MaxedOutMama-I agree 100%. The other question to ask is are the Jumbo's going to be held to conforming standards or not? Ill assume they will not since most people dont have an extra 100-150K in cash to buy a house.
Um, Rob, they can either take the mark through the front door, or take the chunk off through the back end.
Might as well vote for an attempt to survive, rather than join NAR and the homebuilders going down with the ship.
I can't believe how irrational the markets are, and how they maintain value where there patently is minimal hope.
I think that everyone believes in their hearts that this will be a 96 style brush with recession, instead of a full blown three year dragged out bloodletting.
A little bit of cheap money for the big boys isn't going to matter as long as BofA and others are tightening credit as fast as their computer guys can change interest rates.
But that brings up an interesting sidenote: All markets are prone to periods of overshoot followed by periods of undershoot, but the insurance industry are one of the worst offenders (as Buffett has noted at least a half-dozen times in his past 20 chairman's letters).
They're in the midst of suffering a hangover brought on by a half-decade of breathtaking underpricing of risk in the mortgage market.
An irrational correction to a similar level of risk aversion - with associated overpricing - is almost a given.
Which will make this sort of paper worth even LESS, if it's possible to imagine, than it would if markets were pricing risk "normally".
Hee-hee. If nothing else, I'll get some entertainment value out of watching it.
They're in the midst of suffering a hangover brought on by a half-decade of breathtaking underpricing of risk in the mortgage market.
Heck, they are lying in the gutter having gotten tossed out of the bar and hit by a bus. As they reach for the pint in their back pocket to dull the pain they feel a wet puddle growing under their twisted body. With eyes towards heaven they mutter a drunken prayer; "Lordy, Lordy, please let it be blood." The hangover is much much later.
If they are still writing 97% LTV anywhere they are putting off the hang over, with more of the hair of the dog that bit them. What the hell have they been waiting for a sign from god.
The end of 100% CLTV mortgages is near, and that is very bad news for existing home sellers, as it cuts their market down to other existing homeowners. New homeowners will have to go through the homebuilders and their down payment programs (the ones that are still left), or save up 10% or more for a down payment (hope they've got rich parents.) More bad news for home sales.
By eliminating policies for LTVs over 97%, it seems as if PMI is basically saying, "We won't insure these loans at any price."
Nope, they're saying that the price that they would charge to insure the 97s would be so high that they borrowers would not be able to keep up with payments and would default.
It's like doing one of those rate sheet things for a loan and discovering that you'd have to charge the borrower 14%. They can't make those payments so the loan goes into proactive default. Which means you just say not to lending them money. Same difference for the insurance.
I read somewhere about a mortgage insurer pulling completely out of California. Anyone know if that was an unfounded rumor or maybe something being planned? If insurers were to pull out, then I assume that everyone would need a 20% down payment. With prices going down, a 20% downpayment seems about right for the buyer to have some "skin" in the game and for the mortgage holder to have a bit of cushion.
I believe this only impacts properties located in non-declining markets. My understanding is that for properties located in declining MSA's, the maximum LTV/CLTV financing allowed on agency loans was already reduced from 100% to 95% for deliveries after 3/1.
When we bought our present home back in 1994, loans with less than 5% down didn't exist. If you only put 5% down, you would pay a pretty big penalty in PMI and higher rates. Our mortgage agent strongly encouraged us to find a way to make a 20% down payment. My hunch is we'll be back to 1994 standards (and maybe prices) in a few years.
Feb. 11 (Bloomberg) -- Standard Chartered Plc will appoint a receiver to run its $7.15 billion Whistlejacket Capital Ltd. structured investment vehicle after the fund lost more than half its net asset value.
The slump in Whistlejacket's holdings triggered rules forcing the SIV to wind down, London-based Standard Chartered said in a statement today. The so-called enforcement event means the U.K.'s sixth-largest bank by market value won't carry out a bailout plan for the SIV announced Jan. 31, the statement said.
From Realty Check. You just cant make this stuff up. Apparently even a big builders daughter cant seem to keep faith in the Florida housing market.
According to an SEC filing, Wendy Topkis, daughter of Toll Brothers co-founder and Vice-Chairman Bruce Toll, is walking away from a Florida condo, just like everyone else. A Toll Bros. condo!! The Palm Beach Post says it best: Et Tu Wendy?
Wow, just... wow. So much for the "sanctity of contracts" argument. The Walk-Away'ers are just modeling the rational, self-insterested, ethics-free business behavior of the people at the top of the food chain. Nothing to fret about --it's "just a business decision", right?
From energyecon's Bloomberg link: Whistlejacket, based in the U.K. Channel Islands, holds asset-backed securities and bank bonds with an average rating of AA, the third-highest investment-grade ranking.
Uh, I thought "AA" was the second-highest investment-grade rating (after AAA)? And as a statistician, how the hell do you find the "average" of a categorical variable?
I've said this before, but you can't look to insiders for help on this one. (By this one, I mean the current financial mess).
For instance, all those who price and evaluate equities do so because it's their business. And they do so the way they have always done it: By looking at a business, its management, its book value, its earnings growth, its PE, etc. In a shifting market where things are happening that haven't happened before, you can't price a stock the same old way.
Example: What would a terrorist/hijack expert told you to do prior to 911. They would have said to comply, cooperate, negotiate, time is on your side.
911 changed all that. Not most...not many....But 100% of those in the business would have given the exact WRONG advice. You could ONLY get the right answer by asking those who knew the LEAST about dealing with hijackers.
Same goes for Columbine. 100% of police experts would have given you the EXACT wrong answer as to what to do when responding to armed men in a school. Set up a perimenter, negotiate, call out swat, time is on your side.....These were exactly the wrong things to do. We've since changed mindset and training to what's called "active shooter". THe plan now is don't wait for a plan...go in and handle things as best a possible. But before it occured the institutional training and mindset were not only not helpful...but were opposite of what was required. You could not even hope to get the right answer from those in the police business. In fact it would have been simply impossible BECAUSE they were the most knowledgeable about police tactics etc.
We are in a similar situation. We are in uncharted territory. Those who say buy equities do so because they cannot think differently (until after it's over and obvious to all). Many on CNBC or simply incapable of telling you when this will end, how to profit, when it's time to buy or sell. They are too close to the problem to see it.
To stay on topic....pricing everything in this market from stocks to insurance to interest rates are confounding the experts because forces outside the normal parameters of finance are having an effect. Trust your own common sense.
Proof: How many average joes saw this problem outside their front door before wallstreet even had a clue?
To get the right answer you MUST NOT ask any expert.
Actually, Allen, prices were up in all markets in Canada except Windsor, Ont (too close to Detroit). Even place like Montreal, Quebec City and Toronto (no oil there) saw decent appreciation. And very few no down-payment and no neg-am mortgages, as far as I am aware. And interest is not deductible.
I disgaree that the COL in Canada is 30% higher than in the US. Some items are more, but some are less. My daughter goes to a university that is rated in the top-25 in the world (McGill) and pays a bit over $ 2,000/year for tuition and fees.
I disgaree that the COL in Canada is 30% higher than in the US. Some items are more, but some are less
My inner Georgist tells me that the money that the majority of Canadians "save" on subsidized social services goes straight into the pockets of the landlords and mortgage bankers
Am I right to assume that VA loans do not fall under MGIC restrictions or is this apply to portfolios containing VA loans as well. And how will this effect VA streamline refinancing at 100% LTV?
You get a different mix of expenses. There is no tax relief on mortgage interest. You do get a national subsidized health system that in nine years living there I never had to use so cannot comment. When I was there it did not cover any dental work.
They did, perhaps still do have, a Registered Home Ownership Savings Plan (RHOSP). You put money into this plan, came off taxable income and earned interest tax-free and was used to help purchase a home - if withdrawn for any other reason then penalties etc..
They did, perhaps still do have, a Registered Home Ownership Savings Plan (RHOSP). You put money into this plan, came off taxable income and earned interest tax-free and was used to help purchase a home - if withdrawn for any other reason then penalties etc..
I never used a RHOSP but thought it a good idea.
There will probably be a need for something similar in the US. A large down payment is going to be mandatory sooner or later. Maybe something similar to a 401K, since that idea is familiar and popular. Maybe limit it to a one time event so it doesn't become yet another housing entitlement.
Seems like it could solve a lot of the problems that developed in the housing market over the past decade and also serve as a partial refuge from the scary inflation/low interest rates that savers of downpayments are currently facing.
It's a heck of a lot better than the Mortgage Interest Deduction.
I wonder if any/many DC politicians would ever endorse something that's so clearly in the interest of citizens?
It's going to be very interesting indeed when the GSEs try to work out their guidelines for their new jumbos.
Would you insure that crap? Would Buffet?
What are a non-seasoned pool of high- CLTV jumbo mortgages concentrated in an area with rapidly declining home values really worth?
MoM - I think they will eventually be worth whatever your elected representatives say they're worth.
PMI showing signs of PMS
Did they just say they are essentially going to write 32% less PMI insurance this year? That'll leave a mark on the bottom line.
MaxedOutMama-I agree 100%. The other question to ask is are the Jumbo's going to be held to conforming standards or not? Ill assume they will not since most people dont have an extra 100-150K in cash to buy a house.
What are a non-seasoned pool of high- CLTV jumbo mortgages concentrated in an area with rapidly declining home values really worth?
$2.13 and a half-eaten fig newton? no wait, i forgot about the convexity. 40 ticks back of that previous quote.
Um, Rob, they can either take the mark through the front door, or take the chunk off through the back end.
Might as well vote for an attempt to survive, rather than join NAR and the homebuilders going down with the ship.
I can't believe how irrational the markets are, and how they maintain value where there patently is minimal hope.
I think that everyone believes in their hearts that this will be a 96 style brush with recession, instead of a full blown three year dragged out bloodletting.
A little bit of cheap money for the big boys isn't going to matter as long as BofA and others are tightening credit as fast as their computer guys can change interest rates.
Someday this war's gonna end...
Florida Taking Its Toll (Brothers) On Daughter's Condo - CNBC
Bob Tolls' daughter does the walkaway!!
Priceless!!
Ruthless!!
Toll blood will out!
Someday this war's gonna end...
CR,
You ought to consider running the Toll item AllenM posted...priceless!
We're talking about insurance here, are we not?
There has got to be some price at which writing the policy will be profitable. Of course, black box assumptions apply.
By eliminating policies for LTVs over 97%, it seems as if PMI is basically saying, "We won't insure these loans at any price."
Or, they could be saying...
"In order to be profitable on Above 97s, we would need to charge such a high premium that nobody would purchase the product."
Or, in the worst case?
"We have no way of modeling the losses on the Above 97s, so we're just going to sit this one out, thanks."
Would you insure that crap? Would Buffett?
For the right price, yes, he would.
But that brings up an interesting sidenote: All markets are prone to periods of overshoot followed by periods of undershoot, but the insurance industry are one of the worst offenders (as Buffett has noted at least a half-dozen times in his past 20 chairman's letters).
They're in the midst of suffering a hangover brought on by a half-decade of breathtaking underpricing of risk in the mortgage market.
An irrational correction to a similar level of risk aversion - with associated overpricing - is almost a given.
Which will make this sort of paper worth even LESS, if it's possible to imagine, than it would if markets were pricing risk "normally".
Hee-hee. If nothing else, I'll get some entertainment value out of watching it.
So right now, they would insure a mortgage in Calif for more than 97% LTV? That just seems incredible.
They're in the midst of suffering a hangover brought on by a half-decade of breathtaking underpricing of risk in the mortgage market.
Heck, they are lying in the gutter having gotten tossed out of the bar and hit by a bus. As they reach for the pint in their back pocket to dull the pain they feel a wet puddle growing under their twisted body. With eyes towards heaven they mutter a drunken prayer; "Lordy, Lordy, please let it be blood." The hangover is much much later.
If they are still writing 97% LTV anywhere they are putting off the hang over, with more of the hair of the dog that bit them. What the hell have they been waiting for a sign from god.
Does anyone have the link to the story of MBIA restricticting insurance in the 19 areas...
I thought i saw it on here?
The end of 100% CLTV mortgages is near, and that is very bad news for existing home sellers, as it cuts their market down to other existing homeowners. New homeowners will have to go through the homebuilders and their down payment programs (the ones that are still left), or save up 10% or more for a down payment (hope they've got rich parents.) More bad news for home sales.
By eliminating policies for LTVs over 97%, it seems as if PMI is basically saying, "We won't insure these loans at any price."
Nope, they're saying that the price that they would charge to insure the 97s would be so high that they borrowers would not be able to keep up with payments and would default.
It's like doing one of those rate sheet things for a loan and discovering that you'd have to charge the borrower 14%. They can't make those payments so the loan goes into proactive default. Which means you just say not to lending them money. Same difference for the insurance.
So you only need 3% down to get PMI?
On a median house in the USA, that's far less than $8000.
Even in a high priced market like California, a $700k house only needs about $20k.
Wake me when you need 20% down? Or do I misunderstand?
I read somewhere about a mortgage insurer pulling completely out of California. Anyone know if that was an unfounded rumor or maybe something being planned? If insurers were to pull out, then I assume that everyone would need a 20% down payment. With prices going down, a 20% downpayment seems about right for the buyer to have some "skin" in the game and for the mortgage holder to have a bit of cushion.
I believe this only impacts properties located in non-declining markets. My understanding is that for properties located in declining MSA's, the maximum LTV/CLTV financing allowed on agency loans was already reduced from 100% to 95% for deliveries after 3/1.
When we bought our present home back in 1994, loans with less than 5% down didn't exist. If you only put 5% down, you would pay a pretty big penalty in PMI and higher rates. Our mortgage agent strongly encouraged us to find a way to make a 20% down payment. My hunch is we'll be back to 1994 standards (and maybe prices) in a few years.
Does anyone have the link to the story of MBIA restricticting insurance in the 19 areas...
The MGIC list is here...
MGIC Restricted Markets
PMI guidelines are even tighter for declining markets. Lower CLTV, higher FICO requirements.
In the 4th Q they were still writting 21% of their book at over 97 LTV...ASTOUNDING. What the heck are they thinking.
Tolls daughter, and her husband for a purchase price of $2,468,075
too small , they say...as an excuse.
Pardon if a repost...
Standard Chartered's SIV Net Asset Value Slumps 50% (Update2)
By Neil Unmack
Feb. 11 (Bloomberg) -- Standard Chartered Plc will appoint a receiver to run its $7.15 billion Whistlejacket Capital Ltd. structured investment vehicle after the fund lost more than half its net asset value.
The slump in Whistlejacket's holdings triggered rules forcing the SIV to wind down, London-based Standard Chartered said in a statement today. The so-called enforcement event means the U.K.'s sixth-largest bank by market value won't carry out a bailout plan for the SIV announced Jan. 31, the statement said.
[snip]
From Realty Check. You just cant make this stuff up. Apparently even a big builders daughter cant seem to keep faith in the Florida housing market.
According to an SEC filing, Wendy Topkis, daughter of Toll Brothers co-founder and Vice-Chairman Bruce Toll, is walking away from a Florida condo, just like everyone else. A Toll Bros. condo!! The Palm Beach Post says it best: Et Tu Wendy?
Wow, just... wow. So much for the "sanctity of contracts" argument. The Walk-Away'ers are just modeling the rational, self-insterested, ethics-free business behavior of the people at the top of the food chain. Nothing to fret about --it's "just a business decision", right?
From energyecon's Bloomberg link: Whistlejacket, based in the U.K. Channel Islands, holds asset-backed securities and bank bonds with an average rating of AA, the third-highest investment-grade ranking.
Uh, I thought "AA" was the second-highest investment-grade rating (after AAA)? And as a statistician, how the hell do you find the "average" of a categorical variable?
Declining markets? I don't see any declining markets. Looks like they are up, some of them quite a bit.
http://www.reportonbusiness.com/servlet/story/RTGAM.20080211.whousing0211/BNStory/robNews/home
Aotc,
Yup, they going up where de oil is, man. Um, kinda makes you forget about that last big bust in Alberta after the last big oil boom.
It could happen again, but meanwhile, make all the money you can.
Of course, in Canada, the cost of living is nearly 30% higher than in the US, but the money is at parity.
Of course, you could enjoy some fantastic skiing for four months of the year;-}
But hey, they don't seem to have SuperSiv disease of the homegrown variety up there.
The Canadians are the saviors of real estate here in Phoenix, too- or so the local realtors tell me.
have to work on me "eh?"
Someday this war's gonna end...
You'd think Daddy Toll would have bailed her out to avoid this kind of headline. Unbelievable.
I've said this before, but you can't look to insiders for help on this one. (By this one, I mean the current financial mess).
For instance, all those who price and evaluate equities do so because it's their business. And they do so the way they have always done it: By looking at a business, its management, its book value, its earnings growth, its PE, etc. In a shifting market where things are happening that haven't happened before, you can't price a stock the same old way.
Example: What would a terrorist/hijack expert told you to do prior to 911. They would have said to comply, cooperate, negotiate, time is on your side.
911 changed all that. Not most...not many....But 100% of those in the business would have given the exact WRONG advice. You could ONLY get the right answer by asking those who knew the LEAST about dealing with hijackers.
Same goes for Columbine. 100% of police experts would have given you the EXACT wrong answer as to what to do when responding to armed men in a school. Set up a perimenter, negotiate, call out swat, time is on your side.....These were exactly the wrong things to do. We've since changed mindset and training to what's called "active shooter". THe plan now is don't wait for a plan...go in and handle things as best a possible. But before it occured the institutional training and mindset were not only not helpful...but were opposite of what was required. You could not even hope to get the right answer from those in the police business. In fact it would have been simply impossible BECAUSE they were the most knowledgeable about police tactics etc.
We are in a similar situation. We are in uncharted territory. Those who say buy equities do so because they cannot think differently (until after it's over and obvious to all). Many on CNBC or simply incapable of telling you when this will end, how to profit, when it's time to buy or sell. They are too close to the problem to see it.
To stay on topic....pricing everything in this market from stocks to insurance to interest rates are confounding the experts because forces outside the normal parameters of finance are having an effect. Trust your own common sense.
Proof: How many average joes saw this problem outside their front door before wallstreet even had a clue?
To get the right answer you MUST NOT ask any expert.
Actually, Allen, prices were up in all markets in Canada except Windsor, Ont (too close to Detroit). Even place like Montreal, Quebec City and Toronto (no oil there) saw decent appreciation. And very few no down-payment and no neg-am mortgages, as far as I am aware. And interest is not deductible.
I disgaree that the COL in Canada is 30% higher than in the US. Some items are more, but some are less. My daughter goes to a university that is rated in the top-25 in the world (McGill) and pays a bit over $ 2,000/year for tuition and fees.
I disgaree that the COL in Canada is 30% higher than in the US. Some items are more, but some are less
My inner Georgist tells me that the money that the majority of Canadians "save" on subsidized social services goes straight into the pockets of the landlords and mortgage bankers
Average Joe -
Please add the prefix 'ABOVE' to your handle.
Dirk van Dijk writes:
In the 4th Q they were still writting 21% of their book at over 97 LTV...ASTOUNDING. What the heck are they thinking.
Astounding is an understatement. In Florida, half of those would have been underwater before the paperwork cleared.
How can people with a front row seat to the mortgage debacle not see it?
Troy-Nope, most of it goes to Molson and Labatt!
My daughter goes to a university that is rated in the top-25 in the world (McGill) and pays a bit over $ 2,000/year for tuition and fees.
That puts things in perspective. You couldn't to a community college here for that.
Hmm. I think this AOTC is different than our usual AOTC?
If I'm right, pick a new handle, it's taken. If I'm wrong, well, wouldn't be the first time.
Am I right to assume that VA loans do not fall under MGIC restrictions or is this apply to portfolios containing VA loans as well. And how will this effect VA streamline refinancing at 100% LTV?
Just curious?
VA loans are not privately insured, They are gov't insured. Therefore, this doesn't apply to them whatsoever.
Can still be found but at a price.
LTV\t97.01% - 100%
Coverage 35%
FICO\t620-659
New Monthly Premium 1.70%
Current Monthly Premium 0.96%
$250,000 at .96% premium is $200/month.
$250,000 at 1.70% premium is $354/month.
Re: Canada COL
You get a different mix of expenses. There is no tax relief on mortgage interest. You do get a national subsidized health system that in nine years living there I never had to use so cannot comment. When I was there it did not cover any dental work.
They did, perhaps still do have, a Registered Home Ownership Savings Plan (RHOSP). You put money into this plan, came off taxable income and earned interest tax-free and was used to help purchase a home - if withdrawn for any other reason then penalties etc..
I never used a RHOSP but thought it a good idea.
I lived Montreal and Toronto 9 years.
They did, perhaps still do have, a Registered Home Ownership Savings Plan (RHOSP). You put money into this plan, came off taxable income and earned interest tax-free and was used to help purchase a home - if withdrawn for any other reason then penalties etc..
I never used a RHOSP but thought it a good idea.
There will probably be a need for something similar in the US. A large down payment is going to be mandatory sooner or later. Maybe something similar to a 401K, since that idea is familiar and popular. Maybe limit it to a one time event so it doesn't become yet another housing entitlement.
I like that RHOSP idea.
Seems like it could solve a lot of the problems that developed in the housing market over the past decade and also serve as a partial refuge from the scary inflation/low interest rates that savers of downpayments are currently facing.
It's a heck of a lot better than the Mortgage Interest Deduction.
I wonder if any/many DC politicians would ever endorse something that's so clearly in the interest of citizens?
It's funny, I just posted about Lender Paid Mortgage Insurance
I've already seen the effects with some of my borrowers, since mortgage insurance is not covered over 97%.
Let's just hope it doens't get worse...like 95% or 90%. Ouch!