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I think we're at the stage of the horror movie where the protagonists think that the villain is dead.
"Well! Thank goodness we're all safe now."
And on topic, how many risky jumbo (oops, I mean high-value conforming!) loans will FNM and FRE be buying and packaging while the performance of their own, supposedly safe, book of business is rapidly deteriorating?
so whatever, dudes.
i believe that should be "doodz".
don't count me out yet!
" . . . though it would be permanent for loans guaranteed by the Federal Housing Administration, the New Deal-era agency that typically helps low- and middle-income home buyers qualify for low-interest mortgages."
Can someone help me understand why we're giving low- and middle-income buyers high-value loans?
Didn't the WSJ understate the Boehner cap figure by $500? I read $625,500.
In the end, I'd go with the Boehner figure. If there is any ambiguity in the final language, the regulator wins, and the regulator is, for now, in the same hands as the minority caucus.
Hmm, dont the GSEs have enough problems atm?
Last thing we need are McMansions sucking the oxegen out of the GSE life support tent.
Nancy bailing out her rich Cally friends... talking her book, I guess.
Peripheral Visionary | 01.25.08 - 9:12 am |
Don't go into the basement! Oh! Shit! We're already in the basement!
Cue Psycho shower-scene music.
In the end, I'd go with the Boehner figure.
It's possible that the plan is $625 or thereabouts for the contiguous 48 and the higher figure for Hawaii, Alaska, and the territories.
Really, though, haven't we been going through sufficient media attention to matters mortgage for long enough that a WSJ reporter could, you know, think to ask a few clarifying questions by now?
Pelosi has sure proved to be a major disappointment as House Speaker. It seems power has already corrupted her.
there's got to be a joke about a Pig in Mudd here, but i haven't had enough coffee yet...
Last thing we need are McMansions sucking the oxegen out of the GSE life support tent.
Call me contrarian, but I'm a bit more worried about the jumbo brokers rushing into FHA lending (which they've never done before) because wowzers, you can now do BIG ONES!
By the way, what's the view on GSE capital? Didn't OFHEO recently say that in order for the cap to go up, all else equal, the GSEs would need to raise capital? I understand that the GSEs could reduce their holdings, or new holdings anyhow, of below $417k mortgages and that there would still be a better market for conforming than non-conforming loans - there is room for some magic in this process - but I would think the bigger deal would be the GSEs actuall expanding their mortgage portfolio to bring in jumbos. What do they need to do about their capital structure? If they need to do something substantial, isn't that new capital going to come at the cost of capital available to some other entity. Like maybe a mortgage firm that doesn't have a government charter?
Tanta:
A reporter asking clarifying questions? Surely you jest!! If anyone has learned anything over the past 7 years, it is that reporters are too damn lazy to ask any kind of follow up questions that make sense or help fill in the blanks so to speak.
I find myself wondering what'll jump out of the closet late this afternoon or weekend -- and if I can guess well enough to peg some shorts for Monday's "Oh Crap" reaction.
I read FHA does 97% + gift (3% from comnnunity or something.) Is this true?
I dont understand why they dont just nationalize the mortgage industry, get rid of conforming limits altogether, allow LTVs up to 120%, no doc, no residency requirement and lower the interest rate on mortgages to 1%. And just pass a law that says its illegal to sell houses for less than they previously sold for. Make a new agency that would pay the difference between what people could afford and the ever rising price. That would support the housing bubble for a quite a while. And its just stupid enough to garner a lot of support in the house and senate.
(begin sarcasm)
Yes, we badly need higher loan limits! If this doesn't happen, the government won't be able to effectively take over the housing market: entire companies that made stupid decisions could be lost, thousands of crooks could be out of business, and tens of thousands of house-flippers and committers of mortgage fraud may be denied their Amerikan right to get free money at somebody else's expense - we can't have this!
A government backed loan program will make sure that housing always goes up and stays unaffordable, and will let many Americans continue to spend beyond their means using their home as equity. It will also punish all the savers and other responsible people who feel that they have a "right" to the wealth they've earned or that "freedom" is something they deserve. Not in Amerika! If you want house, get ready to be a debt-serf!
(end sarcasm)
On a more serious note, we all know how higher loan limits will go. It'll start as "affordability options for the poor in high-cost areas" and end with the removal of all lending standards and tax-payer funded bailout of all the crooks as the government brings us socialized housing for all. Then comes the laws that make sure housing only goes up, debt-serfdom is mandatory (either via some new "renter's tax" for "unAmerikan behavior" or through not being able to find a house at less than 5 times one's income in price). Gotta keep the scam going!
I read FHA does 97% + gift (3% from comnnunity or something.) Is this true?
Yep.
Tanta, What might be some of the additional steps needed to complete the offloading of the toxic mortgages onto the FHA?
Or should I just Google the following search every morning?
schumer+dodd+plan+help+mortgage+homeowners+save
More panic.How long before FHA,Fannie and Freddie blow up? Inflation or Deflation?
Yesterday, Bankrate.com was quoting mortgage rates for 30-year fixed conforming mortgages of 5.25%, compared with 6.41% for some nonconforming mortgages.
Is this because the nonconforming mortgages properly price the risk vs. the conforming mortgages?
IIRC mispricing risk was the source of all our current problems.
"Oh Suzanna, now don't you cry for me,
I'm noving to Clowniforina to pick a HELOC off a tree"
Seriously, can someone get a HELOC against an FHA mortgage?
Bernanke. FHA conforming. My sense is that the word "prudence" and its synonyms have been expunged from the dictionary by the US government.
ac non conforming loans still did not price in risk.someone BIG has to be the first to do so,otherwise price risk= make no loans.
Will The Congress direct FNM and FRE to buy and guarantee Option ARMs, and No-Income-verification loans?
Without that, this is just phoney window-dressing.
If you can't yet get a HELOC against the FHA loans, I'll bet they'll roll out that "new feature" within a year or two. We NEED to keep the Bubbles inflated since we no longer have a real economy, real jobs that pay real wages, or any real future. So, rolling Bubble/Scams are the way things are going to be, and everyone who plays will be jerked around by those in power. Those who don't play will lose everything to runaway inflation. That's the game!
So we are going to grow the loan portfolios of these institutions with no concurrent plan to increase their capital levels proportionally?
Tanta, What might be some of the additional steps needed to complete the offloading of the toxic mortgages onto the FHA?
You know, I was wondering about that myself. But I was afraid to speculate out loud, for fear I'd give them ideas.
I suspect it might involve changing the rules on the "streamlined" FHA refi such that you can do one when the old loan is not FHA. (Currently the "streamlined refi" is available only FHA-to-FHA.)
That and increasing the maximum LTV for refis to 100%.
JS,
Shhh..they might do it
" I dont understand why they dont just nationalize the mortgage industry, get rid of conforming limits altogether, allow LTVs up to 120%, no doc, no residency requirement and lower the interest rate on mortgages to 1%. And just pass a law that says its illegal to sell houses for less than they previously sold for. Make a new agency that would pay the difference between what people could afford and the ever rising price. That would support the housing bubble for a quite a while. And its just stupid enough to garner a lot of support in the house and senate."
The GSE's still have other standards to evaluate loans, no? I mean if you loan 500k to an unemployed short order cook with no money down and no ability to pay, they can't just flip that off on Fannie Mae now that the limit higher, correct?
If "prudence" is the name of dodds favorite Intern...
ac non conforming loans still did not price in risk.
Well, it looks like in August they started to price in risk more better anyhow.
Can someone explain the 97% and if private mortgage insurance is required.
I stand by my comment from yesterday that we the readers need to form a lobby group on congress to advocate sane finiancial and legislative policy.
Its in our best interests and long term interests of the country.
Weird people keep sitting in my pew. Now it's Paulson, asking for regulation tightening.
The choice has been made. We've chosen stagflation. It won't take too long for that $700,000 limit will feel just like the $417,000 limit. Place your bets accordingly.
Is this because the nonconforming mortgages properly price the risk vs. the conforming mortgages?
Well, it's possible that they are both currently priced properly (or both mispriced, but in the same direction). I do not understand the assumption that there is a "natural" spread between the two which is necessarily smaller than the current spread.
stealthwii
Lobbying requires a lot of cash. Where do you propose to find it?
Disappointing. Since when do upper middle class people need government subsidies? (And yes, anyone earning enough to cover a loan of $625,000 is upper middle-class. Median household income in this country is about $48,000. Do the math.)
OT, but fyi. Seems someone else likes gold. Some CB's sell ... some buy.
I've been wondering what Russia has been up to.
Seems they want to save the world economy with their gold http://www.themoscowtimes.com/stories/2008/01/24/042.html
This is another thing that could become a problem. As our clowns destroy our dollar, its reserve currency status will be challenged at some point since not everyone is our best bud as tptb seem to think. The article linked doesn't say anything specific but it does show that Russia has a high opinion of gold. Just thought I'd throw this out there.
Can someone explain the 97% and if private mortgage insurance is required
Private mortgage insurance is only used on conventional (not government-insured) loans. FHA is a government insurance program. So no, FHA loans do not involve private MI. They by definition already have sufficient insurance from FHA.
Prices have dropped an average of 1.5% a month in sonoma county since 8/05.what do you think an appropriate rate is in a market falling that fast with $250 k more on the downside before we reach historic levels? 6.41% with 3% down? I want 20% down and 12% and i'm a bit nervous.
I met a subprime broker/CDO peddler the other day. He said that all of the "action" had just moved to FHA loans, and by action he meant "absolutely crazy loans." Ridiculous DTI ratios, etc.
30 year loans are so 20th century.
Why doesn't Congress change it so Fannie and Freddie and the FHA do 50 year loans.
This is the 20th century.
Sarcasm off... WTF?
stealthwii - the problem is that a majority of voters believe that home prices should and can go up by 10% per year forever. I'm going to write a letter to my federal reps but to be blunt the chances of it doing any good are less than zero.
The White House, Congress, the Treasury, and the Fed are starting to look like 1930's era slapstick. If not the 3 Stooges, at least the Keystone Cops.
These bumblers couldn't manage a hot-dog cart on opening day at the ballpark. Watching their knee-jerk reactions to the rapidly degrading economic environment - quick-fix legislation, deficit funded "stimulus" packages, and spastic monetary policy - is too rich.
These dudes are out of control.
Too bad we have to pay to watch.
Ziggurat,
Many here will be getting $600 this June. Thats a good start.
But seriously we could if we had the right leadership. The money would come in from dedicated readers and it could EASILY be spread.
Lots of sane people still out there who want this madness to stop, but it involves to parts.
1) Educating more people on what is really going on and what will happen if we dont change our ways (IN = OUT, invest in real things like factories, not casinos, dont prop up the housing market using gov't subsidy, forced inflation from the fed...)
2) Lobby congress, challenge congress on their decisions, educate congress. Organize drives to call, write, fax them on issues to get action.
I know it can work - numbersusa.com went from nothing to 500,000 members in just a few years. (increased 250,000 this past year alone). They do the same thing for immigration that we need for Monetary reform, bugetary reform etc.
Tanta intone: Call me contrarian, but I'm a bit more worried about the jumbo brokers rushing into FHA lending (which they've never done before) because wowzers, you can now do BIG ONES!
I relish the thought of them rushing in with their existing practices of wage overstatement and other forms of fraud so we can watch them get carted away by the FBI. "What? You meant it at the bottom where it says under penalty of law?"
The financial situation in this country is so screwed what's another few trillion in liabilities when the cost of Bush to America since 2000 is $32 Trillion dollars in total liabilities and unfunded commitments for future payments.
GAO Comptroller General David Walker
"The federal governments total liabilities," Walker explained, "translates into a de facto mortgage of about $455,000 for every American household and theres no house to back that mortgage. In other words, our government has made a whole lot of promises that, in the long run, it cannot possibly keep without huge tax increases.
Japan-sans-savings or bust.
But fannie and freddie will still have the limit of 80% on conforming loans? Or has that been totally trashed.
I don't really mind the conforming loan limit being raised, but it is 100% financing thing that I find troubling.
And Fannie and Freddie both produced audited financial releases when???
Sure just dump it out back in there patch...they have no clue what they have now so let's just add to the whole mess and allow the banks to use it as a dumping ground....CFC and Pelosi sitting in a tree.
As a long time housing market bear, I'm officially throwing in the towel. I had hoped to get more than the 10-20% declines we got, but I'll take it.
Despite all the well-reasoned claims of continued deflation as a result of credit contraction, I'm convinced that any (domestic) deflation is just a short-term blip. And by "short-term", I mean a matter of months.
The near future path is inflation, whether you like it or not, as our entire way of life is built around nominal asset price increases. While average real wealth will probably decrease, there will be only minor nominal declines on any asset class.
Deflation is nothing but a red herring: here today, gone tomorrow.
First Fed just reported for the 4th quarter. Just look at the decline of asset backed paper sold and 300 million worth of negative amortization revenu!
Is this worst or better than expected? To me, every line in the report is a deterioration of operations, and pretty marked too. Also their prevision of 2008 loans to reach max negative amortization is pretty optimistic!
I got the link from Google Financial News. Maybe someone can post a working link, as I am not sure how this will end up.
News
i believe that should be "doodz".
its d00dz.
In other words the Congress sitters want more Americans to be jumbo subprime bagholders !
Whooopedeee F$cking Doooo
If you cant full doc the income it REALLY doesnt matter what happens with conforming loan limits.
If you cant full doc to a 45 - 50 DTI @ 6.41% then for those that squeek in @ 5.25% rate its just tinkering at the margins.
If you cant afford the PITI based on full doc income - you cant afford it.
This is all window dressing to give the illusion the Washington is DOING SOMETHING.
Oh right its an election year.
d'oh
"This, along with the fact that interest rates have dropped, will give a big kick to the demand side of the housing market," said Nariman Behravesh, chief economist at Global Insight, an economic consulting firm in Lexington, Mass.
This man is delusional. The bubble sucked in every last marginal buyer. Those people are in the process of being foreclosed and they will have neither the will or the way to get back in.
Those who have the ability to buy now, under much tighter lending conditions, have little incentive to act quickly. Inventory is at record high, distressed sellers litter the market and, with the general economy weak if not in recession, little competition among currently available buyers is on the horizon.
Far more HAVE TO SELL than than those who have any NEED or urgency to buy. This will be amply demonstrated as soon as spring comes and the sales stink. The Fed, Congress and the White House all know this is coming and that is why a stimulus bill is being fired out the door asap. Its an election year and being seen as "doing something" is the political priority.
Unfortunately, highly negative economic fundamentals are already in place that cannot be overcome with mere fed cuts or one shot rebates (which have always failed to deliver). This will take real estate, stocks and the economy down in the spring, unfortunately, but inevitably.
...I suspect it might involve changing the rules on the "streamlined" FHA refi such that you can do one when the old loan is not FHA
That would be a great way to unload a bunch of junk off of the portfolio.
The GSE's still have other standards to evaluate loans, no? I mean if you loan 500k to an unemployed short order cook with no money down and no ability to pay, they can't just flip that off on Fannie Mae now that the limit higher, correct?
Yes.
Here's the short version: IT IS NOT A LOAN LIMIT PROBLEM. IT IS NOT AN INTEREST RATE PROBLEM. IT IS A DOWN PAYMENT AND INCOME PROBLEM. THOSE PROBLEMS WILL NOT GO AWAY BY REDEFINING "AVERAGE" TO MEAN 125% OF MEDIAN.
Look, how can we possibly say with a straight face that there is a credit crunch in the jumbo market because the rate is around 6.50%? That's silly and everyone knows it. The "crisis" is because there just aren't many lenders out there making jumbo purchase loans except of the "full doc down payment" sort.
The GSEs cannot and will not step in and start making no doc no down jumbos at 5.125%, whatever you set their loan limit at.
The ones who can't even cough up a 5% down payment will go FHA now (where, btw, they'll be happy as hell if they get 6.50%).
The ones who get the new GSE superprime loans will be primarily the ones who don't especially need it. Economic stimulus to the well-heeled who won't go spend that monthly mortgage savings on stuff.
I simply do not believe that Dick Syron is going to do a 180 on this statement:
"Neither we nor anyone else can buy at par loans that probably shouldn't have been made in the first place"
Calculated Risk: Raise the Conforming Loan Limit?
Even the housing woman on cnbc had a hard time saying that people should buy now.
The problem is that there is no "path to chose" when facing a mix of hyperinflation and stagflation. Okay, they won't allow deflation and they won't allow saving money unless you want to lose it all to inflation.
There isn't another effective asset Bubble that can reliably keep up with the coming hypinflation, and once we start seeing $5 a gallon gas and $10 per loaf of bread while our salaries at best stay the same or decline (assuming we still have a job at all), it becomes much harder to save anything, even to put it in a Bubble.
I can't help but feel at this point that we've started a countdown to runaway inflation or runaway "solutions" from our leaders that will both result in us all being very poor in all sense of the word.
More panic.How long before FHA,Fannie and Freddie blow up? Inflation or Deflation?
Tom Stone | 01.25.08 - 9:36 am | #
If you wanted to kill Fanny & Freddie I couldn't think of a better way - let them eat themselves to death.
They needed to be refocused on their core mission (middle & low income market) with a re-emphasis on sound practices & reasonable debt limits & show the rest of the market how its safely done...
Then this proposal comes alone. Goood Gawd.
If you want to see the graph illustrating the median income versus median house price and how it has violated the 3 to 1 rule over the past few years, check this out
Winter (Economic and Market) Watch » The Blame Game
It should be clear that the housing issue will only be solved with higher incomes or lower prices.
But fannie and freddie will still have the limit of 80% on conforming loans? Or has that been totally trashed.
Fannie and Freddie do not have an "80%" limit across the board.
They require private mortgage insurance on all loans with an LTV higher than 80%. So the question becomes how much risk appetite the PMIs have and how they will price the premiums. (There are no longer kamikaze second lien lenders willing to write piggybacks on this stuff at rates these borrowers can contemplate.)
Both GSEs are enforcing the "no maximum financing in declining markets" rules. That means that in most of these markets with high jumbo loan concentrations, the practical maximum LTV is no more than 95%.
Rob Dawg -
Something tells me this plan isn't complete? Let's see..what else is needed...
Maybe the next step is to appoint Alphonso Jackson as the US Ambassador to the Netherlands, recall that d00d and make him the new FHA secretary.
Tanta,
"I suspect it might involve changing the rules on the "streamlined" FHA refi such that you can do one when the old loan is not FHA. (Currently the "streamlined refi" is available only FHA-to-FHA.)
That and increasing the maximum LTV for refis to 100%."
The purpose of this insanity has to be to refi Jumbos in high cost areas. They have to put that in there or this legislation does nothing. It may tempt a few buyers to buy FC's, or stressed sellers. But since this a bank bailout, it would not be enough.
Cheers,
So the question becomes how much risk appetite the PMIs have and how they will price the premiums.
The pmi's have gotten ignored a bit because of the bond insurers, but they are under some financial stress. I would think they need capital.
Also, don't they need to keep their ratings to do this?
They don't get paid up front like most bond insurance.
I simply do not believe that Dick Syron is going to do a 180 on this statement:
"Neither we nor anyone else can buy at par loans that probably shouldn't have been made in the first place"
I haven't seen a reaction from Fannie or Freddie.
Has anyone else?
Since fannie and freddie are 'private' -- shouldn't they be increasing fees to try to get whole on this bailout?
They already did once, but if they took a big enough bite, they could actually earn some money.
Not only can the FHA 3% down be a gift, it can be a gift from the seller. The FHA tried to stop this but the courts won't let them.
They don't get paid up front like most bond insurance.
Not true, Z. The new trend for high-credit borrowers is LPMI instead of piggys.
The higher loan limit would definitely help me out. I have a five bedroom house with three full baths. It's not an extravagent home. The rooms are just big enough for a bed, dresser and desk. I'm married with four children. Because of where I live, the house costs $639,000 which puts me well above the conventional loan limit. Gas, food,and utility prices have soared over the last year. Right now we have money only for the basics. If I could refinance, I'd knock about $300 off the mortgage. That would help us tremendously and though we'd put part of that money in savings, I'd have a little available for something fun every now and then.
I'd like to make the case against rising wages as a part of the solution. As physical objects houses are not worth as much as we were paying for them. We were making a blended transaction of living expense, asset acquisition and speculative investment. No amount of rising wages us going to reignite the speculative investment portion. That part has to go away via either inflation or lower prices or both.
Tanta and/or others,
What's your best guess on how much impact raising the conforming loan limit will have?
For example, let's say Hope Now and Super SIV rank a 0/1 out of 10. And the WPA ranks a 9 out of 10.
Where does jubprime come down?
Shnappy,
The Mortgage Pig has spawned. Cute little LPMI there. One stated benefit of LPMI is as a way to maximize your HMID. That makes sense. The Feds could look into that and address the HMID as a way of a optimally targeted bail out. We could eliminate the AMT and/or go with 150% interest deduction against regular income. It would certainly "reward" the most over-leveraged, most irresponsible borrowers but then so don't all the other ideas I've heard floated.
Pelosi has sure proved to be a major disappointment as House Speaker. It seems power has already corrupted her.
But hey she promised to get us out of Iraq, and she did, didn't she?
Welcome to stagflation. As they say, you can not fight the FED or our elected representatives. Seems like they assume that everyone needs to be helped. Time for me to do more research on stagflation as the FED has already cost me some money this week.
Since fannie and freddie are 'private' -- shouldn't they be increasing fees to try to get whole on this bailout?
Either the GSEs are the only game in town or they aren't.
If they aren't, then this is all much ado about nothing because private sector jumbo lenders will offer competitive rates.
If they are, then they will have to do the half & half thing (they are, remember, half government/half private). Meaning, they will make some concessions to "taking one for the team," but they will absolutely not just give away the farm once they have that kind of leverage.
The GSEs have rules about the acceptable rating of a mortgage insurer. It would certainly be a huge deal if they were forced to lower them. It would be a huge deal if they were forced to stop accepting policies from one of the big carriers because its rating slipped. (Not to mention the fact that the GSE portfolios and MBS currently carry a boatload of policies from these very carriers; a downgrade of the carrier would force nasty repricing).
The GSEs just cannot afford to try to "stiff" the MIs by asking them to write a bunch of crazy policies on high-LTV high-balance loans in declining markets right now. You can't afford to kill your counterparty.
I personally do not see how the MIs would not take the position they've been waiting for during a long painful boom (where their business was being taken away by crazy second lien lenders), namely, to finally collect premiums that make them a profit.
When the GSEs are the only game in town, the MIs are the only game in town. We think they won't use this opportunity to exercise pricing power? Really??
"If I could refinance, I'd knock about $300 off the mortgage."
How can you possibly know this until you've seen a rate on the refi?
If you're assuming your rate on a soon-to-be-ex-jumbo will be the same as the rate on current conforming, I suspect you're going to be disappointed.
OT -- MBIA and Ambac require $22B in new capital if they go down to AA, and $143B if they go down to A:
Banks May Need $143 Billion of Reserves for Insurer Downgrades - Bloomberg.com
My wager: S&P wimps out today (due date for review of Ambac, I vaguely remember) and kicks the can down the street for a few more weeks, in lieu of 'Ambac capital raising efforts now underway.'
Are these higher limit mtges still requiring 20% down? If so, this will affect only a few people at the margin.
Plus, with prices continuing to drop, and foreclosures constantly in the news, who is going to buy? I think this is all a delusion, so that the govmint can say they tried to do something.
By the way, Nancy Pelosi is Tommy D'Allesandro's daughter. He was an extremely corrupt Maryland politico of the 50s and early 60s, that my Balto family loved to hate. The apple hasn't rolled far from the tree.
IT IS NOT A LOAN LIMIT PROBLEM. IT IS NOT AN INTEREST RATE PROBLEM. IT IS A DOWN PAYMENT AND INCOME PROBLEM. THOSE PROBLEMS WILL NOT GO AWAY BY REDEFINING "AVERAGE" TO MEAN 125% OF MEDIAN.
You might want to save this as a standard response. Please add there is no Santa Claus, tooth fairy or Easter bunny.
The deal is Anti-competitive...
all loans will now be gse loans...
"That and increasing the maximum LTV for refis to 100%."
I think we should start to consider LTVs @ 120% so families can stay in their homes as they refi in a declining market.
good link...
"The estimates are based on banks' holdings of the outstanding $820 billion of structured securities covered by bond insurers, the report said."
It seems like another large number thrown out there for headline purposes.
I would like to know where they get the $820. That number fails the smell test.
I still think the capital markets' exuberance over these recent moves to prop up the system are unwarranted.
The increase in the conforming limit will help some people buy higher-priced houses or refinance but I doubt that we will see even a fraction of it turning into speculative buying. Therefore none of the fuel similar to 04-07.
The effects of all these fixes will be felt only in 09 so people will still be cautious this year.
The market run-up is a dead cat bounce.
" read FHA does 97% + gift (3% from comnnunity or something.) Is this true?
ugh | 01.25.08 - 9:25 am"
ugh,
read this article for a true heart warming story of how a mortage broker has figured out a way to get sellers to "contribute" to a non-profit who in turn can "gift" the down payment to the potential jinglemailer
From the article
"At closing, the seller sends 5percent of the sales price to the Nehemiah Corp. of America, a Wisconsin-based community development agency that Continental's using, and the nonprofit then "grants" that money to the buyer for the down payment, closing and other fees. Nehemiah also gets a $500 donation from the seller. The seller directly pays the rest of the fees that exceeded the 5 percent, while Continental and the buyer seal a loan for up to 97.75 percent of the sales price."
Yup sounds above board and legit to me....
FHA LOOPHOLE
The deal is Anti-competitive...
That must be why Angelo Mozilo was on his knees begging for it.
Anonymous | 01.25.08 - 10:16 am |
Downsize to a 3/2. For gawd's sake, each kid does not have a constitutional right to their own bedroom. Think outside of the McMansion box.
Sorry to take it out on you, but America's sense of entitlement has tested my patience this morning.
All ur loanz are belonging to GSE.
The problem is that there is no "path to chose" when facing a mix of hyperinflation and stagflation. Okay, they won't allow deflation and they won't allow saving money unless you want to lose it all to inflation.
The Federal Reserve is still draining money from the market even after the 3.5% cut. I guess the primary dealers aren't willing to lend, even at 3.5%.
Since the primary dealers aren't willing to lend, deposit rates remain stubbornly high. They are still high, even with the Fed's 40B in TAF auctions and negative un-borrowed bank reserves (which is equivalent to the Fed opening a big, fat savings account at each participating bank). I can still get 5% FDIC insured money market accounts and LIBOR spreads still remain high.
Loan rates, which are more closely tied to the FFR, are dropping in lock-step. This is hitting banks net-interest-margins and suppressing profits at exactly the time banks need strong earnings to offset write-downs.
Banks are going to have to decrease lending with write-downs impacting regulatory capital and lower operational earnings. Less lending, less money.
I think this is called, pushing on a string.
I'm not ready to call this until I see a strong increase in the monetary base and banks NIMs. Even then, it's still going to take a long time for banks balance sheets and lending to recover.
This FHA move makes me really uneasy.
Effectively 100% LTV in many cases.
What happens if Ben goes Sweeny Todd?
And effective mortgage rates fall to 3%?
Napkincalc shows 36% DTI for median income and $600K. Does FHA go 36% DTI?
That can't end well.
The higher loan limit would definitely help me out. I have a five bedroom house with three full baths. It's not an extravagent home. The rooms are just big enough for a bed, dresser and desk. I'm married with four children.
Having 4 children is extravagant. Having 4 children and a house with 1 child/room is very extravagant.
Because of where I live, the house costs $639,000
Dude... think about moving.
Having 4 children is extravagant.
Thanks for saying what can't be said.
A hundred years ago, 4 kids would be an asset (help out with the chores, work on the farm, work shifts at the family store). Today, aren't they really closer to being super-expensive toys?
"If I could refinance, I'd knock about $300 off the mortgage"
Dude,
You're rich as heck. You want a family of 4 living in a doublewide in Mississippi to have sympathy for your $5000 month house note. Also, It does not matter how nice or plain your house is. If you live in a cardboard box that is 5x your take home pay you cannot afford a cardboard box of that size. We have all gotten out of touch with reality. We (americans) are much poorer that we used to be, but we are not living like it.
DJ is no more bye bye
I wrote most of what I care to write about FHA and DAPs some time ago.
Calculated Risk: DAP for UberNerds
Having 4 children is extravagant.
Thanks for saying what can't be said.
and now to be entirely politically incorrect: my thoughts exactly why procreate if you can't afford it?
I haven't seen a reaction from Fannie or Freddie.
Has anyone else?
I'd like to ask has anyone heard any opposition from any mainstream political faction? [Other than the usual fringe voices].
I mean what happened to the small gov't no more big gov't talk of a decade ago?
So that was only for when markets were going up? Once that stops we really are all Keynesian then?
I mean I can understand Pelosi & her supporters being comfortable with this proposal - big gov't solutions don't scare them so much. What I find astonishing is the silence from the other side of the isle. Or is it there and I'm missing something?
Not intended to incite political rants - just totally confused by the apparent SILENCE regarding this 'done deal'...
By the way, what do you guys think will happen if BB doesn't give the market its 50 bp rate cut next week?
Today, aren't they really closer to being super-expensive toys?
Yes they are!.....$639,000...ouch I think i would do myself if i had that kind of nut.
Washington is caving to pressure from Wall Street and real estate groups that stand to lose if home prices continue their downward slide. The CFO at Los Angeles-based KB Homes (KBH) sums up the conflict of interest by saying the stimulus package [is] a shot in the arm to the market. Its going to spur people to move up to a more expensive home, and thats going to get the new and used markets moving again.
Comment: Most people need to sell their existing house to move up. People will not move up because of a $600.00 check and an increase in Jumbo's this CFO believes his own B.S.
New York State Insurance Superintendent Eric Dinallo moved to quell speculation today about how fast regulators and banks might move and what action might be taken to bolster troubled bond insurers.
On Tuesday he said his department was talking with banks, insurers, financial advisors, credit rating agencies, other state regulators, government officials, and other stakeholders about developing measures to help stabilize the market and capital infusions.
One report out today suggested that a $15 billion bailout for bond insurers might be worked out within 48 hours in a meeting with bankers.
In reaction, Mr. Dinallo said he would not respond to rumors, adding that any effective plan will take some time to finalize because the issues are complicated and a number of parties are involved.
Word Of Bond Insurer Bailout Plan Premature: Says Dinallo - Commercial Insurance & Reinsurance - Property and Casualty Insurance News
Out of curiosity does anyone know the list of largest jumbo originators in 2006 and 2007? I've been unable to find this information, as all the government studies seem to break it down by segment size but not lender. For example, where does C versus CFC versus IMB versus WFC? Who is this going to literally benefit the most in terms of returning to their previous securitized jumbo glory?
Tanta,
I read the DAP article. Good read.
I'm amazed that many people don't understand FHA does "100%".
Tanta sums it up nicely, as usual, with the link to the Uber-Nerd post. I especially like what she says about how "innovative" it all is, much like money laundering is "innovative." How true.
In the end, this is the "camel's nose in the tent" - eventually the rest of the camel follows. Raise the GSE limits to "save the sheeple" and eventually we'll see the removal of the lending standards to "save the sheeple even more" or some nonsense.
The goal is to make people depend upon the whims of government for their housing via absurdly high housing prices vs. declining wages and making it so nearly all loans go through the GSE's. Imagine the power if the only way to get a house was to take out a toxic loan you can barely afford and then refinance - IF the government lets you - into another toxic loan a few years later. Why, it would be even easier if the refinance periods were sent up to match election years: "Vote for me, or I'll prevent you from refinancing into a new loan and you'll lose your house." That has a nice ring to it, I think!
Maybe I am getting ahead of myself here, and maybe the whole thing will come crashing down first, but I can't be the only one to see how this can end very, VERY badly - especially for us "old-timers" who believe in savings, responsibility, and freedom.
...I suspect it might involve changing the rules on the "streamlined" FHA refi such that you can do one when the old loan is not FHA
While they are changing the definition of "Streamline" they need to just go ahead and do away with that nifty max mtg amount calculation cause that will just get in the way. Maybe do away with LDP and GSA requirements as well. (Sarcasm)
Frankly, i feel sorry for the good "old dog" underwriters that are going to have to deal with this crap.
Having 4 children is extravagant. Having 4 children and a house with 1 child/room is very extravagant.
Ahhhh...
There it is. We've created a country where it's too expensive to have an above-replacement-rate family. We've outsourced our children to the developing world.
Let's hope our outsourced children; where-ever they are; will still care about the needs of their aging boomer "parents".
Mr. Fly,
Things have gotten to the point that some rather large businesses (and rahter large contributors?) are endangered. Whatever ideals may have existed are thereby discarded.
XL Capital [a Bermuda reinsurer] announced last night that it expects to take fourth-quarter charges in the range of $1.5-to-$1.7 billion related to credit market exposuresprincipally coming from an investment in Security Capital Assurance, a financial guaranty insurer and reinsurer.
XL Expects A Quarterly Loss Up To $1.2 Billion - Commercial Insurance & Reinsurance - Property and Casualty Insurance News
I would just like to point out that the list of states with a jumbo problem did NOT contain Florida. Repeat, Florida is NOT on the list.
In my area prices have come down a lot already, and new home building has been slowing to stopped over the past 2 years.
"Let's hope our outsourced children; where-ever they are; will still care about the needs of their aging boomer "parents".
Kicker | 01.25.08 - 10:50 am | #"
Exactly.
We've outsourced our children to the developing world.
Oh, and another thing: Chinese adoptions. Ethiopian adoptions. What's up with that? Has the infertility rate in America exploded, or do wealthy American women just not want stretch marks?
"and now to be entirely politically incorrect: my thoughts exactly why procreate if you can't afford it?
"
Yea, but he can afford it. What he can't afford is the lifestyle he wants, and the 4 children. And he has lots of room to move. He could easily go down to a 3bed2bath. My mother was born in a 3 room (total) sharecropper cabin with 8 brothers and sisters. four kids in a 3/2 is not the end of the world requiring massive government intervention.
bode:
National Mortgage News - Free Data
..Having 4 children is extravagant
This is completely absurd. Children are not a luxury item.
A 600k+ house is a luxury item.
Harsh responses regarding children... If I had the resources I'd have 4 children (currently only have 1).
Aren't most people thankful to be alive, even if not all parents are perfect and some are downright abusive?
As a renter, there is no way I am coming into this market at any price. It's just not worth it. But the American dream is home ownership so y'all will buy and sell to each other. It takes too long for anyone to save for a down payment (unless I hit the lottery). These teaser rates and loans for down payments were the way to bring people like me into the market. Now - forget it.
American children are damned expensive these days. First you have to move to a district with "good schools," and those have expensive homes; then there's the endless activities (with fees and equipment) you have to pay for in order to make them college material; then of course there's gajillions in tuition to pay; and then you're going to have to sometimes kick in a bit more when they can't find a job right away. Oh, and don't forget the super-extravagant wedding so you can marry 'em off so they can have even more expensive kids of their own.
There it is. We've created a country where it's too expensive to have an above-replacement-rate family. We've outsourced our children to the developing world.
Right, lets keep shitting out kids to infinity. I don't see what could possibly stop us from doing that.
"Having 4 children is extravagant. Having 4 children and a house with 1 child/room is very extravagant."
I tend to agree. But then I live between the Cascades and the Appalachians so my values may be off.
My wife grew up w/ 5 brothers and sisters in a 4 bedroom house and nobody noticed that they were deprived. Maybe if they had been in CA someone would have been around to inform them.
If I had the resources I'd have 4 children
Indeed... if you had the resources.
Which is what any one of us might say.
It's when people are having kids when they aren't honest about their resources.
Yes it's irresponsible and a silly move by the government, but how many people can actually qualify to do a Full-Doc refi or purchase of a $600,000 home, even at 97% LTV? I'd be willing to wager very very few (what kind of income is needed to satisfy the ratios). I think this may have a negligible impact unless they're also relaxing lending standards.
How does this affect PMI companies going forward? Is there an automatic reset of the FHA limit or is it one of those "we'll let Congress figure it out in a few years" kind of deals?
Downsize to a 3/2. For gawd's sake, each kid does not have a constitutional right to their own bedroom. Think outside of the McMansion box.
Ya - I'd bunk some of them up even if there was a room for each - use the other room as a den/playroom or adult 'sanity room'.
I raised three kids in a very small 3BR (1200 sqft) and bunked two of them - not the end of the world. Plus we lived in a place where its frozen outside for 6-8 months of the year... yet you can still kick the monsters outside to play if they become too obnoxious.
Plus we chose to live in an affordable part of the world - I had more earning opportunities on either coast than I do here but increased cost of living more than offset the increased earning potential.
People need to think all this stuff through - it isn't rocket science. GSEs aren't going to solve those issues for you.
American children are damned expensive these days.
Only as expensive as you let them be. You have choices on how expensive you let them be - I been there.
Today, aren't they really closer to being super-expensive toys?
Super-expensive toys that will provide your future health care and economic activity that will provide whatever small social net remains.
Of course, that's a concession of the premise: a reduction of children to a means rather than an end, which is precisely what I despise most about the secular left today.
Cheers,
prat
Paul - its impossible to save a down payment? Obviously I don't know what your income is, but, the average person cries poor about not being able to afford anything, including monthly health insurance. Then when you look at the budget of the average person you usually see the following items:
- cell phone of 50/month
- pretty darn large monthly cable bill of 100+ / month
- larger than necessary car payment with increased monthly insurance payment
- Starbucks at 25-50 per month
- lots of restaurant bills
A lot of people who cry poor could cut expenses by 500/month without much suffering - some just by avoiding restaurants.
how many people can actually qualify to do a Full-Doc refi or purchase of a $600,000 home, even at 97% LTV?
A lot less than in 2005, 2006 and 2007.
HOLY SMOKES!
Mortgage Grapevine: FHA Question?
This FHA move will end very, very badly.
First you have to move to a district with "good schools,"
This is in fact the biggest expense associated with children (whose parents care about them), since it is the main reason for the huge rise in housing costs (I'm not talking about the recent bubble but long-term trends). Unfortunately, the simple solution (relegalizing segregation) is not politically feasable.
unfortunately, in this case the meddling kids running things don't seem to have any interest in actually STOPPING the monster.
Saving for a down payment while contributing to 401k is very difficult if you make
I am sooo.. shocked!!!
I am not a mortgage broker dear Tanta as you know, but I do remember FHA having some sort of MI.(If I remember corectly it was .005 of the loan, which didnt make any sense to me - still doesnt)
Saving for a down payment is difficult if you make
HaloScan hates me!
What happens if the Fed doesn't cut 50bps as widely expected?
"Unfortunately, the simple solution (relegalizing segregation) is not politically feasable."
This is a subject that w haven't touched on before. We now segregate based on income/class instead of race. The problem is that many people cannot and willnot accept their current class and use mortage tricks to fake their way into the upper classes. My kids can't go to xyz schools. thats where my black garbage man, and my mexican roofer send their kids. I went to college! Well sir, you are all in same income bracket.
I mean I can understand Pelosi & her supporters being comfortable with this proposal - big gov't solutions don't scare them so much.
dryfly | 01.25.08 - 10:46 am | #
I'll let the long-term Repubs share their horror on their side; but as a long-term Demrat, I am repulsed by this hijacking of a program designed to aid low- and moderate- families and draining its resources for the upper classes. If the R's have abandoned their fiscal roots, so have the D's abandoned any pretense of supporting the workers and poor in their haste to suck-up to their new campaign-contributing overlords.
Unfortunately, the simple solution (relegalizing segregation)
Huh? I guess you mean that having nonwhite kids around automatically pulls down school quality? Uh... I'll pass on that "solution," thanks.
ugh, please bear in mind that this is how things are supposed to work:
If Desktop Origination approves the DTI, the DEU insures it.
Just closed a 66%DTI with FHA - 755 score and 12 months reserves.
Used W2 for Borrower;
Did not use self-employed wife´s income because under 2yrs,
otherwise DTI would have been 34%
Translation: FHA rules require there to be two years worth of documented income history before it can be counted in the DTI.
This loan has a co-borrower who has income, but it doesn't "count" in the denominator of DTI because it hasn't made the 2-year mark. However, it does exist. It therefore is a "compensating factor" for approving the loan at what appears to be a very high DTI.
This is called "honest underwriting."
The approach during the boom was just to "go stated" and produce a loan with a 34% DTI. That looked better to some people, but it's the same underlying loan facts.
You can't see the details of the loan file. Imagine that the co-borrower is, say, an RN who went into business for herself just over a year ago as a consultant.
Well, if the business does fail, an RN can pretty much always get a job. I can imagine many sets of facts in which I might sign off on this loan.
Sure, I can imagine sets of facts in which I wouldn't. But I will always pick the fully-disclosed loan at 66% DTI over the "stated doc" loan at 34% DTI. However, doing so forces me to look down all the way to loan file-level to see what the "compensating factors" are.
That is not an approach favored by lazy credit analysts.
I'll let the long-term Repubs share their horror on their side; but as a long-term Demrat, I am repulsed by this hijacking of a program designed to aid low- and moderate- families and draining its resources for the upper classes. If the R's have abandoned their fiscal roots, so have the D's abandoned any pretense of supporting the workers and poor in their haste to suck-up to their new campaign-contributing overlords.
DCRogers | 01.25.08 - 11:13 am | #
I pretty much agree... we are all 'New Deal' now.
ISTM that the spread between conforming and non-conforming loan rates is bound to shrink to more "natural" levels (~25 bps). But not just by non-conforming coming down, but conforming going up!
So this change is likely going to lead to higher rates going forward for borrowers who already qualified for conforming loans.
Of course, the key to it all is lending standards...
I'm the one with four kids.I never said I was poor. I'm not. We're not suffering in the least. I just said that the increase in the cost of gas and food increased our basic expenses. Gas was about $2.24 a gallon when we bought the house, now it's $3.16 a gallon.(That's an additional $150 a month for us.) The cost of electricity in our area increased by 50%. (That's an additional $200 a month). Food has increased quite a bit. An additonal $200 a month.That all adds up to an additional $550 a month. At the time we purchased the house we were fine. And we're still fine now. I have the resources to make my mortgage payments and utilities and pay for food. I'm not in debt at all. But we cut waaaay back on buying or spending on everything else.Cable,restaurants, extravagent gifts. We're not buying anything extra. I think that was part of the problem. That people arent spending. I'm just saying, that being able to refinance would likely free things up for me a little and would and would for a lot of folks here in this area.
This is called "honest underwriting."
I think it's just called underwriting. For stated deals it's called "making loans"
but I do remember FHA having some sort of MI
Broker. For Christ's sake. You needle me all the time and you do not even know what "FHA" is???
FHA IS MORTGAGE INSURANCE.
It is simply not PRIVATE mortgage insurance.
It is GOVERNMENT-BACKED mortgage insurance.
It involves borrowers paying INSURANCE PREMIUMS into the FHA MUTUAL MORTGAGE INSURANCE FUND.
FHA loans ARE NOT MADE BY THE GOVERNMENT.
They are made by PRIVATE LENDERS.
All FHA does is PROVIDE THE INSURANCE.
The usual MONTHLY insurance premium on an FHA loan is .50%/12.
There is also an UP FRONT PREMIUM of at least 1.50% paid at closing.
To talk about "FHA loans having some sort of MI" is like talking about ham and cheese sandwiches having some sort of cheese on them. Well, yes.
That is not an approach favored by lazy credit analysts.
that is not the roach favored by lazy credit analysts.
To talk about "FHA loans having some sort of MI" is like talking about ham and cheese sandwiches having some sort of cheese on them.
dang, i'm hungry now. thanks a lot, Tanta!
Huh? I guess you mean that having nonwhite kids around automatically pulls down school quality? Uh... I'll pass on that "solution," thanks.
Statistically, it does. Specifically, blacks and hispanics do. Azns improve school quality.
You might not like it, but that is reality.
..That is not an approach favored by lazy credit analysts
I wouldn't say lazy. Some of the hardest working credit analysts avoided this approach. How do you think so many loans got made?
"That is not an approach favored by lazy credit analysts"
That's what concerns me. Greatly.
Now, does anyone have a chart of FHA defaults verses DTI ratios? That would make interesting reading.
Tanta, thank you.
Look, how can we possibly say with a straight face that there is a credit crunch in the jumbo market because the rate is around 6.50%? That's silly and everyone knows it. The "crisis" is because there just aren't many lenders out there making jumbo purchase loans except of the "full doc down payment" sort.
YESYESYES. The idea that 6.5% and actually showing the lender your W2s are signs of a "crisis" is an indication that the crazies are running the asylum.
The cost of electricity in our area increased by 50%. (That's an additional $200 a month).
Jeebus Christmas. Your electric bill is $600 a MONTH?!
I don't care how many bedrooms are in that house; that sucker has gotta be BIG to rack up those kinds of bills. 3,500+ square feet, at least. We're paying 15.5c a kWh now (which is insane), and we've never even had a bill half that high before.
These are the types of "hidden costs" that people who take on 41% DTI mortgages don't even stop to consider when they're signing the paperwork for that McMansion. And it always comes back to bite them in the end.
Oh, I'm sorry ... in this case it comes back to bite the American taxpayer, it appears. How naive of me!
My one bedroom -941 sq ft condo - $80 last month (gas and electricity)
May I suggest there should be a version of Godwin's Law that can be used to describe any thread where someone ignites a "Bell Curve"-discussion of race-based intelligence differences, esp. if it involves their children. These never end well...
ISTM that the spread between conforming and non-conforming loan rates is bound to shrink to more "natural" levels (~25 bps). But not just by non-conforming coming down, but conforming going up!
So this change is likely going to lead to higher rates going forward for borrowers who already qualified for conforming loans.
Bingo!
And ... hey, willya lookit that! ... the required net yields for Fannie and Freddie's conforming mortgages have spiked by better than 1/2% since word of the loan limit increases started getting floated 2 days ago.
This isn't going to end well.
..So this change is likely going to lead to higher rates going forward for borrowers who already qualified for conforming loans
We need cheap jumbo rates! The tan-man demands it!! If ING ever gets serious about the US mortgage business hiring Angelo would be great for marketing. In addition to our orange savings accounts we now have orange mortgages.
It's a decent size not huge. 2800 square feet. Things are just expensive in this area. What makes you think we didn't have to show w2's? we did. It's just that if you buy a house that costs more than $417k, it's classified as a jumbo loan and subject to a higher interest rate on the portion that's was higher than $417k. That rate is 8%. If I can bundle it all together into one loan, I could finance the entire amount at about 5.75 percent. The average 4 bedroom home (1900 sq feet costs about $525,000 here.) So lots of folks had to get a nonconforming loan.
Tanta,
Still trying to absorb all of this news, but won't borrowers need to go full-doc under Fannie, Freddie, or FHA? Will they qualify for these higher loan amounts?
Are we looking at a lot of FHA streamline refi's with no appraisal and no income verification?
What is FHA again? LOL. The point I was trying to make is that,( at least IMO) if the banks want to insure their loans, they should be paying for the insurance not passing it on to borrowers.
I'm in a position to buy but there is no way I'm touching the California market. Prices need to drop dramatically. Complicating things, the state is a mess due to an exaggerated and irrational aversion to taxes. Infrastructure is crumbling. It's just not worth buying here at this time. So they can supersize all they want, I'm still not buying their burger.
PS Dinner's still on tonight with the future real estate mogul. As promised, I'll be sure to take notes.
if the banks want to insure their loans, they should be paying for the insurance not passing it on to borrowers."
Take it out of the Bank President's bonus check - right?
"Can someone help me understand why we're giving low- and middle-income buyers high-value loans?"
Duh! Its called 'Sound Economic Policy That Investors Crave' i.e (SEPTIC)
The point I was trying to make is that,( at least IMO) if the banks want to insure their loans, they should be paying for the insurance not passing it on to borrowers.
That was your point, huh? Amazing how I managed to miss it.
All you are saying is that loans over 80% LTV shouldn't be allowed. (If lenders can't charge the insurance to the borrowers in any way, they won't write these loans.)
You are entitled to that opinion, but you need to quit calling me a Stalinist.
Paul | 01.25.08 - 11:12 am - HaloScan hates me!
Paul use the words "less than" and "greater than" not the symbols, it's HTML that hates you....
I have the resources to make my mortgage payments and utilities and pay for food. I'm not in debt at all.
Some snarks write themselves. (emphasis added)
An asset-dependent economy like the US' can't withstand a deflation period. A deflation will lead to the collapse of many over-valuated financial assets, and potentially a collapse of the whole economy. So, inflation is the only way out of this mess, and Congress acted accordingly. The interesting thing is how will the foreign CB's and SWF's, who are holding trillions of US nominal assets, react to this development? Anyone chimes in?
r0m30
Thanks for the tip!
I don't know what a "Snark" is. What What does that mean, "Some snarks write themeselves?"
FT Woods said: "Complicating things, the state (California) is a mess due to an exaggerated and irrational aversion to taxes."
Huh? According to the Tax Foundation, California had the 12th (actually, tied with Minnesota at 11th) highest state and local tax burden (11.5%) among the states (and the 8th highest when adding federal taxes to the state/local taxes at 34.3%). That doesn't sound like an irrational aversion to taxes to me. In fact, it seems rational to me - we pay more than enough in taxes here in California.
WHEN are the next earnings reports from Fannie and Freddie due out?
I remember bad news last time which supposedly put the kabash on any efforts to raise the conforming limits.
Good grief, this was only a month or 2 ago...
Anon 2:44,
A snark is a snide remark.
OH, I see what you mean. I guess since houses typically go up in value and considered and asset, I consider it 'good' debt. But yes, it is debt. When I said I wasn't in debt, I meant, I don't have a car note and I don't have any balances on my credit cards. I have money in 401k and I'm putting a little aside for college. My mortgage is 30 year fixed. If I needed to, I'd sell the house. I was just frustrated because the comments seem to insinuate that people that get those loans don't think about budgets. If I don't have the money for extras, I just don't buy it. There were just an awful lot of expenses that increased over the past year that makes it so that I don't have money for extras right now. I don't mind buckling down a bit.
I'm not sure whether the MI's are going to be that enthusiastic about writing insurance for these "confirming jumbo" loans. The margins on the GSE flow business are really tight - it doesn't make much money for them. And they are starting to rack up a lot of data on the increased default rates on these jubprime loans.
MTG just warned that 4Q incurred losses will be around $1.3B. I'm not sure the MI's would have the capital to move into the space even if they wanted to.
More information about how the GSE programs will be structured would be nice.
FNMA = Fannie Mae
OK
FHLMC = Freddie??? Mac
Seems to me it should be Phil, Fannie & Phil.
Where did they get Freddie?
Flawed from conception.
(Apologies to all the nice Phils out there...)
Dear Tanta I want to make myself clear. I do not believe in 20% DP. That would be IMO just plain stupid. My problem is with Fannie, Freddie, FHA and other idiotic gov. or gov."sponsored" organisations. As long as the banks can insure(FHA) or dump these mortgages to (Fannie&Co) they will never give a shit.
WaitinginOC...thank you for proving my point.
Perhaps you'd like to discuss the last batch of fires in Orange County. They were paid for by the federal government because YOUR county is TOO CHEAP to pay for its own firefighters. In fact, surrounding counties had to jump in to help OC out because you don't believe in paying for the services you use.
Excellent work, but most analysis seem to miss the point.
The business tax incentives and tax payer rebate checks are a diversion.
Lets mail the working stiff a one time $300 check,
while we give $150K and a hall pass to the buyers and banks that got us into the mess.
Where's the beef? The pea is under the pod called
the GSE loan limit increase from $417K to $729K.
The more stringent FNMA, FHLMC limits are raised for one year,
while the less stringent FHA limits are raised, permanently.
According to California Sen. Barbara Boxer's office:
On the average $650,000 jumbo loan balance, a 30-year fixed rate mortgage,
the lower rate (-1%) on the "conforming" GSE jumbo would result in an average $417 per month savings, every month for 30 years!
Thats a $150K subsidy which amounts to white collar welfare for rich homeowners and speculators.
Millions of 1, 2, 3 & 5 year interest only & teaser jumbos will be reset this year.
Calculations estimate if only 1 million default after a FHA refi, this will result in a $260 billion cost to the taxpayer within 2 years.
There is nothing preventing Countrywide and other lenders from refinancing
their delinquent and defaulting "liar loans" with the GSE's under this program.
In effect tax payers will be subsidizing the banks and borrowers with non conforming jumbo loans:
California 35%, New York 19.5%, New Jersey 13,5% & DC 21.5%
This stimulus package is despicable, digusting, a disaster and a disgrace.
Should it pass and be signed into law as currently drafted, its constitutional legality needs to be tested.
At a minimum, it is a violation of the GSE charters infringing into the "primary" mortgage markets.
I urge you to contact your House & Senate reps to have the loan limit increase provision stricken from the bill.
The Nattering Naybob Chronicles: Barney Frank; HR 1852; SB 2338; Economic Stimulus Bill
Don't flame me. I repeat, don't flame me. I have some honest questions that are way above this history major's head. Here it goes: Sold my property in CA last year and made close to $600,000.00, and kept it all because of the cost of improvements. Put the money in Cds as we rented a home (900 square feet and 3 bedrooms-if anyone is interested) and started looking. The subprime thing hit and everything was put on hold, until we had some idea how this whole thing was going to work out.
We have managed to save $3,000.00 a month and are getting about $2,200.00 on our money a month.Unfortunately, if we don't by this year we are looking at one very large tax bill.
Please tell me what everyone's guess on the LTV on new jumbo loans will be and the word on the street about what the rates will look like. I am also interested on everyone's ideas on how this whole thing is going to shake up the top five markets in CA. Is it a pipe dream the coast areas are going to go down 30%. Other than a little slowing nothing seems to be happening in my neck of the woods, yet.
Figured your advice is as good as my accountant and attorney.