see the bozos tripping all over their dicks demanding more hits off the crack pipe.
When I worked on Wall St. (almost 30 years ago) the term "big swinging dicks" was a compliment. I guess some dicks got too big.
-- Hiding Out
Time for the FHELOCA or better known as the Federal HELOC Administration "Providing flatscreens, motorcycles and boats for those with lower than wanted incomes"
Do these mortgage companies constantly monitor the "value" of your house? How often do they recalculate how much your house is worth and how much you can borrow? Each time you tap the HELOC?
Sorry for the basic Qs
This is the same company that was concerned about their borrower's "economic interest to repay", right?
I am guessing this will doing nothing to help their borrower's "economic inclination to repay".
But, if I cannot access money from my HELOC, how am I going to pay my mortgage?
Punked Pauper,
They sure as hell don't pull a preliminary title report on every asset. It must be SWAG
To steal a line from the LOL Cat: I can has HELOC?
But, seriously, at this point in our economic cycle, what good does lowering interest rates do? It seems like it will drive inflationary pressures and little else. Lenders are now developing an on-going strategy to manage risk.
Regards,
If you're going broke, go broke BIG. Being broke is like being dead - once you cross the threshold, the degree doesn't matter.
Regarding the "Big Schwinging Dicks" on WS:
Q: How do you know when your dick's too big?
A: You keep on running over it every time you roll your chair back from your desk.
"Other than fraudulent occupancy status & late payees, I'm surprised they can legally limit/stop the MEW / HELOC use activity after a note has been executed. Especially if the borrower has been paying on time."
There's a lot of fine print in those notes. Same with Option ARMs. We're going to see Option ARM payments go up this year because of valuation declines.
It's going to be very painful for a while.
The 1st line will catch a lot of homeowners. Significant decrease in supporting property value.
Here's an example.
House Value = $500K
1st Mortgage = $250K(50%LTV)
HELOC amount = $150K(Total LTV = 80%)
Untapped Equity @HELOC opening date = $100K.
"If the customer's current untapped equity (home value minus all mortgage liens) drops by 50% or more"
In the above example, once the untapped equity falls $50K, the line will be suspended. If the house value declines 10%($50K/$500K) the line will be suspended.
Given the latest Shiller numbers, it won't be long until that 10% threshold is met by most homeowners.
OT, but WTF?
Jan. 31 (Bloomberg) -- Bristol-Myers Squibb Co. narrowed its loss in the fourth quarter as surging sales of its anti- clotting pill Plavix partially offset charges for costs that include investments backed by subprime securities.
Maybe they'll come up with a drug that stiffens the users'...errr... resolve to avoid the HELOC.
People need to realize that HELOCs, like most all open lines of credit are callable. I've been warning of this for quite some time and am waiting for the next shoe to drop: that being when someone with a 1st that they want to refi, and a HELOC that they got as a stated income loan, find out they can't refi becauser they can't re-qualify for the HELOC...and they have a big outstanding balance. - This is just one more way that tightening of credit and UW will help RE values spiral lower. Homeowners with decent credit, positive equity and who make their payments on time won't be able to lower their payments as long term mortgage rates come down...(if they do come down, before the market realizes how inflationary all this "stimulus" is)
NAR Campaign Touts Real Estate as a Great Investment
NAR Campaign Touts Real Estate as a Great Investment - Developments - WSJ
Oh, the humanity.
HELOC reductions will be followed by credit reduction on all finance lines. Expect your credit card, personal loan lines, etc to follow the HELOC reductions.
JamesRaven writes:
OT, but WTF?
Jan. 31 (Bloomberg) -- Bristol-Myers Squibb Co. narrowed its loss in the fourth quarter as surging sales of its anti- clotting pill Plavix partially offset charges for costs that include investments backed by subprime securities.
Their anti-clotting pill couldn't stop the bleeding?
There's no such number. Not in the industry's interest to promote it.
Any retirement plan number you see will be positive (inflows net of outflows) and very old.
On a current basis, you have to look at mutual fund flows from the ICI:
U.S. equity funds had net outflows in both November -7.96 billion and December -14.58 billion. But flows into international equity funds offset most of the loss.
404 : Page Not Found
Ha! I guess this line is going out of style:
"You should pay me back because you OWE me the money. Just like we agreed, it was a loan that you were supposed to pay back."
I personally haven't fallen for the old "I'll pay you back, dude, I promise!" line in a long while. It's very hard now for anyone to get me to loan money to them. I think the lenders are going through the messy phase of learning the same thing.
Funny thing was, once upon a time, when I did loan money to drunks, deadbeats, etc. (in college) I was doing the worst thing possible for these people. The best thing I could do was NOT loan them money and force them to deal with it.
Maybe the best thing the lenders and banks can do to Americans is imposed austerity.
Like a greased pig looking trying to get to the trough, debtors will continue to wiggling, hoping to break look for that one more feeding.
The great irony: the people who "need" a loan the most are the worst ones to give a loan to.
Kinda like doctors. Your best customers are those hooked on vicodin or oxycontin.
When will the greased pig become bacon?
This is outrageous. How are people supposed to pay their Christmas bloated Credit Card minimums with going into debt borrowing from their homes?
There's just no justice.
Cheers,
OT -- more evidence that the recession began in October 2007: revised figures for real personal consumption expenditures turned south in October. See table 7:
http://www.bea.gov/newsreleases/national/pi/2008/pdf/pi1207.pdf
All we need are revised establishment employment figures (coming in four months) to get rid of the inane October 2007 birth/death adjustment of 103K (the household survey of total employment turned south in October 2007).
Those two, along with industrial production having fallen 0.7% in October and real disposable personal income having fallen in October, too, and I think we can be 'official' on the recession start date as October 2007.
Today show did a puff piece on refi's this morning. They missed the key point that falling property values are closing that door without regard to lower interest rates. Going to be a lot of disappointed people after they pay their fee and find loan to value is not going to allow a refi!
Curious.... I have a Countrywide mortgage (despite their shady practices, they had great rates for prime customers), and even when I log in today to my account I get this:
QUERY_TOOL, how much EXTRA CASH could you use now? With our Fastrack refinance loan program you may qualify for up to $101,198 from your home equity with little or no paperwork and faster processing. Get cash to make home improvements, pay off credit cards and more. Take just five minutes and call now, toll free, 1-800-778-0632
And I live in Alameda county, CA, which they designate as a "4" on that this sheet we saw a few days ago. Ahh, but in companies this big, one hand usually doesn't know what the other hand is doing.
Freddie FC avoidance research:
http://freddiemac.com/service/msp/pdf/foreclosure_avoidance_dec2007.pdf
I never owned a house. Even still, during the heyday period, I received several offers of HELOCs up to 70K pre-approved mostly from major banks.
I got an offer for a low fixed rate credit card so I decided to transfer my balance. They asked me if I planned to use it for cash advance an if I had taken a cash advance in the past 6 months. I haven't and don't plan to but why should they believe me?
American Renter, I hope you took the HELOC and used that $70k on fast cars and loose women.
Here is an article telling why loans are so Important.
Lively Money: A true business takes money makes money!
OT, what happened to spike the markets up?
Can't imagine a reason for this.
jg - do you think that data made its way into the q4 gdp advance number? If not, then we'd be looking at potentially negative growth for q407.
Those 2.4 million folks buying a new TV for the Super Bowl (according to the bobbleheads on CNBC) better tap their HELOCs soon.
Gary - what happened? Someone does like us folks shorting, that's all. Squeeze Arakas!
OT, what happened to spike the markets up?
Manic phase.
OT, real time data documenting large price drops in southern San Jose (southern extremes of SFBA):
Property 1:
3Br/2Ba 1617Ft^2
220 Omira Dr. zip code 95125
Last Purchased 5/12/2006 for 687,000.
CURRENT PRICE $499,000.
Property 2:
Also 3Br/2Ba 1617Ft^2
239 Bieber Dr. zip code 95125
Last Purchased 5/3/2006 for 658,500.
CURRENT PRICE $495,000.
Property 3:
4Br/2.5Ba 2380Ft^2
190 Blossom Hill Rd. zip code 95125
Last Purchased 2/19/2005 for 695,000.
CURRENT PRICE $530,000.
Plenty of 20%+ corrections here in south SFBA. More to come, as buying voume is practically nil.
Thanks for your attention and/or tolerance!
Corrections: all zip codes above should be 95123.
I'm still receiving HELOC offers on a place I sold in 2005 at the peak. I rent.
On another note, anybody want to guess how much of this pullback is driven by fears of falling collateral values, and how much by plain ole' lack of capital to lend?
(Still hoping for comments from CR and Tanta on Mish's post on bank reserves, btw.)
One of the permitted reasons for lowering the credit limit or stopping cash advances under Reg Z is "The value of the dwelling that secures the plan declines significantly below the dwelling's appraised value for purposes of the plan". You can contest this if it happens to you, but the reality is that the value of many home is dropping materially.
Default in material obligations is another. Another is "The creditor reasonably believes that the consumer will be unable to fulfill the repayment obligations under the plan because of a material change in the consumer's financial circumstances."
They can pull a credit report and if it shows some significant problems, that would qualify.
At the current stage, banks that don't review their open HELOCs in many areas will take heat from the examiners for it.
Reg Z, 226.5b
This is why I don't short and settle for the meager returns of CDs.
No stomach for playing against much deeper pockets.
Gary,
The "much deeper pockets" is the government trying in vain to instill confidence in the stock market.
Query Tool's experience seems to be similar to mine--Countrywide is offering HELOCs well above house values even as they tighten HELOC rules. Does this inflate the perceived value of the homes on their books?
query_tool writes:
"Curious.... I have a Countrywide mortgage (despite their shady practices, they had great rates for prime customers), and even when I log in today to my account I get this:
"QUERY_TOOL, how much EXTRA CASH could you use now? With our Fastrack refinance loan program you may qualify for up to $101,198 from your home equity with little or no paperwork and faster processing. "
"I'm surprised they can legally limit/stop the MEW / HELOC use activity after a note has been executed."
With lines of credit there are usually stipulations as to under what conditions the line can be pulled back. Examples for this would be declining value of the posted collateral so that the existing line can plausibly be considered actually or soon unsecured, or other material conditions calling repayment performance into question (e.g. company/industry/economic outlook with business lines of credit).
Good heavens, even if they DO succeed in rounding up more capital, how in the world are these banks going to EARN anything on it??? The forthcoming financial sector layoffs will likely be MASSIVE, and I don't even see how they can delay them til the election.
Good reports from WAL and HOME are supposedly spiking the ^DJI. In the meantime, the 13-week is off by 8% to 1.97.
So they were offering HELOCs to people without homes and we are supposed to just blame the people who took their offers?
I was recently going through some old mail from the year and found an offer Citibank sent my wife (a real estate agent) this year. They just wanted to let her know that they would loan money for people to buy vacant land with only 5% down and with no intention to build any time soon.
They pushed all this junk hard.
"The "much deeper pockets" is the government trying in vain to instill confidence in the stock market"
There is way too much short money, just sitting there, not to be swept off the table. Margin calls are squeezing the crap out of the shorts. The stock market only exists to fleece as many people as possible each and every day.
I think the HELOC restrictions are part of a larger shift in the lending industry. So many lenders in subordinate claim positions are looking at greater than 100% losses that 2nds and equity lines may become endangered species. Not extinct but increasingly rare.
CFC might even have a marketing angle. "Oooops, your payment recorded 2 days late. Your draw rights are rescinded. If you are late again the note becomes due." "That's tough, we are only the servicer after all but we do make consolidation loans in our other division. Here let me connect you." Reduce exposure to more losses and get first in line in the case of default and collect origination fees and keep the servicing account. Not bad if it works.
Home debtors have been using their HELOCs to make their mortgage payments and credit card payments and car loan payments and HELOC payments to forestall foreclosure. What "income" will they use now?
Commentary: FAS 140, Bloomberg Columnists, and the Truth : HousingWire || financial news for the mortgage market
Props to "Tanta at the Housing Wire if not posted.
12th percentile writes:
So they were offering HELOCs to people without homes and we are supposed to just blame the people who took their offers?
You shouldn't get too worked up about this... I'm sure that the mailing Markel received was an "invitation to apply", and that there was no firm offer of credit.
Some lender had a lead list, most likely based off of data from the County Recorder's office (which is public information), that told him that Marcus was a home owner. The lender probably even had an idea of how dated the information was, but the economics of direct marketing still made it worth it to send Marcus that piece of mail.
Worked up?
Hell, I'm profiting from the whole mess.
You want to lend to people who can't repay, go ahead.
12th Percentile writes:
You want to lend to people who can't repay, go ahead.
My point is that Marcus wouldn't have gotten very far in the application process.
Regarding withdrawals from retirement accounts, the Investment Company Institute, ICI issues reports relating to activity in this type of account. The problems are that (a) the data are not terribly current, and (b) as an industry-operated organization they tend to report only the good data.
I have a friend that is an underwriter for HELOCs for one of the big banks in North Carolina.....
HELOCs up to 100K were essentially auto-approved.....
Last fall the underwriters had to go to training to learn which loans to say no to, but their bosses still won't allow them to deny the loans.
IMO a lot of executive/management greed to hit the numbers and make the bonus keeps the wheels spinning on this game.
I've heard the comment as far back as summer 2007 on how ridiculous the underwriting practices have become.
I can see that CFC has to pull down the HELOC lines cause they have no capital, but I wonder if the other banks are also going to get that far before they change their practices. Should be interesting to watch.
agwee, I call 'em 3 income families. "Molly and me and the HELOC makes three."
My barber related a story today about one of his customers. This person has two houses and is trying to sell one. They noticed that items seemed to be rearranged in the listed property, investigated and discovered that the real estate agent had been living in the home.
CR y Tanto,
Very Very Very wuanderful ... sorry mi inglich. I from Brazil very thanks nice nice x nice video & ImplodeAMetric lettar. Sorry, we are open for busines.
Gracias,
Carlo
I liked this blurb on MarketWatch: "Stocks higher after troubled bond insurer MBIA assures investors in a conference call after reporting $2 billion loss. MBIA shares up 8%."
Gee CR, no hat tip for the Zillowed Away© invention from several months back.
HERE IT IS FOLKS!!!
A downward spiral of finance in now in place!
Someday this war's gonna end....
America's going to HELOC in a handbasket.
If he can't borrow against his overpriced unpaid-for house, how can J6P lay in all the extraneous gear (iPhones, LCD TVs, Chevy Suburbans, intelligent fondue systems, mammary upgrades for close personal relatives) vital for living in this world until shedding it all in the flaming rummage sale known as the Rapture?
"Gracias" is spanish. Obrigado (a) is the correct name...
Another thing to consider is the number of people that rely on their HELOC as a source of emergency funds. It always amazes me when I ask someone about their emergency fund and they say, "Nope, I don't have one. If I get in a jam, I'll just use my HELOC."
WAMU is rumored to be doing the same thing. They can actually call in the HELOC and force an asset sale, knowing they're toast anyway in the event of foreclosure. I have one from them--completely tapped out, and I'm keeping my fingers crossed I have enough LTV to consolidate into a new first.
Broke Not Broken,
I have seen a number of financial advice publications that recommend people to do just that, so they probably think of it as being a prudent well-accepted practice.
Suspend my HELOC for being 2 days over huh? No problem, then you can refund those fees I paid you, and immediately reduce the rate premium I paid to obtain line of credit because it's now a simple second, not a reveloving line of credit. This one has lawsuit written all over it. Does Countrywide even have the ability to make a quality decision anymore? They have dug themselves so far into a hole now that your run-of-the-mill trailer park resident is going to be worth more than they are. IDIOTS!!
Anecdotal (on topic)...
In a small town about 50 miles to my north ( I happen to pass thru there about once a month) there is a S&L (I presume its an S&L as it has "Savings" in its name). They have one of these fancy schamnzy moving electronic (w/artwork) signs out front. For at least the past 6 months, everytime I drive by, in big huge scrolling letters.. "HELOC No Closing Costs". It was still there at 4pm today. Why does this seem odd... like they have so much money they're just dying for people to come in and borrow ? They have no concern for the ability of the borrowers to pay it back ?
Ahh, but in companies this big, one hand usually doesn't know what the other hand is doing.
But wait. I thought private enterprise was lean and efficient, thanks to market discipline, and only government ever wastes money?
HC re "The Rapture".
A coupla years ago I had this funny idea...what if all the born-agains woke up one morning... & everyone else was gone? Thought it was a cool idea for an Ellison-type SciFi short story. I in a small town with more way more churches than bars.
Actually, I "live" in that small town.
I got one of those letters today; the irony is that I had just called to find out how to cancel my HELOC. I can't cancel it without paying a $350 fee. But now they are suspending it? I think we'll have a chat tomorrow about how they will waive that fee and just cancel the HELOC, as they have effectively done already. If I had known they could cancel the HELOC, I wouldn't have put as much cash equity into my home.
I have a 300K mortgage on a house I bought for 550K 2 years ago. My credit score is over 800 and I have no debt. Way to go Countrywide--I'm the kind of person who can't be trusted to have a HELOC.
Not all HELOC borrowers are irresponsible. We have a CFC HELOC to pay college tuition/R&B fees for our two children - then we pay it back down (kind of difficult to cough up $20-30K all at once every semester without access to a HELOC).
When we opened the HELOC 3.5 years ago, our home was appraised at $1.2M. Total debt on the home, including 1st mort. and CFC HELOC, was only 75%.
Our HELOC balance is currently 0, and bam! We received one of the infamous 122,000 January 25th CFC HELOC suspension letters.
We owe nothing on the HELOC, our credit scores are in the low 800s, and the home across the street sold in 4 days to a qualified buyer for $1.6M.
But, my HELOC was frozen because CFC believes (the letter's actual verbage) that my home's value has declined siginificantly (more than $400K according to a phone inquiry - what a joke!) since we opened the HELOC.
CFC refuses to provide documentation supporting their claim that my home's value has declined significantly. Apparently, they're under the impression that it's enough for them to just believe that a home's value has declined in order for them to freeze the HELOC.
They're obviously refusing to provide documentation that my home's value has declined because they can't.
This is happening to others, too. Has class action lawsuit written all over it.
***holes!!!
BTW, I'm in a Chicago suburb that's in high demand because our public high school is one of the top nationally ranked schools.
Homes here continue to appreciate, the current value over last year is up 4%.
I could easily dispute the HELOC freeze, but the bigger point is that apparently lenders can just arbitrarily cut off your HELOC without corroborating documentation of any of the conditions under which contractual reductions or suspensions are allowed.
IOW, just because they feel like it.
Or as my suspension letter from CFC states, they believe - not actually know - the condition to exist.
Hmmm...
How can they freeze your HELOC if your property's value hasn't declined, and none of the other conditions under which they can restrict or suspend the HELOC exist?
Did Countrywide's legal department approve the mass (122,000+) nationwide freezing of HELOCs because of a decline in value in some states, and as such not applicable to individual HELOC agreements in other areas of the country?
Or is Countrywide just making a last-ditch, though futile, effort to stem the bleeding from their jaggedly slashed jugular?