T is back!!!

did you find Mishkin?

when do we go beyond a blog that just bitches to itself in the comments section to a group that can represent the voice of reason, responsibility and common sense regarding financial issues to the congress?

People have been very effective this past year starting new groups and getting results re: immigration.

We can do the same thing. It just requires a small group, a website, some info, and lots of people making lots of calls to congress. We could also write letters to the editor about financial issues.

We have to start lobbying congress and educating the public or else we are in more trouble that we are now.

Tanta - you up for starting this?

stealth:
what do you think should be some of the core ideas which would be espoused?
d

It's not that hard to write or call your representative. Most of the avalanche of calls and e-mail that representatives received during the immigration debate were just individual citizens who were fed up with inaction. You can do this without having to set up new groups, institutions, lobbyists, etc.

"On Wednesday, for instance, some short-term insured municipal bonds, which typically trade at a premium to other bonds, were trading at a discount of as much as 1.5 percentage points to similar uninsured bonds, said Michael S. Downing, an account manager at Thomson Financial."

From NYT's.....

Personally, I don't have a problem with this.........

IF they explicitly tell everyone that the "assumed government guarantee" is in fact not a guarantee.

"I think this will help with refi's for people who are not underwater,but people who have been thinking of buying are already spooked by the headlines about record foreclosures and huge losses.The meme that "real estate always goes up" is dead.Brown lawns and for sale signs everywhere in sight are the headstones.
Tom Stone | 01.24.08 - 9:37 am | #"

I'm not sure that message has fully taken hold in California. Real estate is a religion and if you ask most people if a house will have a higher nominal value now or in 5 years, I think that most people will say 5 years.

You need more blood to really break people of this habit.

Inappropriate comment deleted by CR.

Edited By Siteowner

What the heck?? How would that work, I made too much for an FHA loan and I sure as heck can't afford a 625k house. I must be missing somthing here.

If I'm not I want a do over on my mortgage, can they write that into the law while they're at it?

I swear I just heard Morgan Freeman's voice-over from Shawshank Redemption:

"And on that day, the 23rd of January in the year 2008, mf officially became a republican"

or better yet, a libertarian i suppose

can someone please scream in the ears of these fools "ain't nothing wrong with renting; you still have a 'roof over your head!"???

A roughly $3,500 month mortgage before taxes and insurance. That only exceeds the household income for 44% of the population. Tripling the payment in an attempt figure out who's qualifying for the loan means qualifiers are in the top 10% of household income. I guess we are all subprime now.

stealthwii - others have already mounted an effort, and got some response, but not exactly a horde of angry citizens, to act. It's hard to get J6P distracted from Entertainment Tonite long enough to do anything.

Have a look at this, and sign it if you agree:

Congress - Repair Our Financial System! 

Karl at Market-Ticker Forums sponsors it, you sign, he picks up all fax costs etc. So far, I don't think it has gotten more than 10k signatures since he started it a few months ago.

Not for lack of trying, but the apathy levels out there are incredible.

Does this mean the GSE's role of promoting affordable home ownership will be amended to "providing a back-stop to all of the wildly speculative behaviour of the US mortgage business"

Assuming this does happen, I wonder how many loans would qualify?

can anyone come up with a fair market value of these programs. For example, if I got a regular 625k loan the interest rate would be x, but with fha the iterest rate is y. This results in a z dollars per month subsidy to the millionares in the USA. As someone living in the rural south I thought 425k fannie/fredie/fha limits were way to high.

Zigurrat - Did you spot the flaw in the Bartlett quote?

There is absolutely nothing to show that the stimulus was unnecessary - stimulus applied, recession bottomed. No demonstration of stimulus applied and no bottom, none of stimulus after bottom and no effct, no recovery without stimulus...

Now in my opinion the currently discussed stimulus is going to fail, but that's mostly because it isn't aimed at being a stimulus. It's a rescue of the agents that brought us to this point.

Tanta,

I'm actually about to go call my senator and I want to make sure I have the Homer-Simpson-level message straight. Would appreciate correction if I'm wrong:

(me speaking to polite intern manning the phone) "I've heard that, as part of the stimulus package, Congress is thinking of raising the FHA loan limit from $417,000 to $625,000. Please tell the Senator that I think this is crap --- all it's going to do is let the irresponsible lenders sell their bad loans to the GSEs so that we taxpayers get stuck with the bailout when they go bad."

thanks ---

As someone living in the rural south I thought 425k fannie/fredie/fha limits were way to high.

So Michael, anyone not living in the rural south should be penalized? What about adjusting income for cost of living?

i think the argument is that thornburg can't get "rational" execution right now (they can only sell the super seniors), and banks have to keep them on stressed balance sheets, but the GSEs could get the execution that would allow them to "just price the risk," so rates would be higher, but not 100+bps higher.

Yeah, title agents don't do anything for the money they make, unlike say government, or even better, recipients of back-end yield spread on loans (for those who don't know, all originators have very good incentives to sell borrowers higher rates).

To give you an idea of what happens on a "simple" refi, I assembled this simple 28 step process:

Title Process for Refis

1) Open a title order with a name and address;
2) Do a title search - tax information, parcel/tract search, judgment search, tax lien search, bankruptcy search, visual location report and plat drawing for mechanic's liens (obvious signs of recent improvements that give rise to statutory rights in favor of those providing material and/or labor for improvements). The requirements of the search are highly local. Sometimes much (but, rarely all) of it can be done on-line. Oftentimes, however, it must be done in person, in multiple public offices (in different locations). Consequently, the cost is wildly variable.
3) Examine the results of the search, eliminate items properly released, or that may be ignored by operation of law (expired judgment liens, non-identity of the debtor, e.g Bob Smith, not Roberta Smith, stale mortgages, BK'd items, under certain circumstances)
4) produce a title commitment - the official terms and conditions for insuring the refi, that is, those things that must be done to insure the lien, leaving standard exceptions to the coverage.

For 2007, we were lucky to close 50% of the deals we did commitments for (the per closed file hard costs were $200. If the search and exam together cost $100 per file, then it is really $200 per closed file). This is probably pretty close to industry average, even though the big companies deny it for regulatory reasons.

5) Fix problems (determine what threshold of proof is needed to determine whether something is a technical, but ignorable problem, not ignorable, but fixable with with how much? effort, or a deal-killer)
6) Revise the commitment
7) get payoffs for all liens - mortgages, homeowners assoc. dues, judgment liens, tax liens, property taxes owing, ex-spouses getting paid to release interests, etc.
8) schedule closing (our company closes more than 75% of refis at borrowers' homes, work etc.); we need to confirm that borrower(s) is/are available, a signer can meet them; we will have lender docs in time; that all payoffs are received.
9) receive lender instructions for doing the settlement statement - we draft this document, the "HUD1/HUD1A." It includes all lender fees, broker fees, pre-paid interest, insurance, taxes, title fees, city/countystate fees and taxes, secured creditor payoffs, unsecured creditor (debt consolidation) payoffs, and cash out/in to/from borrower to close.
9a) Receive/pre-process lender documents and make appropriate changes and copies, forward to signer.
10) have the originator review and approve the HUD (make corrections, adjustments, changes, if necessar

One of the interesting things about this action is that all of the currently blowed up Jumbo lenders were very much against the idea of raising the limits. It's felt (correctly) that the agencies play with an advantage in the cost of capital area that the FFC pledge gives them.

The whole point of the GSEs was to initially foster homeownership in the belief that promoting an ownership society is socially beneficial. People buying an 800K house should probably have a clear understanding of the benefits of participating in capitalism and therefore the societal goal of proving the efficacy of ownership is not achieved by subsidising their borrowing.

Blindly raising the limit won't help anything in the long run. In fact I've always thought that having one fixed limit nation wide (except inexplicably 50% higher in Alaska, Hawaii, Guam and the USVI) is a terrible idea. Do you have any idea what kind of house you can get in Dallas for 525K? I've always thought that a better solution was to set the limit to 75% of the 40th percentile home value by MSA. The data is there to do this and I think it would probably more closely align the portfolio with the charter.

10) have the originator review and approve the HUD (make corrections, adjustments, changes, if necessary)
11) have lender approve the HUD (the originator is the loan officer, AE, mortgage broker. The lender is the funder, underwriter etc. who approves the transaction.)
12) Make sure the deal is what the borrower is willing to sign.
13) Complete the signing of the roughly 100 pages of documents
14) Review the signed documents for errors, missing documents.
15) return the documents to the lender for funding review, generally 24-48 hours before funding;
16) Receive lender approval to fund the loan;
17) Receive funding from lender by wire or check (we don't like checks these days - lenders also bounce checks).
18) Fund the loan - disburse to HUD payees.
19) Overnight/wire all secured creditor payoffs to lienholders.
20) Overnight unsecured payoffs and proceeds to borrower.
21) Forward checks for taxes, insurance and appraisal to proper parties.
22) Review documents for recording with the county and attach checks for necessary taxes and fees.
23) Submit documents for recording and await rejection/return.
24) Upon return of recorded documents, issue a final loan policy to lender guaranteeing (generally) first lien position, due dates on taxes
25) copy policy to title underwriter with its portion of premium
26) await trouble
27) Take calls from borrowers requesting that payoffs to unsecured creditors necessary to reduce their DTI's be re-issued to the debtor because the LO/AE told the the 'title company does it all the time." Respond to Attorney General inquiry because borrower accuses of of "fraud." LMAO.
27) Reconcile escrow account, subject to underwriter, state audit and statutory escheat law.

@ Mstar

Living in the bay area and a renter i can see why you might think this is a good idea. It is not.. as there is no reason what so ever that SF bay area ought to have median prices at 650K, where only 12% of of the population can afford it under old standards (20% down, 30 year fixed, 28% gross income payments). A major reason why there is high pried is that they were jumbo's 80/20 loans at low teaser rates. I read somewhere that during the past few years almost 50 of all loans here where these types.

So if you want to see affordable housing here, don't muck with the market, these toxic loans are gone until the next wave of "financial innovation" so you w/ your 20% down payment will not be competing with them when buying a house in the next 10 years. That will cause prices to lower to the point that you and I can afford. But if you raise the conforming loan rate, these insane prices become locked in, locking us out of the market.

Shnaps, no way, i can do that with only 2/3 of my fully caffeinated neurons. the other 1/3 is permanently dedicated to thinking about Excel Art projects.

The problem I have seen with high cost areas is that they little more than ghettos with different income levels. Hoffman Estates outside Chicago is expensive. The cheapest houses there are very expensive. You can still however buy a reasonable conforming in the Chicago land area. Admittedly, the neighborhood may not be that desirable. It's not that I personally don't believe that some areas of the country are more expensive so much as I believe that people have a very poor understanding of what class they are in. I remember on guy whose earnings were described as modest and who once looked it up made 150% above the median household income for his county.

"As someone living in the rural south I thought 425k fannie/fredie/fha limits were way to high.

So Michael, anyone not living in the rural south should be penalized? What about adjusting income for cost of living?
Mstar | 01.24.08 - 10:41 am | # "

I mis-spoke I should have said 425k was high enough. It's difficult for people living in alabama, ohio, and nebraska to wrap their minds around a 'problem' with 600k mortgages. Remember the median family income in the usa is about 40k for a family of 4. That means half of people make less than that.

From the Thornburg front page --

We Can Do That

With an eye toward selling his new home when his two-year consulting assignment is over, Joe Steiner chose a 3/1 ARM from Thornburg Mortgage for $500,000. His interest-only payments allow him to easily manage cash flow by lowering monthly payments. Looking to finance today? Learn what Thornburg Mortgage can do for you.

And where is Joe today? Out of job, upside down on his mortgage, three months behind on his reset payment, with no offers on his home.

How did that 3/27 ARM two-year-hold-and-sell plan work out for you Joe?

=========

They aren't even the same species.

yes they are, they're both jubprimes.

Er, Tanta..

Did I miss something here?

OK, they raised the limit. How jawboningly cute. However, they can't change the DTI requirement, because that's set by your equivalent.

How does this save, help, prevent, or otherwise do anything useful either now or moving forward?

If Hausfrau X can't get a conforming loan, how do they think she is going to be approved for jumboconforming loan?

i'm saying that's the argument, i'm not making it.

The idea behind all of these government "aid" to the mortgage industry was to make MIDDLE CLASS homeownership simpler/easier.

Having a $400k limit was absurd when the common, safe, ownership multiple was 3x income. If median income is 50K the maximum should have been $150/200k.

Anyone who wants to buy more house than that should be willing and able to finance it completely privately. Raising the limit simply drives up prices over time. As to those who live in high cost areas (such as I), you decide where to live and work according to a number of factors. If housing costs are THE factor than you can chose to live/work elsewhere.

If the goal is to have AFFORDABLE, decent, middle class housing than the subsidy should be limited to solutions that PROVIDE that outcome. Subsidizing McMansions, either through the interest deduction or with mortgage guarantees is grossly counterproductive to the stated goal.

Its a choice to pay more. Maybe it will pay off, maybe it won't. Having the bulk of taxpayers subsidize the costs of homeowners who CHOSE to live in higher cost areas is ludicrous. People in high cost areas need to petition their LOCAL governments to facilitate more housing SUPPLY. That is what, ultimately, brings prices down, no?

I've lived my entire adult life in a high cost area. I knew it would result in sacrifices in other financial aspects of my life but I NEVER expected anyone else to pay me for that decision. Frankly, these programs are legalized theft; even worse, it steals from those with lower financial capicity to subsidize those with higher capacity.

And its Barney Frank, everyone's favorite "progressive" who supports this scheme. So much for being "compassionate" or "for the little guy". Its simply an efficient vote buying scheme aimed at the economically illiterate and the coffers of the real estate lobby.

Sweet stuff, particularly if you know virtually no one in the MSM will report anything other than how this "will help homeowners" and that opponents will be branded as "mean" and "unfair".

Deflationary Jane,

If your still single I think there's a poster here you should meet.

"apperantly the $625 figure came from Mozilo."

I would laugh if I wasn't cursing so loudly.

The only thing that can stop this stupidity will be the bankruptcy of Fannie Mae and Freddie Mac.

Hopefully, WaMu will go into receivership before the legislation can be implemented and give Barney Frank pause. Where's Richard Baker when his country needs him?

Although, it will be fun originating 100% LTV My Community's at $625,000. I've done a couple of 100% GRH loans in the $580's, in Hawaii. At least those had an explicit Government Guarantee.

People in high cost areas need to petition their LOCAL governments to facilitate more housing SUPPLY. That is what, ultimately, brings prices down, no?

Which is why people in high cost areas that can afford to live in those high cost areas do everything they can to facilitate LESS housing supply. Petitioning for more supply brings the price of your own house down, and also makes it more likely that someone much lower on the economic scale than you could move in next door.

Even when petitioning for more supply DOES take place, the petitioners are usually people who think "profit" is a subject that can be ignored. I think of the typical condo building in Chicago that had "affordable set-asides"; buyers that qualified for the 20% affordable units bought in a building that had another 25% buying units as secondary/spec housing with mortgages they now can't or won't meet. Whoever bought those "affordable" units are also seeing their property values drop and will likely lose money if they sell within the next few years - they were subsidized into a losing proposition. The people who waited until the bubble burst are the ones who can now afford.

James Lockhart must have heartburn right about now.

As long as the US dollar is the de facto currency for
1. oil pricing
2. foreign central banks' key reserves
3. trade and business transactions

The US govt. can concoct and scheme all sorts of wasteful rescue efforts like the ones we are seeing now. The US govt knows this, the IB's know this, so why not? socializing loss at great discount financed by the citizens of the world. We, the United States of America, are too big to fail, not the Citibanks, Merill Lynch, or Countrywide, or your average joe and his ATM home, etc. Everyone is simply playing the game. Greed is good because we are not the ones left holding the bag! When it gets out of hand, inflate them away. This game will stop once the world stops financing our debts, or use the dollar for economic transactions. Until then just watch the looting and ponder why the nightmares keep recurring.

The first of many Wile Coyote plans.

Next up: Price doesn't matter, ability to pay at teaser rates is all that matters.

Sound familiar?

Qualify? Uhh, we'll worry about that later.

THIS IS JUST THE BEGINNING GUYS, we the taxpayer are the new subprime lender and next year at this time WE WILL BE THE ONLY MORTGAGE LENDER...........count on it we will bail this mess out to the tune of 10 trillion dollars........CDS 45 trillion, monolines 250 billions.........heheheh and being the new subprime lender when values fall 50%............heheheheheee

Use the social network to popularize it:

Citizens For Financial Responsibility

A couple of random comments:

(1) There is no such thing as a temporary raising of the conforming loan limits. Once they are up it is a technical nightmare to bring them back down. Based on the metrics used to calculate the limit it should have dropped 2 years ago but lenders and gse's lobbied to keep it static so as to not have a pipeline of loans at the old conforming limit that the GSE's could not buy.

(2) Borrowers struggling to make the minimum payment on their Option ARMs are not going to be helped by an increase in the conforming limits as they are more than likely not going to meet the underwriting criteria of the GSE's - especially those that have racked up a bunch of negative amortization and have watched their FICO's drop as they have struggled to pay their bills.

Lots of misinformation on this thread.

1) FHA loan limits will go up to the lesser of area median home price (I believe as defined by the Census Bureau's MSAs, so NOT micro-neighborhoods) or the new loan limit. The number of areas that are actually affected by this is exceedingly small, and mostly in California. There are NOT going to be McMansions insured by FHA.

2) GSEs are for profit entities, so why does anyone believe that they will act as a repository for shitty mortgages? As I understand it, the GSE conforming loan limit increase is intended to restore some liquidity into a sector of the market that is currently experiencing a marked lack thereof. GSEs sponsored mortgages have not been the problem in this mortgage crisis; it was loans originated by and sold to the private sector. What's the big deal about a temporary injection of liquidity into a part of the market that's not performing?

FHA increases = no big deal.

GSE increases = temporary bump in liquidity in the market for jumbo loans (up to $625k), which will hopefully come back in the next year on its own.

These seem like prudent measures, esp. when you consider that they are being proposed on a temporary basis. Fueling an angry mob with talk of McMansions and bailouts seems pretty irresponsible, imo.

Uhmmmm.....Does anybody here actually originate FHA mortgages? From the look of the comments, probably not. We definitely have some bright people here, but it seems like we have a lack of FHA knowledge.

"Jubprime"? Pretty funny term (wry smile inserted here), but what does it have to do with raising the FHA loan limits?

Ladies and gents, FHA underwriting is FULL doc underwriting...no such thing as Stated, NINA, No Doc, etc. And as a general rule, FHA D.E. underwriters do not play around. Self employed? 4506 is gonna get run before the underwriter even looks at the file. As of about a month ago, virtually all appraisals are getting secondary reviews. Every dime of income is documented, every dime of assets are documented.

Do they have higher ltv's? Yeah, but they are insured. During the last documented 2 Year Performance Period (Dec 1 '05 - Nov 30 '07), there were 2,750 claims paid by the mortgage insurance fund....OUT OF 847,580 TOTAL LOANS. Do the math - that is a 00.32% claims rate. In other words, 99.68% of the FHA loans are performing.

Should the FHA limit be raised to the GSE limit? Nah. But does it need to be raised? The correct answer is a resounding "Damn skippy!".

Been originating over ten years, running my own branch for over five. I probably haven't done fifteen subprimes in the past five years -- it is (well, was...most subprime is dead) definitely the loan of last resort. I would much rather coach my clients on how to get their financial act together and then get them a good loan with a good rate, even if that means putting off the purchase for a while.

If the FHA limits has been raised to 60-65% of the GSE limits years ago, oh, I don't know, maybe a third or more of those subprimes loans had been avoided by having borrowers opt for fixed rate FHA financing, we could have avoided at least some of the current mess.

And stop the blather about "...subsidies for the rich..". Hogwash. It is only a subsidy if a claim has to be paid, and as the numbers prove, FHA loans perform.

guys they are tinkering with FHA and going to bail freddie and fannie out cause no one else has mortgage money to loan IN THE WORLD.

The banks are broke, the investment bankers that funded this fiasco tied 38% of the world's investments to securities that are based on your neighbor keeping his home that is worth 50% of what he owes...............

THE GOVERNMENT IS GOING TO BUY ALL THAT CRAP AS SOMEONE REFERRED AS POURING MONEY IN A LEAKY BOAT, WE ARE THE ONES GOING TO BAIL THIS OUT, WAKE-UP, NO ONE ELSE IS THERE TO DO IT, THE US TAXPAYER IS THE PROUD NEW OWNER OF THE ONLY SUBPRIME MORTGAGE COMPANY LEFT.........

10 trillion dollars when its over right when the first baby boomer wants his first social security check..........oooops

Funny thing. The U.S has no pain threshold. THe stock market goes down and Big Ben cuts rates. Why didn't Trichet? Because he isn't a bubble blower.

Guaranteed two things:

1) the Government will bail everyone out.
2) the Federal Reserve will the Fed Funds rate to 0.

And the next time we preach to the rest of the world about the virtues of unfettered capitalism, don't be surprised if nobody listens.

The United States of Bailouts. No more U.S.A, its now U.S.B

You can't see a bubble when its forming, right Bernanke and Greenspan, but damn you sure know when the stock market is undervalued right.

It only seems the FED is willing to support U.S stock prices. Its an asymetric bias, but are unwilling to reign in an asset price bubble.

The Government is going to bailout out any financial institution that needs it. The FED will cut interest rates to zero. More stimulus packages will be announced next year, it will never stop.

According to today's WSJ, the Governator just happened to opine that the answer to California's economic crisis is... hiking the conforming limit to $625K.

___ minds think alike. (You fill in the blank.)
Paul Havemann | Homepage | 01.24.08 - 10:28 am | #

Blank minds think alike.

Who is this supposed to help? A home that is $625K will cost $4300/month @ 30yr. 5.5% total PITI.

What is the income requirement for a $4300/mo mortgage payment?

Who makes that kind of money.

So, I ask...WHO IS TRYING TO HELP??? IS THIS REALLY NECESSARY???

Actually, most of us would be
conforming non-jumbo with the change.

There is a local limit of 125pct
of some local median price that
further limits conformance.

But in bubble zones,
that can be over 700k.

I am blown away!
-how does this work with the GSE charters.
-what experience do the GSE have in using AU or other means to underwrite this type of risk and manage this type of exposure (they barely have a handle on thier servicers now and counterparty risk (better bump those Gfees some more)
-now the GSE's will prop up overinflated housing values, investor speculation (the gse's have little insight into if you actual occupy your the prop. you fin), and keep the over paid builders in business?

I could rant for 20 more pages!.. I have an idea... why doesnt the govt just pay everyone's mortgage off and short cut the whole issue of proving they are insane...

I applaud this legislation. Its about time fannie and freddie were relevant to where I live, Northern CA (SF and Silicon Valley). We pay boucoup taxes, and I can assure you my tax dollars will be utilized to bailout every nonperforming loan. Except we don't benefit for confomming loans here- never have - even in the 80s... houses here were always DOUBLE the conforming limits. Always. I defy anyone to find me some hard data that say that jumbo loans in the SF bay area and some of the Socal areas have more defaults that the high end CONFORMING loans (say, high 300s or low 400s) in parts of the midwest where this really means a McMansion as opposed to here. I plan on refi'ing my 640K loan for 4.5% 25-year fixed, if we get that low. ITS ABOUT TIME.