With $77B slosh and $80B in TAFs, It sure seems dangerous to cut any more than .25. I suspect much of the real money doesn't want MBS unless it's at a substantial discount. The GSEs and FHA are writing paper with CLTVs over 90%! I suspect most real, private money is convinced of a 10%+ additional drop in RE valuations.
As I ponder this I conclude the show is about over. Without the government, lending standards have to incorporate falling home prices + a return to sensible lending practices. The government can't prop up the existing paper AND support new origination using uneconomic standards.
Tanta/CR - Do you agree that the current GSE/FHA lending standards are economically unsupportable?
Why not just sell the loans to Freddie and Fannie? Both are still accepting higher CLTV loans.
Maybe they see a future for originators with a reputation for quality ("A loan originated by JPM is a Quality loan"). If you're not BK yet, it's never to late to start improving your reputation.
I think originators have to seriously start considering the health of the institutions they are foisting paper onto if they want them to be around in the future.
There are lenders with declining market overlays on FHA even though it isn't a FHA requirement. Corporate responsibility making a comeback? Legal liability worry?
"I suspect much of the real money doesn't want MBS unless it's at a substantial discount. The GSEs and FHA are writing paper with CLTVs over 90%! I suspect most real, private money is convinced of a 10%+ additional drop in RE valuations."
When the Fannie Mae jumbo guidelines came out last week, I said they were taking a risk; but I heard of a lot of "look how strict the guidlines are." Well, 85 or 95 percent and strict guidelines aren't going to protect you much if prices go down another 20 or 30. And it looks like Morgan Chase thinks they will, at least in Nevada.
Cal writes:
"I think originators have to seriously start considering the health of the institutions they are foisting paper onto if they want them to be around in the future."
Why? We just sell what the bank makes available. They are the ones that sent their reps around telling us to go stated/stated to 100%...and, um..to bump up the income to qualify.
I look for the best deal and put my customer into it.
cause Freddie and Fannie require distinctly un-Las-Vegian FICO scores in the 700+ range?
Ken | Homepage | 03.12.08 - 4:30 pm
No they don't. If you can get it through LP, credit score doesn't matter. I had a guy with a 587 FICO full doc that got A paper. Don't know how, but he did.
Gee whiz! Imagine that, confirming incomes and not lending at 100%??? What a crazy time we live in!
I just had a mortgage declined that I tried to get for my clients because I could not confirm the downpayment money was not from borrowed sources. Now I need a certified copy of the last 90 days of their other banks account.
Hmmm. Why not just sell the loans to Freddie and Fannie? Both are still accepting higher CLTV loans.
There isn't much in the article about the other parameters that go into a loan origination that this blog has taught me about - but I have never memorized those parameters- so:
speaking of downpayment, what is one to do with one's $$'s? The USD is scaring me, besides GLD or SLV, which foreign currency's are better? Both the AUD (Australia) and the Swiss Franc are at all time high's.....already bought DBA. What about the EURO?
Scary... if this keeps up, they might only let people who can afford to pay off the loan get mortgages! And that would be very Un-Amerikan, since everyone DESERVES a huge McMansion, $200,000 in profit every 2 years for flipping a house, a huge SUV, etc. Right...
"I just had a mortgage declined that I tried to get for my clients because I could not confirm the downpayment money was not from borrowed sources. Now I need a certified copy of the last 90 days of their other banks account."
Sherman, set the Wayback machine for 1987. I remember having to do that to get funding for an income property.
I just had a mortgage declined that I tried to get for my clients because I could not confirm the downpayment money was not from borrowed sources. Now I need a certified copy of the last 90 days of their other banks account.
You don't even have to go back to the 80s for that.
But hey! I've got an old "certified true & correct copy" stamp with a signature line in my desk drawer you can borrow.
The We Got Mail...that Jingle, Jingle, Jingles! excerpt:
If you look at the default rates or the delinquency rates -- prime has performed fairly well. It's come up, but still reasonable levels. It's the Alt-A that has been really dramatically bad. And the subprime -- not quite as bad relative to where we thought it would be. Relative to where we thought it would be, Alt-A is really the worst. And I think -- a lot of theories about that.
But my theory is, a lot of these borrowers are really renters; they're not homeowners. They were solicited to get mortgage loans with no down payments. And that was very easy to do. If their house went up in value, terrific. If it didn't go up in value, they don't pay their mortgage. And we've got a lot of those in our book; we've got to get through that. And if you think about what's in the Alt-A book and in the A- book, it's a lot of those kinds of borrowers.
The loss-mitigation folks are coming in and saying, These people have the money to pay their mortgages; they don't have the commitment to pay their mortgages. That is completely different from the history of our industry. We've been in the business 30 years. And until two years ago, the borrowers that we insured had a commitment to pay their mortgage no matter what. That changed over the past couple years. It's already changed back, but our book has to get through those borrowers that just don't have that commitment.
Hey you've got to go from one extreme to the other to show that you are "learning" from experience. If you don't do that you don't look like you are "learning" your "lessons."
Tanta I am jealous of your stamp,after my first 30 days as a credit manager the sales staff gave me a stamp that said 'BULLSHIT!"... I still have it.They had gone without a credit manager,and a lot of internal controls for almost two years...the janitor sold guns out of his car trunk and I won't even talk about the coke.Ah,the music biz in the '80s.
Bill Melater. ... That's funny, it reminds me of a discussion I had the other day with someone in the banking biz in South America. I think the quote was something like "the problem with this country is that the only people with access to credit are those who don't even need it."
G-d help us if the 'good ol' days' means being a developing country again.
"I just had a mortgage declined that I tried to get for my clients because I could not confirm the downpayment money was not from borrowed sources. Now I need a certified copy of the last 90 days of their other banks account."
Yeah, Tanta's right (as if it needs saying): I remember this from the 90s - no family loans, etc. Lending officers really used to scrutinize one's relatively recent financial history - like the old 2 years of tax returns, bank statements, etc.
I noticed a dramatic change between 98 and 02, when I did a term & rate refi, at about the same time I noted (somewhat pleasantly) the sudden uptick in RE prices. I didn't put two-and-two together until a few years later.
Hope you liked the '80s. They're back.
What's coming back shortly is the >10% long term rates. Heck, even at 5% down most people can't possibly come up with a downpayment, even after prices take a 30% haircut. Nobody saves, and the ramp-up in inflation will not encourage saving. I'm betting that the 30% drop will bring out the small number of prudent buyers who were waiting out the bubble. The REALTORS like to pretend this is a huge pent-up demand just sitting on the sidelines waiting for the situation to settle. They're gonna be disappointed. That will be followed by a long stagnant, low-volume period.
Scott, I think you touch on a good point about people not saving and not being able to come up with a down payment.
I think a bigger issue is that it will take a long time for most people to save up a 10% downpayment. It's going to take 2-3 years for those who are now cut off from borrowing to save up that kind of money. They're not going to be fueling a housing rebound any time soon.
If you can save up $20K in a year or so, you're not the type who can't refinance in this market.
I agree with daksim, people are NOT saving in general, let alone for a goal. The max you are going to see is 5% down on a home and most of that gets eaten up in closing costs.
I'd say 7 out of 10 of the first time buyers I help out are upside down on day one. The insurance premium gets financed and that wipes out the downpayment altogether. After the first 5 year term they have made $80k in payments and 10k of that goes to principal.
The real question is: will this be resolved and it can be "money for all" again, or will people try and save the required amount to get in. Oh and of course, most people have unsecured debt which needs to be paid off and that will conflict with the savings part. Yes, it is a rich tapestry.
knew it wouldn't last long...DOW down 47
cool i was fir-sizzle
Wonder how much the BLM can get for their land sales around Las Vegas now? $.75/acre?
With $77B slosh and $80B in TAFs, It sure seems dangerous to cut any more than .25. I suspect much of the real money doesn't want MBS unless it's at a substantial discount. The GSEs and FHA are writing paper with CLTVs over 90%! I suspect most real, private money is convinced of a 10%+ additional drop in RE valuations.
As I ponder this I conclude the show is about over. Without the government, lending standards have to incorporate falling home prices + a return to sensible lending practices. The government can't prop up the existing paper AND support new origination using uneconomic standards.
Tanta/CR - Do you agree that the current GSE/FHA lending standards are economically unsupportable?
Come on Elvis, I'd have to have a downpayment of $.27. Who's got that kind of money?
Sheeeesh.
Cheers,
At least they kept the DJIA over 12k. That is the target that led to this round of stop-pulling.
Why not just sell the loans to Freddie and Fannie? Both are still accepting higher CLTV loans.
Maybe they see a future for originators with a reputation for quality ("A loan originated by JPM is a Quality loan"). If you're not BK yet, it's never to late to start improving your reputation.
What miracle is the Fed hoping for ?
why don't they let the triage start ?
65% LTV? How long before it's a 90% LTV ... three or four months?
Why stop at 90% LTV? Think about how much more the masses could borrow at 200% LTV. You have to think big to solve this crisis, not small.
I think originators have to seriously start considering the health of the institutions they are foisting paper onto if they want them to be around in the future.
There are lenders with declining market overlays on FHA even though it isn't a FHA requirement. Corporate responsibility making a comeback? Legal liability worry?
65% LTV? How long before it's a 90% LTV ... three or four months?
That's what I thought, sounds like they're expecting another 15-20% drop in home values in the next year.
"I suspect much of the real money doesn't want MBS unless it's at a substantial discount. The GSEs and FHA are writing paper with CLTVs over 90%! I suspect most real, private money is convinced of a 10%+ additional drop in RE valuations."
When the Fannie Mae jumbo guidelines came out last week, I said they were taking a risk; but I heard of a lot of "look how strict the guidlines are." Well, 85 or 95 percent and strict guidelines aren't going to protect you much if prices go down another 20 or 30. And it looks like Morgan Chase thinks they will, at least in Nevada.
square one---
cltv-
1st, 2nd''s and heloc's constitute Combo's? no other lender to the party for jpm to lend?
Why not just sell the loans to Freddie and Fannie?
'cause Freddie and Fannie require distinctly un-Las-Vegian FICO scores in the 700+ range?
Cal writes:
"I think originators have to seriously start considering the health of the institutions they are foisting paper onto if they want them to be around in the future."
Why? We just sell what the bank makes available. They are the ones that sent their reps around telling us to go stated/stated to 100%...and, um..to bump up the income to qualify.
I look for the best deal and put my customer into it.
Negative equity between signing and settlement?
Yurp doesn't seem to have bought the latest Free Ponies Four All(sic) from the Fed. Euro $1.555, Pound $2.0266
It's like an episode of The Honeymooners - "Right to the moon, Alice. Right to the moon."
cause Freddie and Fannie require distinctly un-Las-Vegian FICO scores in the 700+ range?
Ken | Homepage | 03.12.08 - 4:30 pm
No they don't. If you can get it through LP, credit score doesn't matter. I had a guy with a 587 FICO full doc that got A paper. Don't know how, but he did.
Gee whiz! Imagine that, confirming incomes and not lending at 100%??? What a crazy time we live in!
I just had a mortgage declined that I tried to get for my clients because I could not confirm the downpayment money was not from borrowed sources. Now I need a certified copy of the last 90 days of their other banks account.
Welcome to Canada!
Hmmm. Why not just sell the loans to Freddie and Fannie? Both are still accepting higher CLTV loans.
There isn't much in the article about the other parameters that go into a loan origination that this blog has taught me about - but I have never memorized those parameters- so:
yeah, anybody, why not ?
-J
Well, forcing people to come up with a 35% downpayment will help unstick prices, won't it? What will the plunge protection team do about that?
speaking of downpayment, what is one to do with one's $$'s? The USD is scaring me, besides GLD or SLV, which foreign currency's are better? Both the AUD (Australia) and the Swiss Franc are at all time high's.....already bought DBA. What about the EURO?
Hm. From a lender's point of view, shouldn't the CLTV you accept depend on how much further you think house prices might fall?
Is "rising delinquencies" really the best predictor of that for a region?
A 35% downpayment is no problem in Vegas. You take a 1% downpayment and place it on one of the numbers on the roulette wheel and pray.
This what a bank does if it thinks it may be stuck with the mortgages and it expects that the collateral is still in for some decline in value.
OR...pretty much the exact opposite of what the government entities are doing.
Scary... if this keeps up, they might only let people who can afford to pay off the loan get mortgages! And that would be very Un-Amerikan, since everyone DESERVES a huge McMansion, $200,000 in profit every 2 years for flipping a house, a huge SUV, etc. Right...
"I just had a mortgage declined that I tried to get for my clients because I could not confirm the downpayment money was not from borrowed sources. Now I need a certified copy of the last 90 days of their other banks account."
Sherman, set the Wayback machine for 1987. I remember having to do that to get funding for an income property.
Hope you liked the '80s. They're back.
Anon @ 5:05pm
In every which way. When I saw the Hoff on the teevee the other night in a NightRider made for TV movie....it was official.
everyone DESERVES a huge McMansion, $200,000 in profit every 2 years for flipping a house, a huge SUV, etc.
Hey, you forgot to mention my pony. What about my pony?
I just had a mortgage declined that I tried to get for my clients because I could not confirm the downpayment money was not from borrowed sources. Now I need a certified copy of the last 90 days of their other banks account.
You don't even have to go back to the 80s for that.
But hey! I've got an old "certified true & correct copy" stamp with a signature line in my desk drawer you can borrow.
Mine says:
Manager.............
Awesome.
Tanta you should eBay that shit!
Why not just sell the loans to Freddie and Fannie? Both are still accepting higher CLTV loans.
My take was that they meant across all of their business channels. In essence, they not gonna do seconds in Nevada if the CLTV is more than 65%.
Of course, I would assume they'd still do anything they could sell to the agencies.
Transcript of Bob Quint's remarks from Radian Group presentation at AIFA conference. Worth a read:
Radian Group at AIFA 33rd Annual Conference - Final - - insurancenewsnet.com
The We Got Mail...that Jingle, Jingle, Jingles! excerpt:
If you look at the default rates or the delinquency rates -- prime has performed fairly well. It's come up, but still reasonable levels. It's the Alt-A that has been really dramatically bad. And the subprime -- not quite as bad relative to where we thought it would be. Relative to where we thought it would be, Alt-A is really the worst. And I think -- a lot of theories about that.
But my theory is, a lot of these borrowers are really renters; they're not homeowners. They were solicited to get mortgage loans with no down payments. And that was very easy to do. If their house went up in value, terrific. If it didn't go up in value, they don't pay their mortgage. And we've got a lot of those in our book; we've got to get through that. And if you think about what's in the Alt-A book and in the A- book, it's a lot of those kinds of borrowers.
The loss-mitigation folks are coming in and saying, These people have the money to pay their mortgages; they don't have the commitment to pay their mortgages. That is completely different from the history of our industry. We've been in the business 30 years. And until two years ago, the borrowers that we insured had a commitment to pay their mortgage no matter what. That changed over the past couple years. It's already changed back, but our book has to get through those borrowers that just don't have that commitment.
I have a certified true & correct stamp too! I last used it 2 months ago.
Fitch downgrades Countrywide IDR to 'BBB-'; remains on watch positive
CNNMoney.com: 404 Page Not Found
girlbear - Euro is at an all time high also. I've been pondering the big glod miners (NEM, etc.) hedged with a sprinkling of EEV.
Maybe if rich is around he could weigh in on the idea.
Now I need a certified copy of the last 90 days of their other banks account.
Welcome to Canada!
Matt | 03.12.08 - 4:45 pm
Borrow it from Lehman Brothers! Just kidding...but they used to have liquid asset borrowing a couple of years ago.
I know who Sebation is:
"Bush on PBS: 'Times are tough,' but no recession yet"
Bush says U.S. needs cheaper gas, fewer for sale signs
this guy says Fannie is levered 200:1
The Market Ticker
I dunno, sometimes he just rambles, but...
Thanks MLM
Completely off topic, but according to bloomberg, Target is in talks to sell half of its Credit Card business.
Most of us here think CC's are one of the shoes hanging out there, and possibly a big one.
Bill Ackman of Pershing Square recently bought a very large piece of the Target pie, and is pushing for the sale.
Some of you may remember Ackman from his vocal condemnation of the monolines.
Not really a conspiracy theory, but I think some people might have some interesting data hidden under the covers.
It seems that people are rapidly reaching a point where they no longer care about their FICO scores. If this doesn't scare you I don't know what will.
Bush says U.S. needs cheaper gas, fewer for sale signs
And flying cars and robot maids.
Hey you've got to go from one extreme to the other to show that you are "learning" from experience. If you don't do that you don't look like you are "learning" your "lessons."
Tanta I am jealous of your stamp,after my first 30 days as a credit manager the sales staff gave me a stamp that said 'BULLSHIT!"... I still have it.They had gone without a credit manager,and a lot of internal controls for almost two years...the janitor sold guns out of his car trunk and I won't even talk about the coke.Ah,the music biz in the '80s.
It seems that people are rapidly reaching a point where they no longer care about their FICO scores. If this doesn't scare you I don't know what will.
Just another symptom of financial breakdown. No trust means no cooperation means no modern economy.
Bush says U.S. needs cheaper gas, fewer for sale signs
It could also do without stupid warmongering Presidents. Oh, gee, but it's too late for that, right?
Translation:
We're not in the mortgage business any more, but we want to make everyone think we still are.
Target is in talks to sell half of its Credit Card business.
Not to pick nits but what they are offering are credit card receivables - not the business. Which account balances at what haircut is the question.
Re Ackman: Wanna bet ,if the sale is made, he will demand a special dividend? Asset stripping ?
Jim
Girlbear:
For a very different exposure try firebird funds (fbird.com)
I believe that they have a new fund ope
chase is full of it many lenders
still giving high ltv up to 100%-95%
the only thing that they do is starve their AE that all
the only thing that they do is starve their AE that all
nir degni | 03.12.08 - 7:51 pm | #
Did I accidentally stumble onto Broker's Outpost?
We're going back to the good old days. To get a loan you had to prove you didn't need it.
Bill Melater. ... That's funny, it reminds me of a discussion I had the other day with someone in the banking biz in South America. I think the quote was something like "the problem with this country is that the only people with access to credit are those who don't even need it."
G-d help us if the 'good ol' days' means being a developing country again.
NC Jim,
Target has had those receivables for sale for at least 6 months, and they are not getting any healthier.
Freddie announced that they will not purchase anything above 97% CLTV
"I just had a mortgage declined that I tried to get for my clients because I could not confirm the downpayment money was not from borrowed sources. Now I need a certified copy of the last 90 days of their other banks account."
Yeah, Tanta's right (as if it needs saying): I remember this from the 90s - no family loans, etc. Lending officers really used to scrutinize one's relatively recent financial history - like the old 2 years of tax returns, bank statements, etc.
I noticed a dramatic change between 98 and 02, when I did a term & rate refi, at about the same time I noted (somewhat pleasantly) the sudden uptick in RE prices. I didn't put two-and-two together until a few years later.
Hope you liked the '80s. They're back.
What's coming back shortly is the >10% long term rates. Heck, even at 5% down most people can't possibly come up with a downpayment, even after prices take a 30% haircut. Nobody saves, and the ramp-up in inflation will not encourage saving. I'm betting that the 30% drop will bring out the small number of prudent buyers who were waiting out the bubble. The REALTORS like to pretend this is a huge pent-up demand just sitting on the sidelines waiting for the situation to settle. They're gonna be disappointed. That will be followed by a long stagnant, low-volume period.
Scott, I think you touch on a good point about people not saving and not being able to come up with a down payment.
I think a bigger issue is that it will take a long time for most people to save up a 10% downpayment. It's going to take 2-3 years for those who are now cut off from borrowing to save up that kind of money. They're not going to be fueling a housing rebound any time soon.
If you can save up $20K in a year or so, you're not the type who can't refinance in this market.
I agree with daksim, people are NOT saving in general, let alone for a goal. The max you are going to see is 5% down on a home and most of that gets eaten up in closing costs.
I'd say 7 out of 10 of the first time buyers I help out are upside down on day one. The insurance premium gets financed and that wipes out the downpayment altogether. After the first 5 year term they have made $80k in payments and 10k of that goes to principal.
The real question is: will this be resolved and it can be "money for all" again, or will people try and save the required amount to get in. Oh and of course, most people have unsecured debt which needs to be paid off and that will conflict with the savings part. Yes, it is a rich tapestry.
Rumor has it that JPM isn't doing any new loans on condos in Florida.