Are borrowers with second mortgages ineligle for the progtram? If so, I don't know how many will actually qualify for this new program. It seems like most of the people who are underwater bought properties or did cash-out refis with 100% (80/20) financing.
Well, it appears that the author is disappointed that the lord and saviour government has not returned him and the homeowner to the land of milk and 20% monthly appreciation. Imagine facing your friends day after day with the fear that they will learn that your "home" is not the blessed investment you thought. Imagine living with the fact that you are no longer in the land of appreciation and must share any future appreciation with the program that helped bail you out. Imagine the humiliation and damaged pride.
Or the pain of having to repay the First-Time Homebuyers Tax Credit out of your own pocket over 15 years (unless as he points out your a compulsive saver). "Theres a fishhook in the FHOBTAC sirloin: you have to pay it back. $500 per year added to your taxes (good-bye, refund),..." The horror of the loss of your tax refund to pay back your debt.
Part of the problem is they (you) think these borrowers (aka future walkaways) are concerned about their credit rating.
Well, I'm assuming that people are concerned enough about their credit ratings that they'd rather sell for break-even and keep a good credit rating than walk away and trash their credit rating.
This guy is using an example that just loads the dice. The only way he can make that FHA rate/payment look so high compared to what the borrower has is to use a 2003-era prime credit IO ARM. But how many borrowers who bought in 2003 are even underwater yet? (They might be if they refied, but if they did they don't have that nice 2003-era interest rate any longer, no?)
My point was not about walkaways; it's about the fact that this is just an invalid example for criticizing this program. People who bought in LA, for example, at the peak and are now underwater would likely be getting a much lower payment on the FHA deal.
You can still dislike the FHA deal if you want to, but you won't convince me by making up silly examples.
If this person took out a loan that was interest-only for five years knowing they could not pay the actual amortizing amount, then the use of the word 'victim' in the second paragraph of the quoted section is not appropriate. Let's say gambler or speculator or even dope.
So LA Land has moved from actual anecdotes to hypothetical anecdotes? I dunno ... is that an improvement?
In productivity terms, yes. It's an improvement.
Every time somebody comes up with some "actual" anecdote, I have to spend hours of my life and dollars of my money rooting around in BK filings and land records proving that there's more to this story.
With hypotheticals, though, I can just make up the rest of the story. In minutes and for free.
This gives me more time to buy books at Amazon.com, which stimulates the economy.
I've seen where courts have ruled that lenders don't have legal standing in foreclosure actions owing to the securitization of the mortgages. Might this same sort of issue make it difficult for a lender to write down the principle on a loan?
That a lot of these mortgage securities were sold in 'tranches' might also mean that those holding a lower position would find their share wiped out entirely in a FHA workout. So why consent? Better to get pennies on the dollar than nothing.
I've seen where courts have ruled that lenders don't have legal standing in foreclosure actions owing to the securitization of the mortgages. Might this same sort of issue make it difficult for a lender to write down the principle on a loan?
I see you're new to this.
There is to my knowledge no court which has ever ruled that securitization of a mortgage in and of itself means that the noteholder cannot foreclose.
Some people have held that the security trustee isn't the noteholder if it can't cough up the note. That would be true of any noteholder, in or outside of a security.
Certainly, if you have just accused your lender of having no standing to foreclose because it is not the noteholder, you have some gall trying to get that lender to accept a short payoff. You just claimed that the lender is not entitled to any of your money.
Securitized loans can be worked out with a short payoff as long as the short payoff is less loss to the security than foreclosing would be. Given that loss severities in FC are 50% or worse for first liens in some markets, of course there will be cases where a short payoff in the FHA refi deal is less loss.
"Writing down principal" in the case of the FHA program we are here talking about means "short payoff."
That is, the borrower gets a refinance loan through the FHA program that isn't enough to pay off the full amount of the old loan. So the holder of the old loan accepts a "short payoff," meaning it takes less than the full amount due and releases the old lien.
These are not "modifications," where there is no new loan, just the same lender reducing the principal balance. That could happen too, but that isn't what the Hope for Homeowners thing is about.
Given the initials (HfH) and the degree of corrupt political intervention in the creation, cultivation, and defense of the housing bubble, let's call the bill what it really is...
The price measure was up 2.3 percent from June 2007, the biggest year-over-year increase since December.
This is "tampered with" nonsense. If you stop leaving out the items that have really gone up you have year over year inflation for June at 5%. 5% headed doubtless for 6 and then 7 percent. Then you've got REAL inflation. So what will Bernie do? Slam on the brakes? Or let inflation out of the bag??? We're waiting Bernie for your decision.
To continue my thought, the true victim of this tale is the buyer with the 10% down FULLY AMORTIZING loan who got outbid by this roll-the-dice IO specuvestor back in 2003 on this property.
ie. me.
But of course we know that the whole scenario is slightly off-kilter since 5 year IOs were still something of a rarity in 2003 -- they were a large driver of the market rises of 2004-2006, not the market of 2003, which was driven up by lower interest rates and lower taxes freeing up more income.
...No. But they have to convince the second lien lender to write off the second lien.
Per Housingwire
An amendment added to the bill in compromise negotiations between House and Senate leaders would apparently look to solve this problem by allowing second lien holders to share in future price appreciation, even as their existing lien is extinguished via the refinancing transaction.
Possibly such a borrower should just sell now at break-even or better
Well, this particular hypothetical assumed the buyer bought near peak and was deep underwater. There are such people in Stockton, Inland Empire, and San Diego, where some prices are back to 2001. But in any case, if all the people who bought in 2003 on toxic mortgages try to sell into the slowest market in the history of CA, the 2003 vintage will be deep underwater, and quickly.
It doesn't actually make any difference whether you use $200,000 in the example or $500,000.
The point is that you'd have to find a bubble market--any bubble market--that has seen price drops below the mid-2003 level in order to make the example work.
This is such an elementary error that I can only conclude bad faith.
my poor math says that you have reduced a $296 monthly mortgage payment increase to a $149 monthly mortgage increase, cutting the increase in half, and putting it in a fixed rate with no further adjustment.
That is a great deal for the borrower. That is indeed a bailout.
My neighborhood has dropped 28% since 2003. I'm in a cheap part of the OC and basing this on two houses that were being flipped, and recently sold to owner-occupants. Not scientific, I know...but those are my comps.
You are not on crack, CSC, you are under the influence of the stickiest of the icky. But even you saw eventually saw through all that ganja fog Lou Barnes was clouding up the room with. Now if Fair Economist could just maintain for a minute...
Allow me to poop some more knowledge in your general direction. The 2003 vintage was not the peak, not even close. Here's a nice graph of prices in LA, done by CR. Pay special attention to that lower axis, please.
I hope everyone realizes all that analysis is only about the crumbs. The meat is in the treasury guarantee. The rationale for that is:
Bailing Out the Bank of China
Now that Congress has approved the bailout of housing giants Fannie Mae and Freddie Mac, those who voted "yes" are soon going to be asked an uncomfortable question: Why are you taking money from U.S. taxpayers to bail out the Bank of China and other nations' central banks?...
What exact "Bubble Zone" was selling actual houses for $200,000? In the Bubble Days, you'd have to pay at least $300,000 in most Bubble Zones, and that doesn't even touch the worst of California, Arizona, Florida, etc.
So LA Land has moved from actual anecdotes to hypothetical anecdotes? I dunno ... is that an improvement?
We really do seem to prefer telling each other fables: "There's this grasshopper, see, and say he bought in Coconut Grove in 2006 ..."
Oh, that just gave me a good laugh! As a reader of LA Land for some time now I've found PV to be having a difficult time of fixing his perspective (on his job? his focus?) lately.
Pondering, it does not make any difference what example price you use.
Per Case-Shiller, the "low end" of the LA market is less than $400,000 or thereabouts.
So, fine. Run the same example with a $400,000 home.
You still can't make that borrower underwater yet. LA low-end prices have dropped 37% from the PEAK, which was late 2006. In order for a low-end borrower who bought in 2003 to be underwater by 25%, the drop from peak would have to exceed 60%! You'd think we'd have noticed that happening.
The sleight-of-hand here isn't in the example price of $200K. It's in picking a loan with a 2003-era interest rate and trying to claim that loan would be 25% underwater today.
It is a very strange hypothetical; the loan amount is too low to be anywhere close to an average homebuyer but you can't just double the loan amount to make the example for realistic for SoCal. I believe $400,000 was a jumbo loan back in 2003. There would have had to be a lot of points rolled into a jumbo IO to get that low rate, even at the lowest interest rate point of 2003.
Was it really possible to buy something for $200,000 in 2003?
My sister bought a condo in Orange, CA for $200K in Aug 01 and sold it for $310K back Oct 2003. Zillow sez it peaked at $450K in 2006 and is now back down to $270-$360K.
That is the basic shape of entry-level not-unsafe housing in LA.
I am confused about whether we are still talking about LA or have moved to Stockton, Inland Empire or San Diego, where Fair Economist says prices are now at 2001 levels.
I would have to see a graph for those cities to know how far under 2003 that 2001 price is. See.
$1167=just under £600. That's less than my sodding rent. Why didn't I buy a house? I mean, I didn't have any money, but it wasn't necessary or anything. Why didn't my dog buy a house? I don't have a dog; not that it would have been a problem.
I wanna know: no, there's nothing to rent for $700 in any L.A. neighborhood that I know of. And I don't recall anything selling for $200,000 or less in 2003.
I'm in western Contra Costa County, CA. We bought our 2 bed/1 ba single-family house for $361K in Sept 2002. I think if we had to sell today it would need to be at a 25% reduction of that price, or $275K.
Our house appraised (yes, by a licensed professional - heh heh) for $496K or something like that around Jan. 2006.
No, I didn't take that peak value seriously, but, no, I also didn't think prices would fall as much as they have. It's painful to think about how much work this house needs and how far we'll be underwater for quite some time to come.
Bubble zones and bongwater for breakfast in bed...
yes, butbutbut.... it's not fair that someone else pays less for the same thing. That's not the way free markets should behave! I want my free lunch!
hohoho... people who lived within their means and saved money are kinda like Santa Claus aren't they?
Are borrowers with second mortgages ineligle for the progtram? If so, I don't know how many will actually qualify for this new program. It seems like most of the people who are underwater bought properties or did cash-out refis with 100% (80/20) financing.
Part of the problem is they (you) think these borrowers (aka future walkaways) are concerned about their credit rating.
Even if they were, by the time they're looking at buying again, 4 years from now, wall street will have a "forgiving" loan product to sell them.
So LA Land has moved from actual anecdotes to hypothetical anecdotes? I dunno ... is that an improvement?
We really do seem to prefer telling each other fables: "There's this grasshopper, see, and say he bought in Coconut Grove in 2006 ..."
Well, it appears that the author is disappointed that the lord and saviour government has not returned him and the homeowner to the land of milk and 20% monthly appreciation. Imagine facing your friends day after day with the fear that they will learn that your "home" is not the blessed investment you thought. Imagine living with the fact that you are no longer in the land of appreciation and must share any future appreciation with the program that helped bail you out. Imagine the humiliation and damaged pride.
Or the pain of having to repay the First-Time Homebuyers Tax Credit out of your own pocket over 15 years (unless as he points out your a compulsive saver). "Theres a fishhook in the FHOBTAC sirloin: you have to pay it back. $500 per year added to your taxes (good-bye, refund),..." The horror of the loss of your tax refund to pay back your debt.
Part of the problem is they (you) think these borrowers (aka future walkaways) are concerned about their credit rating.
Well, I'm assuming that people are concerned enough about their credit ratings that they'd rather sell for break-even and keep a good credit rating than walk away and trash their credit rating.
This guy is using an example that just loads the dice. The only way he can make that FHA rate/payment look so high compared to what the borrower has is to use a 2003-era prime credit IO ARM. But how many borrowers who bought in 2003 are even underwater yet? (They might be if they refied, but if they did they don't have that nice 2003-era interest rate any longer, no?)
My point was not about walkaways; it's about the fact that this is just an invalid example for criticizing this program. People who bought in LA, for example, at the peak and are now underwater would likely be getting a much lower payment on the FHA deal.
You can still dislike the FHA deal if you want to, but you won't convince me by making up silly examples.
Are borrowers with second mortgages ineligle for the progtram?
No. But they have to convince the second lien lender to write off the second lien.
If this person took out a loan that was interest-only for five years knowing they could not pay the actual amortizing amount, then the use of the word 'victim' in the second paragraph of the quoted section is not appropriate. Let's say gambler or speculator or even dope.
So LA Land has moved from actual anecdotes to hypothetical anecdotes? I dunno ... is that an improvement?
In productivity terms, yes. It's an improvement.
Every time somebody comes up with some "actual" anecdote, I have to spend hours of my life and dollars of my money rooting around in BK filings and land records proving that there's more to this story.
With hypotheticals, though, I can just make up the rest of the story. In minutes and for free.
This gives me more time to buy books at Amazon.com, which stimulates the economy.
I call that progress.
I've seen where courts have ruled that lenders don't have legal standing in foreclosure actions owing to the securitization of the mortgages. Might this same sort of issue make it difficult for a lender to write down the principle on a loan?
That a lot of these mortgage securities were sold in 'tranches' might also mean that those holding a lower position would find their share wiped out entirely in a FHA workout. So why consent? Better to get pennies on the dollar than nothing.
(crickets chirping)
I've seen where courts have ruled that lenders don't have legal standing in foreclosure actions owing to the securitization of the mortgages. Might this same sort of issue make it difficult for a lender to write down the principle on a loan?
I see you're new to this.
There is to my knowledge no court which has ever ruled that securitization of a mortgage in and of itself means that the noteholder cannot foreclose.
Some people have held that the security trustee isn't the noteholder if it can't cough up the note. That would be true of any noteholder, in or outside of a security.
Certainly, if you have just accused your lender of having no standing to foreclose because it is not the noteholder, you have some gall trying to get that lender to accept a short payoff. You just claimed that the lender is not entitled to any of your money.
Securitized loans can be worked out with a short payoff as long as the short payoff is less loss to the security than foreclosing would be. Given that loss severities in FC are 50% or worse for first liens in some markets, of course there will be cases where a short payoff in the FHA refi deal is less loss.
For newbies:
"Writing down principal" in the case of the FHA program we are here talking about means "short payoff."
That is, the borrower gets a refinance loan through the FHA program that isn't enough to pay off the full amount of the old loan. So the holder of the old loan accepts a "short payoff," meaning it takes less than the full amount due and releases the old lien.
These are not "modifications," where there is no new loan, just the same lender reducing the principal balance. That could happen too, but that isn't what the Hope for Homeowners thing is about.
Given the initials (HfH) and the degree of corrupt political intervention in the creation, cultivation, and defense of the housing bubble, let's call the bill what it really is...
'Hos for Homeowners.
This gives me more time to buy books at Amazon.com, which stimulates the economy.
Now that's progress! More progress would be to create an Amazon wish list (Ritholz has one), so we can buy you shit.
The price measure was up 2.3 percent from June 2007, the biggest year-over-year increase since December.
This is "tampered with" nonsense. If you stop leaving out the items that have really gone up you have year over year inflation for June at 5%. 5% headed doubtless for 6 and then 7 percent. Then you've got REAL inflation. So what will Bernie do? Slam on the brakes? Or let inflation out of the bag??? We're waiting Bernie for your decision.
That's what I think about this whole stinking mess. Ho-Hum.
Tanta -- I have a question.
Whether in the form of Hope Now or the $300B "rescue" that was just signed, are you for homedebtor bailouts or against them, philosophically speaking?
"victim".
Wow.
To continue my thought, the true victim of this tale is the buyer with the 10% down FULLY AMORTIZING loan who got outbid by this roll-the-dice IO specuvestor back in 2003 on this property.
ie. me.
But of course we know that the whole scenario is slightly off-kilter since 5 year IOs were still something of a rarity in 2003 -- they were a large driver of the market rises of 2004-2006, not the market of 2003, which was driven up by lower interest rates and lower taxes freeing up more income.
...No. But they have to convince the second lien lender to write off the second lien.
Per Housingwire
An amendment added to the bill in compromise negotiations between House and Senate leaders would apparently look to solve this problem by allowing second lien holders to share in future price appreciation, even as their existing lien is extinguished via the refinancing transaction.
Housing Bill Adds Second Lien Amendment; DAPs to Be Eliminated : HousingWire || financial news for the mortgage market
Where is this place in LA where you can rent for $700?
Was it really possible to buy something for $200,000 in 2003?
"However, her payment will jump from $871 to a killing $1,167."
Perhaps someone who can't afford a $1167 mortgage payment shouldn't have been buying in the first place.
The writedown is to 87% of current value, not 90%. The writedown has to cover the 3% upfront FHA guarantee fee.
The LA Times writing about a $200k home purchase in 2003? Excuse me...
HAHAHAHA!
Why not just make up totally unbelievable scenarios to analyze? Oh wait, he did.
Possibly such a borrower should just sell now at break-even or better
Well, this particular hypothetical assumed the buyer bought near peak and was deep underwater. There are such people in Stockton, Inland Empire, and San Diego, where some prices are back to 2001. But in any case, if all the people who bought in 2003 on toxic mortgages try to sell into the slowest market in the history of CA, the 2003 vintage will be deep underwater, and quickly.
It doesn't actually make any difference whether you use $200,000 in the example or $500,000.
The point is that you'd have to find a bubble market--any bubble market--that has seen price drops below the mid-2003 level in order to make the example work.
This is such an elementary error that I can only conclude bad faith.
There are such people in Stockton, Inland Empire, and San Diego, where some prices are back to 2001.
And the 2001 prices were 25% less than the 2003 prices?
$871 to $1,167 is a "killer"
$1,167 to $1,020 is "better by a little"
my poor math says that you have reduced a $296 monthly mortgage payment increase to a $149 monthly mortgage increase, cutting the increase in half, and putting it in a fixed rate with no further adjustment.
That is a great deal for the borrower. That is indeed a bailout.
My neighborhood has dropped 28% since 2003. I'm in a cheap part of the OC and basing this on two houses that were being flipped, and recently sold to owner-occupants. Not scientific, I know...but those are my comps.
Wait...I wish I could edit that. We have not dropped 28% below 2003 levels. I'm on crack. Sorry for the confusion.
We have dropped 28% off of the highs, which came long after 2003.
You are not on crack, CSC, you are under the influence of the stickiest of the icky. But even you saw eventually saw through all that ganja fog Lou Barnes was clouding up the room with. Now if Fair Economist could just maintain for a minute...
Allow me to poop some more knowledge in your general direction. The 2003 vintage was not the peak, not even close. Here's a nice graph of prices in LA, done by CR. Pay special attention to that lower axis, please.
I hope everyone realizes all that analysis is only about the crumbs. The meat is in the treasury guarantee. The rationale for that is:
Bailing Out the Bank of China
Now that Congress has approved the bailout of housing giants Fannie Mae and Freddie Mac, those who voted "yes" are soon going to be asked an uncomfortable question: Why are you taking money from U.S. taxpayers to bail out the Bank of China and other nations' central banks?...
Political Diary - WSJ.com
Shnaps: Your graph link did not work. Could you please repost?
Try this:
Calculated Risk: Case-Shiller Tiered Price Indices
You know what I want to know?
What exact "Bubble Zone" was selling actual houses for $200,000? In the Bubble Days, you'd have to pay at least $300,000 in most Bubble Zones, and that doesn't even touch the worst of California, Arizona, Florida, etc.
Re: threetorches
So LA Land has moved from actual anecdotes to hypothetical anecdotes? I dunno ... is that an improvement?
We really do seem to prefer telling each other fables: "There's this grasshopper, see, and say he bought in Coconut Grove in 2006 ..."
Oh, that just gave me a good laugh! As a reader of LA Land for some time now I've found PV to be having a difficult time of fixing his perspective (on his job? his focus?) lately.
looks like 2001-ish is 25% below 2003.
Pondering, it does not make any difference what example price you use.
Per Case-Shiller, the "low end" of the LA market is less than $400,000 or thereabouts.
So, fine. Run the same example with a $400,000 home.
You still can't make that borrower underwater yet. LA low-end prices have dropped 37% from the PEAK, which was late 2006. In order for a low-end borrower who bought in 2003 to be underwater by 25%, the drop from peak would have to exceed 60%! You'd think we'd have noticed that happening.
The sleight-of-hand here isn't in the example price of $200K. It's in picking a loan with a 2003-era interest rate and trying to claim that loan would be 25% underwater today.
looks like 2001-ish is 25% below 2003
Where does it look like this?
It is a very strange hypothetical; the loan amount is too low to be anywhere close to an average homebuyer but you can't just double the loan amount to make the example for realistic for SoCal. I believe $400,000 was a jumbo loan back in 2003. There would have had to be a lot of points rolled into a jumbo IO to get that low rate, even at the lowest interest rate point of 2003.
Where does it look like this?
mid-01 looks to be at ~120, and mid-03 looks like ~170 for the blue line.
mid-01 looks to be at ~120, and mid-03 looks like ~170 for the blue line.
Are we still looking at LA?
Was it really possible to buy something for $200,000 in 2003?
My sister bought a condo in Orange, CA for $200K in Aug 01 and sold it for $310K back Oct 2003. Zillow sez it peaked at $450K in 2006 and is now back down to $270-$360K.
That is the basic shape of entry-level not-unsafe housing in LA.
Are we still looking at LA?
that's what i was looking at, and i'm pretty sure that's what arw was looking at.
I am confused about whether we are still talking about LA or have moved to Stockton, Inland Empire or San Diego, where Fair Economist says prices are now at 2001 levels.
I would have to see a graph for those cities to know how far under 2003 that 2001 price is. See.
But it doesn't matter what the difference is between 2001 and 2003 in LA, because they haven't even fallen to 2003 levels yet.
But it doesn't matter what the difference is between 2001 and 2003 in LA, because they haven't even fallen to 2003 levels yet.
i know that, i was just pointing out what arw was looking at.
Some properties hanging on, but leading edge is falling...
1963 West GREENLEAF Ave Unit C, Anaheim, CA 92801 | MLS# P657890
Asking price: Price: $199,000
Sales History Property Tax
Date Price Appreciation
Jul 03, 1995 $102,000 --
Dec 24, 1998 $100,000 -0.6%/yr
Dec 12, 2003 $255,000 20.7%/yr
Oct 24, 2005 $420,000 30.6%/yr
$1167=just under £600. That's less than my sodding rent. Why didn't I buy a house? I mean, I didn't have any money, but it wasn't necessary or anything. Why didn't my dog buy a house? I don't have a dog; not that it would have been a problem.
I wanna know: no, there's nothing to rent for $700 in any L.A. neighborhood that I know of. And I don't recall anything selling for $200,000 or less in 2003.
I'm in western Contra Costa County, CA. We bought our 2 bed/1 ba single-family house for $361K in Sept 2002. I think if we had to sell today it would need to be at a 25% reduction of that price, or $275K.
Our house appraised (yes, by a licensed professional - heh heh) for $496K or something like that around Jan. 2006.
No, I didn't take that peak value seriously, but, no, I also didn't think prices would fall as much as they have. It's painful to think about how much work this house needs and how far we'll be underwater for quite some time to come.
[Are borrowers with second mortgages ineligle for the progtram?
No. But they have to convince the second lien lender to write off the second lien]
I haven't read the whole bill yet.
However, I had thought that a last-minute provision allowed seconds to join the back-end equity share with FHA.
Can anyone confirm that?
That scenario may not work for LA, but it sure as heck works for Detroit, where Case-Shiller shows prices down over 20% from 2003 numbers.
You'll notice Tanta never answered my question about whether she's for or against bailouts.
Hmmmm.