I love #7. Especially the part about those whip-smart young economic theorists.

Damn! jl beat me to it.

Well, to be fair, naming the loans responsibly is a minor point, say 5a. I wait, wild with anticipation, to find out what the terminology will be.

Would you like to Supersize your mortgage, ma'am?

My guess is they'll be using every one of those 30 days to work this out.

And all their fingers and toes too!

We are all 5 now.

Great analysis and amusing with it. Two aspects:

If its mid year before this gets going ( and I agree it will take that long ) that's getting mighty close to the election - This will affect moves to make it permanent - with delaying tactics in Congress to ensure no political benefits go to the Republicans and by saying "Elect us( Republican or Democrat) and we'll do it when we get into power". So I foresee nothing getting done to make it permanent until a new President is installed.

Also, won't the housing market stall even more during the traditional spring season as people find out that these cheap(er) loans for the house-rich won't actually be available till mid-year so they hold off on housing transactions all along the chains until then ? Sort of like what I believe happens when the Fed embarks on an easing cycle - why borrow now when it will be even cheaper later ?

-K

"this part of the process alone will require ten Gantt Charts, two task forces, thirteen meetings, seventeen dry-erase markers, four new white boards, and eleventy-jillion budget dollars allocated to IT consultants per lender. On the conservative side."

Nah, the consultants will convince them to use RAD, then they will create a six foot pile of "artifacts" and after 6 "time boxed" iterations they will have spent twice their budget and delivered one quarter of their scope. After the project ends, to sell a loan they will have to fill out a paper form that a clerk will aggregate into a spreadsheet to send to the GSE, but it will only be a “temporary” solution until the new project that we just started fixes all this. Not that I've ever seen a project end up that way ;-}

Bacon dreamz - I figured more like 25 bps on the prepayment problem. Jumbo loans will refi into even higher rates if the borrower gets a kickback from the YSP.

I can't see how these jumbos will be much cheaper than current jumbos in those areas. The problem is that jumbos are naturally concentrated in the declining areas. Creating a nationwide pool just doesn't do the same thing as it does for the smaller loans.

One thing I can confidently predict - the old conforming limit of $417K will remain in place for 2009.

Tallying the unintended consequences:

1. "So you just put a big "prepayment hickey" on current jumbo originations."
2. Potential buyers waiting until jumbo rates come down?
3. 6 more months of increasing foreclosures and deepening recession?
4. And then the wave of liquidity turns out to be a trickle?

Oopsie.

The "they'll all refi once it goes into effect" problem is only the half of it. If you really believe that the program is temporary, you then get the "they'll all extend once it goes back to normal" effect. Anyone calculating the 'prepayment hickey' probably has to assume the worst (that the program is temporary) and then make out like a bandit at the borrower's expense once the increase is made permanent.

So- we're going to have loans not many people can use,...but you can't let the effort go for naught,...all that potential money lying there unused,...so in a year we tweak these things so that more people can use them,...but they still don't make any sense,...only scam artists figure out how to use them and then we all act surprised when it all blows up.

I don't have that much detail on their timing, but I'd bet something more like October. They do this as an annual excercise, and it's released at more or less the same time as the conforming loan limit using data from more or less the same time period (more or less, maybe it's Sept. and maybe it's Nov.). Since they would have either just done or now be in the process of the annual calculation, and would already have the data in house for the annual calculation, using the in house data and process would be the fastest way to get something out. So my guess is that's how they'll go. Trying to do a retroactive calculation would involve getting retroactive data and asking their IT folks to process it .

It will come down to sticky notes. Buy shares of 3-M and make your fortune.
Tanta | Homepage | 02.16.08 - 1:46 pm | #

A brief technical OT detour required here...

Working in the shadow of the Great Campus in Maplewood and getting to know many of the wizard apprentices slogging away there I've asked a few why they don't invent 'resticky' or some such... a substance you can apply to old sticky notes so as to extend their stick restick properties ad infinitum.

They look at me dumb founded... "Dryfly you moron, stick notes are only intended for temporary use! Use them for a quick reminder and throw them away... They aren't permanent documents, sheeesh."

Just one more example of the inventors not understanding their invention. Now back to your regular programming...

The result might be starving the fly-over States real estate markets to provide high fat comfort food to the bubble glutton regions.

Same old same old.

We'll just have to call our 40 acre 'hobby farms' alternative energy projects and sell a few bushels of corn to ADM or Cargil. That should work...

Swine-Jumbo (recommended by the Mortgage Pig™)

Ray, it is the height of cupidity to even suggest the Mortgage Pig™ could be swayed by a bigger bucket of slop into well... endorsing a bigger bucket of slop.

The preprinted promotional sticky note business is huge. My doctor clients throw boxes of them at me just to get rid of them.

The problem with them however is that should someone get ahold of a pad of "Tanta tested, Mortgage Pig™ approved" stickies they'd screw up the entire industry. Better than a sheaf of triplex doctor signed undated Class 3 prescription blanks.

mort_fin writes:
Tanta - you simply need an ink pad and a potato the size of a sticky pad. Carve the desired text into the potato and stamp away.

Don't forget backwards e.g. "!tihsgiP"

Can't we just let the pig... ummm... nevermind.

Conforming Plumper?

Was there a Reason Code #167.35:
Nimrod, that is my parking space. If you think your loan is going to close before bonuses are calculated you are gonna have to kiss the Mortgage Pig™.

So then I thought, why doesn't somebody invent a sticky note printer? You print the message on address labels and stick them to the stickynotes. You can always figure out a solution that involves using more office supplies.

I once asked why Word doesn't have a defined paper size for sticky notes, so that I could use my boilerplate comments ("DON'T YOU DARE BRING THIS FILE BACK TO MY DESK AGAIN I SAID NO AND DON'T TRY ASKING DAD.") on them.

Tear the Post-its off the pad and stick them onto a sheet of 8.5 x 11 paper in an orderly fashion. Make up an Excel spreadsheet to print one cell per Post-It. Copy your boiler plate into the cells, Feed the Post-It covered sheet into a cheap ink jet printer. It'll probably work and if it doesn't, you'll probably be able to salvage the ink cartridges that'll be worth more than the now hopelessly jammed printer. If your time is worth nothing you can take the printer apart and clear the jam, but it's probably not worth the trouble.

In concept, you can define a custom label in Word to do the same job, but I've tried doing labels both ways and Excel is almost always easier on you and on anybody within hearing distance. The family pets used to crawl under the bed for safety when I had to use Microsoft Office.

I nominate the term "Jiffies" as a more descriptive & utilitarian term for these LFKAJs thingies. Years of conforming calculation methodology has been rendered asunder by the jiffy solution Congress has bestowed upon us. Hang with me here on the tale of the original Jumbo's untimely death & fate of his earthly remains. The parallels to the current jumbo mortgage market are eerie:

"The elephant Jumbo was born in 1861 in the French Sudan, whence he was imported to France and kept in the old Zoo Jardin des Plantes, near the railway station Gare d'Austerlitz in Paris. In 1865 he was transferred to the London Zoo, where he became famous for giving rides to visitors. Children rode on Jumbo's back during his stay at the London Zoo. The London zookeepers gave Jumbo his name; it is likely a variation of one of two Swahili words: jambo (which means "hello") or jumbe (which means "chief").

As a result of Barnum's publicity the word "jumbo" is now synonymous with "large" or "huge": a large hot dog sausage may be called a "jumbo hot dog"; the Boeing 747 is known as the "Jumbo Jet". Jumbo - Wikipedia, the free encyclopedia 

re: Derivation of Jumbo

Is THAT where they got it ? I heard this explanation on QI ( Quite Interesting ) - a Brit offbeat quiz show with Stephen Fry as host. It sounded like the plausible bs that the Brits like to propagate as a deep in-joke ( like the origin of the two finger salute and the "cold enough to freeze the balls of a brass monkey" ).

Well, who knew !

-K

Would anyone consider the name "malforming jumbo"?

Rob Dawg: "No one seems to be talking about the displacement issue. Every $700k mortgage is going to displace two or three traditional pool purchases. Even if the GSEs expand the cumulative effect is write fewer but larger loans. Not only is this antithetical to their raison d'etre but raises the specter of regional discrimination. The result might be starving the fly-over States real estate markets to provide high fat comfort food to the bubble glutton regions."

One of those "bubble glutton regions" would be California. To stir the pot a little bit ... CA receives about 80% back (at best) for the taxes collected by the Federal Gov. The excess goes to the "fly-over States". So maybe it's only flair play that CA gets back some extra from this.

One of those "bubble glutton regions" would be California. To stir the pot a little bit ... CA receives about 80% back (at best) for the taxes collected by the Federal Gov. The excess goes to the "fly-over States". So maybe it's only flair play that CA gets back some extra from this.
EngineerJim | 02.16.08 - 10:53 pm | #

A lot of flyover states do even worse than California... like mine Minnesota.

2005 data but not much changes year to year... See Table 4.

Minnesota is still behind California, but on a nominal basis, California paid $47 Billion more than it took in in 2005, which was more than the entire amount of Federal taxes Minnesota paid ($40 Billion).

The only measure that matters is per dollar spent. Having more dollars paid spread over more dollars returned means little.

The only other meaningful measure would be as a per capita standardized against per capita income per state. But even without calculating that we see it would come out the same as Cali & Minnie have almost identical per capita income with Minnesota having only a slightly higher per capita income than California... (2006: $37373 vs $37036).

In short Minnesota & a few other flyover states get screwed as badly or EVEN worse than Cali and so there is no justification for Cali Mumbo Jumbo based on these grounds.

I was wondering how that might play out. Are there any plans for the GSEs to purchase existing Jumbos?

A piece like this belongs in MSM. I would be surprised if MSM hasn't reached out to you yet. I suspect that you might not want them editing out your edge.