That is to say, while subprime makes some amount of sense, Alt-A never made any sense. It is a child of the bubble.
Alt-A predates the bubble of the last ten years. The standards may have gone to hell, just like subprime and prime, but people with irregular income streams were legitimately using Alt-A ten years ago.
Think of people who work freelance in the film industry, they average $100,000 a year, but one year it may be $30,000, the next year $170,000. A conforming mortgage would be based on the $30,000 income. For those people, even an Option ARM is reasonable, assuming they have some back up savings and are sophisticated enough to handle it.
The problem wasn't with the Alt-A loan, just the fact that they were given to people who simply earned $30,000 in the best of years.
President Bush on Monday demanded that Russia end a "dramatic and brutal escalation" of violence in Georgia, agree to an immediate cease-fire and accept international mediation to end the crisis in the former Soviet republic.
Our clown in another comic turn. I adore the "demanded". It's just perfect. LOL
Our clown in another comic turn. I adore the "demanded". It's just perfect. LOL
jim
Yeah, Putin has out-maneuvered the U.S. from day one. The push to expand NATO to Russia's borders,m and that dumb ass missile defense plan (which probably wouldn't even work) just added to the Russian's paranoia and gave him something to be tough about. We have a talent for propping up petty dictators through threats, Putin, Castro, Chavez, etc.
Houston Chronicle
Rep. Paul's wife in critical care unit at Houston hospital
"HOUSTON The wife of Republican Rep. Ron Paul was in serious but stable condition Monday at a Houston hospital, a spokesman for the congressman said. Carol Paul was in the critical care unit at an unidentified hospital, spokesman Jesse Benton said in a statement.
Benton would not disclose why Carol Paul was admitted to the hospital Monday, only saying "she has had several abdominal surgeries."
Paul "appreciates the outpouring of concern and good wishes during this difficult time," Benton said. A Texas congressman from Lake Jackson, Ron Paul was the Libertarian Party nominee for president in 1988 and ran unsuccessfully for the 2008 GOP presidential nomination. His campaign, which was a sensation on the Internet, drew support from Republicans, independents and Democrats." 404 Error, No such article | Chron.com - Houston Chronicle
Wachovia Corp increased its previously reported second-quarter loss to $9.11 billion to cover costs to settle a probe of auction-rate securities sales, and said it will cut more jobs as the housing market deteriorates.
The fourth-largest U.S. bank is now reporting a loss of $4.31 per share, up from the $8.86 billion, or $4.20 a share, it reported on July 22, according to its quarterly report filed on Monday with the U.S. Securities and Exchange Commission.
Wachovia also now plans to cut 6,950 jobs, 600 more than it had disclosed, with the additional cuts coming from mortgage operations, spokeswoman Christy Phillips-Brown said. The cuts affect about 5.8 percent of Wachovia's 120,000-person workforce. Wachovia also is also eliminating 4,400 open positions.
File this under - "more people are wearing their clothes dirty these days":
National Dry Cleaners Files for Bankruptcy Protection Jason Hicks, Web Editor , American Drycleaner
Published 08/11/2008 - 10:00 a.m. CT
OVERLAND PARK, Kan. National Dry Cleaners Inc., the largest group of affiliated drycleaners in the United States with 231 stores in nine states, has filed for Chapter 11 bankruptcy protection. It's assets will be liquidated.
As of June 30, National Dry Cleaners operated 231 drycleaning stores and six central drycleaning and laundry plants in nine states, including 164 drop stores. On average, National Dry Cleaners drycleans and launders approximately 300,000 articles of clothes each week. The enterprise, which employs more than 1,500 people, had net annual sales of $70.2 million at Dec. 28, 2007.
National Dry Cleaners listed debt of $10 million to $50 million and assets of less than $50,000 in documents filed July 7 in U.S. Bankruptcy Court in Wilmington, Del. In the filing, the company blamed its lack of liquidity on increased energy costs, environmental cleanup and litigation costs, a decline in discretionary spending by core customers, and a general economic downturn.
Alt-A is sort of a weird mirror-image of subprime lending. If subprime was traditionally about borrowers with good capacity and collateral but bad credit history, Alt-A was about borrowers with a good credit history but pretty iffy capacity and collateral. That is to say, while subprime makes some amount of sense, Alt-A never made any sense. It is a child of the bubble.
Pure gold.
Alt-A was also great for straw buyers and fraud. If you could find a straw buyer with a good credit rating, you didn't need to worry about much else to pull off a good mortgage fraud deal.
According to Zillow, 40% of L.A. homes purchased in the last 5 years are underwater.
What are the chances that those people will see bubble prices again until at least 2015? They won't be able to refinance when their ARMs reset and will have to foreclose.
How does anyone see this thing as anywhere CLOSE to over?
my view of AltA was rather nebulous; I saw these as : not prime, but with not enough information to classify them as subprime
for example: a way to make larger loans to home owners willing to speculate on 'improving future", or to those who could pay but would prefer not to reveal income source (!)
reliance on FICO was a way to say "I have always been good for it in the past, so don't ask, don't tell"
My personal experience is that Alt-A was good way to charge borrowers excessive interest, when they actually qualified for a prime loan. Good riddance WaMu!!!! Just don't ask me to pay for the bailout-Oh Wait!!
Thanks Tanta-Another classic ubernerd post.
Anyone who follows this blog regularly- "We're all ubernerds now"
"Think of people who work freelance in the film industry, they average $100,000 a year, but one year it may be $30,000, the next year $170,000. A conforming mortgage would be based on the $30,000 income. For those people, even an Option ARM is reasonable, assuming they have some back up savings and are sophisticated enough to handle it."
My problem with statements like this is that it is still NOT "Stated Income."
I can understand the concept of "average income over several years" or seasonal income, or otherwise unpredictable income streams. But in all cases, one actually has proof of the income (unless every small business owner and person in the film industry only accepts payments in suitcases full of unmarked bills), and there should be some tax record of the income.
So, even for people with variable income, the concept of "stated income" is a fraud. How can we really hand out huge loans and just assume that the person really has a high income when they have no proof of it? It is insanity, and now that madness will have its effect as the Alt-A part of the Bubble crashes.
Think of people who work freelance in the film industry, they average $100,000 a year, but one year it may be $30,000, the next year $170,000. A conforming mortgage would be based on the $30,000 income.
Since when, Bob? Income averaging has been alive and well in the full-doc conforming world since dirt. The GSEs do it, the persnicketty old prime lenders like me do it. All I want is verification of the numbers I am averaging.
I'm afraid you've been the victim of some propaganda. In my experience, the borrowers who go Alt-A aren't trying to get the lender to count the annual income as $100,000 in your example. They're trying to get the lender to count the annual income as $170,000.
I was an Alt-A mortgage borrower. I lost my job as an IP attorney, then got a job as a loan officer. I did not have two years of experience as a loan officer, and could not qualify for a conforming loan -- did not have 2 years of income in the same field, so my income didn't 'count.'
Which was frustrating. 780 fico, 100k+ in assets... does not qualify.
So I was a no-income 'with assets'. It wasn't that I didn't have income, but that it didn't count.
I think that many of these programs have some legitimate basis. I considered Stated Income programs appropriate for waitresses and bartenders, hairdressers, and other people who could not really prove their income.... b/c they did not declare all of their income.
When you 'go stated' and inflate income, then you depart from the 'capacity' part of sound lending.
My point is, not all of the Alt-A was bad. Some people, although sound, were not "conforming."
I am projecting. I did not lie on applications, so my examples of alt-a include not lying. But these are not the ones in foreclosure. And not the focus of the national attention.
I lost my job as an IP attorney, then got a job as a loan officer. I did not have two years of experience as a loan officer
You want my honest response? I just don't get borrowers like you.
You lost a job. You got another that is based on commission, in a brand-new field in a cyclical industry. You have no idea what your income stream is likely to be in the immediate future. For all you know, relocating for a new job or getting yet another one is a real possibility in your situation. You have savings, but you may need to spend them on supplementing your unstable income for an unpredictable amount of time.
So this is a perfect time to buy a house? Take on a large debt? Why?
My problem is that the "need" for Alt-A that you sketch out here sounds like the "need" for lenders to accommodate imprudent financial decisions. There are sound reasons why prime lenders require a two-year income history in the same field. All you are doing is "self-underwriting."
If you think "stated income" programs are good for people who cheat the IRS, you may have a rockier road ahead of you as a loan officer than you think.
thanks for the information. I think part of the confusion is that a lot of us somehow got the idea that Alt-A included borrowers who required extra effort to document their loans (such as the self-employed in the same field for 10 years where schedule SE's and 1099's have to be used instead of W-2's) but who, once the full doc was done, would qualify as having the capacity and credit worthiness to repay under normal standards. What term should we use for this latter group of extra effort required to document but it is all there for a prime rating under GSE standards borrowers?
What term should we use for this latter group of extra effort required to document but it is all there for a prime rating under GSE standards borrowers?
I am actually curious about why we think we need a "term" for those borrowers.
There are always wide variations in the amount of time, effort, and documentation it takes to get prime borrower loans done. Ever done a co-op loan for which the borrower wants to take title as a living trust? You can do those for salaried borrowers who qualify easily on standard income docs and still the whole loan process will take ages. Or borrowers who spent the last two years working abroad for their multinational employer and were paid in some currency other than the dollar. Or borrowers who are co-heirs trying to refinance a free-and-clear inherited home to buy out a third sibling's interest. Good lord, the world's full of great borrowers whose mortgage process is going to take longer than an hour.
We don't need "special products" or "special terms" for complex loans. The very large population called "prime" will have a basic bell-shaped curve with salaried streamlined refis for long-time low-LTV homeowners on one end and a wide range of odd or unusual or one-off kinds of deals on the other.
The propaganda of the "Alt-A" boosters has obviously gotten to everyone. We are so primed to think that there is this significant portion of the borrower population who "can't be served" by standard conforming prime loans that we can't stop worrying about it, even though it's mostly just propaganda used to justify go-go lending.
If you have a complicated financial life, it will take you longer to do your taxes, write your will, or get a mortgage loan than it will the average person with an uncomplicated financial life. So?
I think I understand you now. I am not disagreeing with you about borrowers with compicated finances. I've just taken over platform chair duties for my local Young Democrats group from a bunch of relators and am trying to sort out their drivel and got confused by their insistence that Alt-A was so important that I started to look for some circumstance where it would be useful and started seeing things that were not there. Thanks for setting me straight.
dare I say it....... fust
Isn't the size of Alt'A suppose to be bigger than SubPrime?
size doesn't matter
That is to say, while subprime makes some amount of sense, Alt-A never made any sense. It is a child of the bubble.
Alt-A predates the bubble of the last ten years. The standards may have gone to hell, just like subprime and prime, but people with irregular income streams were legitimately using Alt-A ten years ago.
Think of people who work freelance in the film industry, they average $100,000 a year, but one year it may be $30,000, the next year $170,000. A conforming mortgage would be based on the $30,000 income. For those people, even an Option ARM is reasonable, assuming they have some back up savings and are sophisticated enough to handle it.
The problem wasn't with the Alt-A loan, just the fact that they were given to people who simply earned $30,000 in the best of years.
President Bush on Monday demanded that Russia end a "dramatic and brutal escalation" of violence in Georgia, agree to an immediate cease-fire and accept international mediation to end the crisis in the former Soviet republic.
Our clown in another comic turn. I adore the "demanded". It's just perfect. LOL
"Scientists Closer to Invisibility Cloak"
This is so area 51.
Our clown in another comic turn. I adore the "demanded". It's just perfect. LOL
jim
Yeah, Putin has out-maneuvered the U.S. from day one. The push to expand NATO to Russia's borders,m and that dumb ass missile defense plan (which probably wouldn't even work) just added to the Russian's paranoia and gave him something to be tough about. We have a talent for propping up petty dictators through threats, Putin, Castro, Chavez, etc.
Houston Chronicle
Rep. Paul's wife in critical care unit at Houston hospital
"HOUSTON The wife of Republican Rep. Ron Paul was in serious but stable condition Monday at a Houston hospital, a spokesman for the congressman said. Carol Paul was in the critical care unit at an unidentified hospital, spokesman Jesse Benton said in a statement.
Benton would not disclose why Carol Paul was admitted to the hospital Monday, only saying "she has had several abdominal surgeries."
Paul "appreciates the outpouring of concern and good wishes during this difficult time," Benton said. A Texas congressman from Lake Jackson, Ron Paul was the Libertarian Party nominee for president in 1988 and ran unsuccessfully for the 2008 GOP presidential nomination. His campaign, which was a sensation on the Internet, drew support from Republicans, independents and Democrats."
404 Error, No such article | Chron.com - Houston Chronicle
Putin flew back from China and went straight to the Georgia border to be near the battlefield.
Why didn't Bush fly back and go straight to the battlefield?
Oh, wait a minute. Which one?
Adam Smith viewed Alt-A with disdain unlike bubble lenders who never read his fine work.
alt-a and their ilk are like the barnacles on the subprime ship.
They all suck and are going to prolong the housing misery, jmho...
Wachovia Corp increased its previously reported second-quarter loss to $9.11 billion to cover costs to settle a probe of auction-rate securities sales, and said it will cut more jobs as the housing market deteriorates.
The fourth-largest U.S. bank is now reporting a loss of $4.31 per share, up from the $8.86 billion, or $4.20 a share, it reported on July 22, according to its quarterly report filed on Monday with the U.S. Securities and Exchange Commission.
Wachovia also now plans to cut 6,950 jobs, 600 more than it had disclosed, with the additional cuts coming from mortgage operations, spokeswoman Christy Phillips-Brown said. The cuts affect about 5.8 percent of Wachovia's 120,000-person workforce. Wachovia also is also eliminating 4,400 open positions.
Wachovia boosts loss to $9.11 bln, cuts more jobs
| Reuters
Never know one day to the next.
un autre canadien avec popcorn writes:
size doesn't matter
that's what we all say so the guy doesn't feel crushed. just like you say she doesn't look fat in that dress....
File this under - "more people are wearing their clothes dirty these days":
National Dry Cleaners Files for Bankruptcy Protection Jason Hicks, Web Editor , American Drycleaner
Published 08/11/2008 - 10:00 a.m. CT
OVERLAND PARK, Kan. National Dry Cleaners Inc., the largest group of affiliated drycleaners in the United States with 231 stores in nine states, has filed for Chapter 11 bankruptcy protection. It's assets will be liquidated.
As of June 30, National Dry Cleaners operated 231 drycleaning stores and six central drycleaning and laundry plants in nine states, including 164 drop stores. On average, National Dry Cleaners drycleans and launders approximately 300,000 articles of clothes each week. The enterprise, which employs more than 1,500 people, had net annual sales of $70.2 million at Dec. 28, 2007.
National Dry Cleaners listed debt of $10 million to $50 million and assets of less than $50,000 in documents filed July 7 in U.S. Bankruptcy Court in Wilmington, Del. In the filing, the company blamed its lack of liquidity on increased energy costs, environmental cleanup and litigation costs, a decline in discretionary spending by core customers, and a general economic downturn.
Alt-A as I understand are lenders who had a better credit score and were able to lie about their income and collateral
Or file under - "ancient Chinese secret.."
Why didn't Bush fly back and go straight to the battlefield?
George goes to the Olympics
Alt-A is sort of a weird mirror-image of subprime lending. If subprime was traditionally about borrowers with good capacity and collateral but bad credit history, Alt-A was about borrowers with a good credit history but pretty iffy capacity and collateral. That is to say, while subprime makes some amount of sense, Alt-A never made any sense. It is a child of the bubble.
Pure gold.
Alt-A was also great for straw buyers and fraud. If you could find a straw buyer with a good credit rating, you didn't need to worry about much else to pull off a good mortgage fraud deal.
According to Zillow, 40% of L.A. homes purchased in the last 5 years are underwater.
What are the chances that those people will see bubble prices again until at least 2015? They won't be able to refinance when their ARMs reset and will have to foreclose.
How does anyone see this thing as anywhere CLOSE to over?
crispy&cole: I would be more inclined to think apparel standards (to avoid the term fashion) have moved away from stuff that has to be dry-cleaned.
Suits are mostly just worn by traditional "suits" in business, and even in business there is ever more casual attire.
That's not to say people aren't stretching the cleaning schedules too.
I just want to say that this website is a gift.
The Alt-A post by Tanta is amazing.
Thanks. This website is what the Internet is for.
Great post Tanta
my view of AltA was rather nebulous; I saw these as : not prime, but with not enough information to classify them as subprime
for example: a way to make larger loans to home owners willing to speculate on 'improving future", or to those who could pay but would prefer not to reveal income source (!)
reliance on FICO was a way to say "I have always been good for it in the past, so don't ask, don't tell"
My personal experience is that Alt-A was good way to charge borrowers excessive interest, when they actually qualified for a prime loan. Good riddance WaMu!!!! Just don't ask me to pay for the bailout-Oh Wait!!
Thanks Tanta-Another classic ubernerd post.
Anyone who follows this blog regularly- "We're all ubernerds now"
"Think of people who work freelance in the film industry, they average $100,000 a year, but one year it may be $30,000, the next year $170,000. A conforming mortgage would be based on the $30,000 income. For those people, even an Option ARM is reasonable, assuming they have some back up savings and are sophisticated enough to handle it."
My problem with statements like this is that it is still NOT "Stated Income."
I can understand the concept of "average income over several years" or seasonal income, or otherwise unpredictable income streams. But in all cases, one actually has proof of the income (unless every small business owner and person in the film industry only accepts payments in suitcases full of unmarked bills), and there should be some tax record of the income.
So, even for people with variable income, the concept of "stated income" is a fraud. How can we really hand out huge loans and just assume that the person really has a high income when they have no proof of it? It is insanity, and now that madness will have its effect as the Alt-A part of the Bubble crashes.
Think of people who work freelance in the film industry, they average $100,000 a year, but one year it may be $30,000, the next year $170,000. A conforming mortgage would be based on the $30,000 income.
Since when, Bob? Income averaging has been alive and well in the full-doc conforming world since dirt. The GSEs do it, the persnicketty old prime lenders like me do it. All I want is verification of the numbers I am averaging.
I'm afraid you've been the victim of some propaganda. In my experience, the borrowers who go Alt-A aren't trying to get the lender to count the annual income as $100,000 in your example. They're trying to get the lender to count the annual income as $170,000.
I was an Alt-A mortgage borrower. I lost my job as an IP attorney, then got a job as a loan officer. I did not have two years of experience as a loan officer, and could not qualify for a conforming loan -- did not have 2 years of income in the same field, so my income didn't 'count.'
Which was frustrating. 780 fico, 100k+ in assets... does not qualify.
So I was a no-income 'with assets'. It wasn't that I didn't have income, but that it didn't count.
I think that many of these programs have some legitimate basis. I considered Stated Income programs appropriate for waitresses and bartenders, hairdressers, and other people who could not really prove their income.... b/c they did not declare all of their income.
When you 'go stated' and inflate income, then you depart from the 'capacity' part of sound lending.
My point is, not all of the Alt-A was bad. Some people, although sound, were not "conforming."
I am projecting. I did not lie on applications, so my examples of alt-a include not lying. But these are not the ones in foreclosure. And not the focus of the national attention.
I lost my job as an IP attorney, then got a job as a loan officer. I did not have two years of experience as a loan officer
You want my honest response? I just don't get borrowers like you.
You lost a job. You got another that is based on commission, in a brand-new field in a cyclical industry. You have no idea what your income stream is likely to be in the immediate future. For all you know, relocating for a new job or getting yet another one is a real possibility in your situation. You have savings, but you may need to spend them on supplementing your unstable income for an unpredictable amount of time.
So this is a perfect time to buy a house? Take on a large debt? Why?
My problem is that the "need" for Alt-A that you sketch out here sounds like the "need" for lenders to accommodate imprudent financial decisions. There are sound reasons why prime lenders require a two-year income history in the same field. All you are doing is "self-underwriting."
If you think "stated income" programs are good for people who cheat the IRS, you may have a rockier road ahead of you as a loan officer than you think.
Tanta,
thanks for the information. I think part of the confusion is that a lot of us somehow got the idea that Alt-A included borrowers who required extra effort to document their loans (such as the self-employed in the same field for 10 years where schedule SE's and 1099's have to be used instead of W-2's) but who, once the full doc was done, would qualify as having the capacity and credit worthiness to repay under normal standards. What term should we use for this latter group of extra effort required to document but it is all there for a prime rating under GSE standards borrowers?
What term should we use for this latter group of extra effort required to document but it is all there for a prime rating under GSE standards borrowers?
I am actually curious about why we think we need a "term" for those borrowers.
There are always wide variations in the amount of time, effort, and documentation it takes to get prime borrower loans done. Ever done a co-op loan for which the borrower wants to take title as a living trust? You can do those for salaried borrowers who qualify easily on standard income docs and still the whole loan process will take ages. Or borrowers who spent the last two years working abroad for their multinational employer and were paid in some currency other than the dollar. Or borrowers who are co-heirs trying to refinance a free-and-clear inherited home to buy out a third sibling's interest. Good lord, the world's full of great borrowers whose mortgage process is going to take longer than an hour.
We don't need "special products" or "special terms" for complex loans. The very large population called "prime" will have a basic bell-shaped curve with salaried streamlined refis for long-time low-LTV homeowners on one end and a wide range of odd or unusual or one-off kinds of deals on the other.
The propaganda of the "Alt-A" boosters has obviously gotten to everyone. We are so primed to think that there is this significant portion of the borrower population who "can't be served" by standard conforming prime loans that we can't stop worrying about it, even though it's mostly just propaganda used to justify go-go lending.
If you have a complicated financial life, it will take you longer to do your taxes, write your will, or get a mortgage loan than it will the average person with an uncomplicated financial life. So?
Tanta,
I think I understand you now. I am not disagreeing with you about borrowers with compicated finances. I've just taken over platform chair duties for my local Young Democrats group from a bunch of relators and am trying to sort out their drivel and got confused by their insistence that Alt-A was so important that I started to look for some circumstance where it would be useful and started seeing things that were not there. Thanks for setting me straight.