Years ago, didn't you gets some FHA premiums back? (Premia?) Seems to mre--this was the 80s now and long and long ago, if the risk pool you were asigned to didn't have many losses, after some number of years you got some money back when you paid the loan off?
Those are the days when dinosaurs ruled the earth and at least some underwriters tried to do a good job.
Fraud still existed tho. I remember at one closing, I needed a piece of paper to scrawl something on. There appeared to be a blank one and I picked it up to see if the other side had something on it. Yep, it shure did. It was a note back to the Seller. Everybody acted very embarrassed, 'cause they weren't supposed to do that. Frankly I don't remember what I did; it was 25 years ago.
Now there's a mental image I can appreciate ... Sheila Bair storming Congress on a Friday with an army of FDIC agents, declaring it a "failed institution".
I volunteer to take down the web site and replace it with a new one !
Years ago, didn't you gets some FHA premiums back? (Premia?) Seems to mre--this was the 80s now and long and long ago, if the risk pool you were asigned to didn't have many losses, after some number of years you got some money back when you paid the loan off?
I think you are thinking of "UFMIP netting."
There are two kinds of FHA premiums you pay: an up-front lump sum premium that is usually financed, and a monthly pay-as-you-go premium.
Borrowers who refinanced an FHA loan into a conventional loan used to be able to get a refund of pro-rated UFMIP. You never got a refund of monthy premiums. The refund of UFMIP in this case is no longer allowed.
If you refinance an FHA loan into a new FHA loan, you can get a credit of prorated UFMIP from the old loan to apply to the UFMIP on the new loan in some cases. (Depends on when the original loan was made and all kinds of complicated shit.) But you can't get an actual cash refund of UFMIP paid.
Sorry for OT but wondering if anyone else is getting an "operation aborted" window after pulling up up ml-implode.com - my tin-foil-ier half is wondering if this is a hack...
/OT -- You just can't describe this as an 'entitlement program' without irony. The only people this seems to entitle are re-shearers of the sheep.
I guess my wager on DAP was a sure thing. Took them only 15 minutes to bend to builders, real estate lobbies, and DAP companies' request. Simply amazing.
Apparently, it's not good enough for Congress that any borrower who makes two years or so worth of on-time mortgage payments (and, um, isn't upside down) can qualify for a streamlined FHA refinance that would lower the monthly insurance premium to the level of a "good credit" borrower.
actually, you can be upside down. there's no appraisal required for FHA to FHA streamlined refis.
On the page loading failure OT, I went and found a good host file (being technically semi-literate) which has allowed me to view all the blogs that were 'bonking'...
Alternatively, one could follow Misean's ...mumble grumgle eff'n Firefox grumble mumble... advice, this seems to be limited to IE users.
Maybe I am not following. Is the FHA insuring GSE loans? The government (taxpayer) selling insurance to the government (taxpayer)? Sounds like a shell game. The rube is the person in the mirror.
GSEs report this week. Could be fireworks, for the financials. They have been way too optimistic with their loss assumptions/projections...
Damn, if these people ever lose an election, they can always start writing material for Jon Stewart.
What a country. We mindlessly spent our way into this mess and we'll damn well mindlessly spend our way out of it! I can just hear Ronald Reagan making that courageous speech at the Mall of America.
Connecticut has one of the best educated populations in the country and yet they elect some of the biggest idiots in Congress.
While "Mad Max" Waters is in a safe House seat, Chris Shays (R) is in a Democratic district and very vulnerable this November. He's going to flip like a pancake if any constituents raise hell.
Anyone in CT please call this clown and let him get a whiff of burning kerosene and pitchforks.
actually, you can be upside down. there's no appraisal required for FHA to FHA streamlined refis.
OK, I changed that to "standard" refi. Which term is a bit vague but I'm not getting into FHA refi details today.
I was under the impression that you could do a streamlined-with-appraisal and reduce the risk-based premium on the new loan under the new LTV/FICO-based premium structure. But apparently you can only do that under a full-qualifying rate/term. Sorry about that.
My point with reference to upsidedownness was not that FHA borrowers can't refi if they're upside down; I didn't mean to give that impression. I meant to point out that they can lower the premiums they are paying if their FICO and/or LTV improves from origination of first loan to origination of refinance. If those things don't improve, they can still refi but their premiums would be based on the terms of the old loan.
Thanks Weather Helm. I clicked on that, but it wasn't really helpful.
It assumes one has attained some degree of literacy.
I don't really understand what a browser is. I guess from context it is something that allows you to access the web.
You are talking to someone who computer-wise, doesn't know her ABCs. She's heard that letters exist and they are helpful in all kinds of ways, but that's about it. I have a way to go to become illiterate.
I suppose I need something aimed at kindergardeners. Nope. They're ahead of me. 3 year olds.
Maybe I am not following. Is the FHA insuring GSE loans?
No. FHA insures FHA loans. Conforming conventional loans--the speciality of the GSEs--are either 80% or less LTV with no insurance or they are insured by private mortgage insurers.
Tanta, are you talking about the new housing bill or something that exists aready?
Since virtually no lending is available in South Florida, I think I'll be advising future clients, they have 2 choices--FHA, and hard equity lenders. (And oh, yeah, there's the VA, too.)
Can you cash out in this type of loan?
It's fair, I think top have the premia credit; after all, unless you cash out or raise the balance by financing closing costs, no new risk is involved.
LL, Tanta - OT: host file does some helping/tranlslation to get to a web page when you are online, IE is the blue e lots of people use to go to web pages and is included with windows, Firefox/Mozilla/fox fire is a better program for going to web pages, it is free and safer to use
On topic- We have the best congress money can buy, and they will stop at nothing to keep things the way they were. Remember, all they have to do is keep patching the holes so the bubble can hold air again. Then it will all be fine once more, long live the ownership society.
I really don't know what "cruise the interwebs" means. I do it, but I don't know how or what's happening. It's as if a boat didn't know what water was.
P. S. I wish I were a grandma, but the kids aren't cooperating yet.
Lawyerliz, the new FHA risk-based premium schedule didn't go into effect until this year (the one with the LTV/FICO grid).
So there wouldn't be older loans that paid those higher premiums. Therefore, people with older loans would probably just want to do a regular old streamlined refi, because they have no need to try to lower their premiums.
It will be when these new FHA borrowers who pay the risk-based premium go to refi at some point in the future that they might be able to lower their premiums.
People are extended credit on the basis of various assumption. Character and some basic intelligence are core fundamentals. This latest action calls into question the creditworthyness of the US goverment.
I believe Lawyerliz was thinking of FHA "distributive shares." Remember FHA is supported by something called the MUTUAL mortgage insurance fund. Long ago (pre 1990) after several years had passed, if it looked like an annual cohort of loans was going to be "profitable" FHA would pay back a portion of the premia paid in by borrowers from that cohort. In other words, the succesful 1977 mortgages still supported the unsuccesful 1977 mortgages, but if 1977 was a winner overall the 1977 winners could get a little bit back, and 1977 winners didn't support 1980 losers. That was the "mutual" part of FHA insurance. It's still in the law, but the Secretary had the right to suspend it, which happened back about 1990, and no one has ever wanted to unsuspend it.
No one should be surprised that Congresscritters want to bring this back. As I've urged several times before, if you really want to lose your lunch just go the House Housing subcommittee (I think, maybe it's the Banking and Urban Affairs committee) site at house.gov, look at hearings, and watch the video on the DAP hearings held in July of last year.
I expect the DAPs will lay low for awhile, but their PR machines will still be cranking out press releases and sending shills to blogs to blather about distorted statistics for awhile, and that a big push to revive them will come next spring with a new administration, a new Senate, and a homebuilding sector deep in the doldrums.
Among other big problems this country has, the extremely entrenched tendency to use higly personal and judgemental language, which in addition is completely free of insight as to cause, when discussing the activities of the federal government is a significant contributor to our complete lack of ability to make useful change.
In plainer language, 1) blaming individual members of congress as if there actions spring from the void, and 2) doing so in derogatory and insulting language is neither helpful, nor frankly insightful.
The idea that congress 'just does stuff', out of the blue, for no reason, other than there is quite frankly naive and more importantly does not provide insight into why and how the american political situation is what is. We have seen this kind of commentary for years now with regard to the administration, who we are routinely informed by certain parties, are 'stupid', and 'incompetent'. Left unexplained in such analysis is why and how a bunch of stupid incompetent people are in control of the most powerful institution in the world.
In this particular case, the idea that a bunch of congress-people just up and did something out of thin air, is quite frankly naive. Congress doesn't 'just do stuff'. Congress does things because some group of people have convinced them that it is in their interests to do so. The fact, and it is a fact, that it has become common place for congress to do things that are not in the best interests of the general citizenry, but rather in the best interest of some powerful economic actor does not show that the individual congress people are rather it shows that this country has given up any interest in, belief in, or valueing of, the common good, and has instead come to believe that the role of government is to make the world safe for large corporate interests. Golly, you think maybe there's some real estate, or mortgage lending group that believes (rightly or wrongly) that it is in their interests to have DAPs? hmmmm, sure seems likely.
Your diatribe would be much more helpful, and in closer harmony with the truth, if you directed it at the actual agents responsible. If such a direction led you to begin to question the entire modern arrangement of government, in which billions of dollars are spent attempting to manipulate congress, (such as for example fannie and freddie's lobbying -- using taxpayer paid for resources to manipulate the the legal process for the private gain of individuals in control of those corporations), we might actually begin to change something.
In any event, knee jerk blame of proximate causative actors is no more insightful than the knee jerk printing of the talking points of spin meisters so prevalent in other publicly presented material.
Whatever the delinquency rates, wait till you see what the elimination of daps does to further drive down home sales. In my market (suburban PA, halfway between Philadelphia and NY) we've been screwed by the increased FNMA/FHA limit only going up to 420k from 417k. Houses in the 5's, 6's, 7's are flat out not moving because the rates are so unaffordable relative to conventional and fha rates. And, below 420k, in this particular market, you are usually talking about 1st time homebuyers and middle class families. We seem to be turning down lots of people who fit one of two classes:
Class 1: Great credit, lots of money to put down, can't verify income....dead deals today. No lenders around who will even do 80 percent no doc loans at a premium.
Class 2: Bad to average credit, FHA candidate verifiable income, no money. Needs DAP or family gift. Without DAP, these folks are renters.
No one thinks that 100% no doc or stated deals are a good idea. No one things giving FHA loans to people who are going to go bad immediately are a good idea. Just understand the implications...this decision will make a bad situation much worse when it goes into effect.
FINALLY, ERROR MESSAGES WE CAN ACTUALLY UNDERSTAND
Old Bill
I was having trouble with my computer. So I called Bill the computer guy, to come over. Bill clicked a couple of buttons and solved the problem.
He gave me a bill for a minimum service call. As he was walking away, I called after him, "So, what was wrong?" He replied, "It was an ID ten T error." I didn't want to appear stupid, but nonetheless inquired, "An, ID ten T error? What's that .. in case I need to fix it again?"
Old Bill grinned.... "Haven't you ever heard of an ID ten T error before?"
"No," I replied.
"Write it down," he said, "and I think you'll figure it out."
So I wrote down . I D 1 0 T
I used to like Bill.
Organizers were scrambling to arrange bus rides for participants who needed to get to the airport in Vancouver for Friday flights all over the world. Most were finding seats on buses travelling to Vancouver via Lillooet.
As if that wasn't enough, things got more chaotic Thursday afternoon when a truck hit a nearby transmission station and the Westin lost electrical power.
Still, "It was still totally worth it," said Cheveol Pascal, who came to Whistler from France. "We still have Internet access, although I only have 20 minutes left on my battery."
It seems like there are two reasons for having/requiring a downpayment:
to ensure that if the house value dips just a bit (10% or so) that the potential for walkaway defaults is reduced
to ensure that the buyer has good financial habits - has saved some money for down payment, and understands the contractual committment they are entering into. A contract is a contract, and should mean intention to carry it out.
Downpayment assistance, depending on the source of the assistance, gets around both objectives. Even in the case of a gift/loan from the buyer's family, the 'obligation' seems weak. It is non-existent if the payment is coming from the seller.
There is NO reason for the government to prefer/encentivize home 'ownership' over renting, especially as a way of creating a financial investment (prices always go up). Homes are housing, and nothing more.
The turmoil that has been created by the crazy 'finance' programs for ownership hurts every US resident/citizen and it isn't worth the positive aspects of 'owning' a home. The phrase 'home ownership' is propaganda, when most people never actually own their dwelling.
I'm madder than hell that we keep on making what should be a low-key aspect of life (entering into a purchase contract for a house that will only be paid off in decades, if at all) as the center of the nation's financial life. I'd forbid securitization of mortgages. Banks should lend only what they have in the way of deposits that are long term. F**k the money lenders in the temple courtyard and their fraudulent practices and usurious ways.
So if I don't have any car accidents while I own my car, can I get my car insurance premiums back when I trade in the car? And my house hasn't burned down, so can I have my fire insurance premiums back? And if Congress passes a law that says we're all immortal, do we get all our life insurance premiums back? 'Cause if we do, I'm gonna get some life insurance.
you make the comment that, without DAP 'these people are renters' for your second class of applicants routinely denied credit, as though there is something wrong with being a renter.
The old paradigm--the ownership society--was premised on that belief. And maybe that belief makes some sense, at some level, if you take the mortgage out of the picture. But a mortgaged house is a mortgaged property and not owned the same way something the occupier can stay in as long as the taxes are paid, without a monthly installment coming due on a note, is owned.
But it's a lousy basis for policy.
Big believers in capitalism and the free market--most of the realtors and home builders, all of the mortgage originators, packagers and distributors--should, if they are honest, welcome an unfettered price discovery process, complete with the inevitable overshoot, that destroys those sectors of the economy as they currently exist and creates the opportunity in the ruins and destruction to create new enterprises and amass new fortunes, by meeting the needs of society as expressed through the market choices of a the public composed of free individuals.
I think Freidrich Hayek called it the creative destruction of capitalism, though his sentences were twice as long as that one. Most people don't have the stomach for it. And bonus driven winners driving leased luxury imports go from winner to whiner in about 4.1 seconds when the concept is applied to people living in Tribeca rather than in Flint, Michigan.
Um, One who knows - who ever said houses in the '5's, 6's, 7's' should be "affordable"? If the buyer can't afford the loan - guess what? Don't buy!
Your implicit premise is that being a renter is inferior to being a housedebtor, which, if you've been paying any attention, isn't particularly tenable on this site.
To reverse the "Driving down (of) home sales" is also not a rational reason to Frankenstein DAP. First, it's a house, not a home. Second, if - when - prices drop to affordable levels, houses WILL sell. Third, putting a buyer's skin into the game is proven to reduce the percentage of foreclosure.
VFTW
If I understand you correctly, are you saying: Congress is populated by evil and stupid perverts. But let's not hurt their feelings in case their wives and mothers read this site?
I would not mind gifts as part of a down payment on one condition. The giftor co-signs the note and carries it on their balance sheet as a contingent liability.
It would add a measure of true risk which might lead to a higher level of responsibility.
The honey pot idea of so-called non profits and NGE's is simply politics.
We should prepare for the greatest wealth re-distribution schemes since FDR.
So would this work like a return of premium insurance policy? That would mean higher rates and a poor return on the premium refunded. On the face, a much more regressive policy
"Left unexplained in such analysis is why and how a bunch of stupid incompetent people are in control of the most powerful institution in the world."
Good people skills. This is why personable idiots rise to the top and brainiacs do not.
IMO, most human institutions (schools, churches, governments) and the social rules they spawn are designed by and for the majority - people of average intelligence. The brightest people are outsiders who have to fight to get their needs met and are less likely to obey social rules. They cause (gasp) conflict.
Watch any political campaign and you'll see it in action. Campaigning is not about who's smartest, it's about people skills. Voters don't plan to vote for somebody smarter than they are. They vote for somebody they relate to.
I've seen it over and over. Happy shiny people rising to the level of their incompetence while their smarter, abler peers do all the work.
My new aspriation is to become a low income, bad credit DAP qualifier. With my new low income status I will not have to pay for my food or utilities. Within the next 6-12 months there will probably be a new "charity" that will make my past due mortgage payments current for me and also pay all my future mortgage payments. I will then be free to spnd all my low income that I will earn on hairdos, nails, cell phones, and shiney new rims for my car. This will also free up my time to whine loudly, publicly & elouquently about my sorry plight. With any luck, I can then become an elected Congresswoman to make sure the freebies continue. I live in a great country!!!! ( sarcasm)
it has become common place for congress to do things that are not in the best interests of the general citizenry... and has instead come to believe that the role of government is to make the world safe for large corporate interests.
Thoughtful analysis, but just how do we cut off these large corporate interests (who have bought our government) without first throwing out their tools in Congress?
Your argument seems circular - it's not really Congress's fault that they're bought and paid for - it's the pigmens' fault. But unless we elect a government that stands up to the pigmen, and says "enough!", we're going to be stuck in this situation for a long time.
The first step is to get people to look beyond typical left/right Dem/GOP divisions. These divisions are a diversionary tactic, or a "divide and conquer" strategy used by empires to keep the people from rising up and claiming their government back.
Left unanswered is why I would feel more connection with disenfranchised losers than with the corporate interests that pay my salary, dividends, etc, and which I own small chunks of via equity and who owe me money via bonds. Of course, I'd like to find a better way to handle the "agency problem" and have management slaving away exclusively for me rather than themselves, but that's an entirely different issue. Back on point, I perforce feel little solidarity with minimum-wagers and the unskilled.
Steve Pearlstein had a great column in the Wash post yesterday. He seems to be on a roll - nailing the root causes of a lot of our problems.
Specifically, "As market failures go, however, few have been more spectacular than the massive misallocation of credit and mispricing that led to the giant housing and credit bubble of recent years.
These bubbles had their roots in deregulated credit markets that were hailed as models of innovation and market-driven efficiency. Now that the bubbles have burst, it is more than a bit ironic that government has had to step in to rescue the markets from their excesses and prevent a meltdown of the financial system. And it is simply outrageous that in the past few days, free-market apologists have tried to divert attention from the colossal screw-ups by builders, bankers and hedge fund managers by trying to shift the blame to two government-sponsored enterprises, Fannie Mae and Freddie Mac, which had only a minor role in the subprime debacle."
Most commenters here on CR love to bash the poor subprime slime and flippers but seem to be less critical - in general - of builders, bankers, and hedge fund managers. I believe in personal responsibility too. The individual home buyers and speculators share the blame, but they only used the tools (easy money and lax due diligence) that were given them. In America, our capitalist values tell us to pathologically pursue profits so these home buyers did what they've been trained to do by free market types for 30 years. It is this profit at all costs ethic that is destroying the financial system, not some silly down payment assistance program for poor folks. We are now seeing the costs of this ethic - corruption at all levels of the financial system have created havoc. When will we learn this lesson?
to be less critical - in general - of builders, bankers, and hedge fund managers
Are you kidding? I don't know of a single non-Tanta thread where commenters don't talk about SRS and SKF. Show us a way to short "poor subprime slime and flippers" and we stop bitching about them.
THE businessman arrived at the United States Treasury Department carrying a suitcase stuffed with about US$5.2 million in petrified, nearly unrecognizable bills. He asked to swap it for a cashier's check.
I think you mean DPA (down payment assistance). The effect of the bill would still do away with DPA, and replace it with a risk based insurance premium for financing up to 100%. The deadbeats would still not qualify. Currently ALL borrowers are lumped into the same risk pool and pay the same amount. As long as the risk premia are adequate this is a good idea. It is the same thing that the private mortgage insurers do.
Most commenters here on CR love to bash the poor subprime slime and flippers but seem to be less critical - in general - of builders, bankers, and hedge fund managers.
What do you expect when the hosts of the site are Countrywide shills and the like? I expect the term 'pigmen' is one of affection, like mortgage pig.
I think instead of bemoaning the rebirth of DAP, we should be looking at setting up organizations so that we, too, can feed from this trough of free money. I plan on using Misean's four sentence counseling program.
I used to believe that all it would take was "people ... rising up and claiming their government back" until I realized the only folks involved in local governance issues were those who could afford to make it to the various meetings held between 9-5. They could afford to get to the meetings because they didn't have to be at work.
In the last year, I've missed three public meetings that I very much wanted to attend. I'm not my own boss and while I do have a great deal of flexibility, I can't be out of office for hours.
Government seems to be slipping further and further out of our hands, assuming it was ever there to begin with.
FT Woods - good point. And yet so many admire the workaholics who stay at the office till 8:00 pm or later. Was a badge of honor for some of my friends when I worked in DC. Society can't function when people don't have time or energy for family or civic duties.
"Golly, you think maybe there's some real estate, or mortgage lending group that believes (rightly or wrongly) that it is in their interests to have DAPs? hmmmm, sure seems likely."
Yep, like, for example, the Holy Trinity Church of Chicago, handing out DAPs to constituents from grants recieved via the USG. Something no one wants to even mention.
Posted yesterday, but appropriate here. Sent the following to my Representative, Barbare Lee (D-(Oakland) CA),
While there is probably a time for the DAP, it is not now!
Nearly everyone who received a DAP benefit in the last three years (especially in CA)now is in far greater debt than they ever imagined they could be. If they haven't lost their home already, they are in danger of losing both it and their credit rating (which will affect their ability to rent when they do lose their home).
The same is very likely to apply to those who buy a home in CA using a DAP during the next few years. Home prices are still dropping and if history is followed they are not likely to stabilize for several years. For example, check out:
REBear - yes there is talk bashing builders etc, but I think the general tone of the comments here blame the individual home buyers rather than the easy money that enabled them. I have a friend who works for WaMu and he finally started getting defensive about his company's role. He said the Wall Streeters were forcing them to move the money at any cost. He claimed they were driving the money flow to subprime slime.
And, of course, stdfs wrote: What do you expect when the hosts of the site are Countrywide shills and the like?
So there is some disagreement on this issue. Thanks for replying to my posting.
Kid Clu writes:
My new aspriation is to become a low income, bad credit DAP qualifier. With my new low income status I will not have to pay for my food or utilities."
Sorry, but I doubt "those" people you envy would appreciate your sarcasm. If you think they're living life better than you are, then you're either stupid, blind, or bigoted. I suspect the latter--and your handle "kid clu" reminds me of the klu klux klan.
The real problem we have had is the financing system. The system generated enormous rewards - hundreds of thousands for homeowners, millions for RE professionals, billions for financiers - to perform actions that only very financially astute individuals would recognize as foolish or fraudulent. The core has been these insanely complicated high finance deals that take a PhD of work to understand. It's crazy to expect people to behave properly under that kind of pressure.
Paul, IMO (which is not worth much), the fault lies with the people and their representatives. I take it as a given that everyone is ready to succumb to the rewards of fraud whenever the opportunity is presented to them. In order to prevent that, you must have regulation.
What this country needs, but will never get, is a coherent and rational national policy or strategy for housing. We need the same for manufacturing, energy, yada yada.
Everyone has abrogated responsibility in the name of the invisible hand. As a result, everyone is gaming what passes for a system in this country.
The idea that Americans might suffer any pain is so abhorent to professional polticians that they are prepared to do any crazy thing to try to fend it off. This is a sort of the political version of that drug that Limbaugh, the reactionary radio guy got hooked on (I have blotted out the name of the drug for some reason. Is it drug oxycontin or something like that?).
Actually, to get the representatives from urban minority neighborhoods to stop seeking this kind of program, you need a different kind of leverage.
Community organizers, and the kind of churches and temples that actually run soup kitchens, are behind this because they believe that home ownership is a route out of poverty for working people.
In this case, industry is selling them and the people they try to help down the river.
Get the leaders in the neighborhood to believe that down payment assistance is a trap, and it will be harder for Ms. Waters and others to support it.
By the way, in this economy, we are likely to need soup kitchens and tent cities. It's better not to trash the people who give money and time to provide them.
The Mortgage Bankers Association (MBA) released its Weekly Mortgage Applications Survey for the week ending July 25, 2008. The Market Composite Index, a measure of mortgage loan application volume, was 420.8, a decrease of 14.1% on a seasonally adjusted basis from 489.6 one week earlier. On an unadjusted basis, the Index decreased 13.7% compared with the previous week and was down 30.3% compared with the same week one year earlier.
The Refinance Index decreased 22.9% to 1074.4 from 1392.7 the previous week and the seasonally adjusted Purchase Index decreased 7.8% to 309.5 from 335.6 one week earlier. The Conventional Purchase Index decreased 7.1% while the Government Purchase Index (largely FHA) decreased 9.5%.
To follow on from my comment above, I've read conservative writers who will tell you we should have no FDA. They say that the "marketplace," the "invisible hand" will ensure--in the long run-- that food and pharmaceutical companies make "good" products.
The problem is, in the short run, thousands will die because of tainted food and pharmaceuticals.
Site problems. Just hit the stop button as soon as the page loads. you have to be fast. Then no problem.
I have had the displeasure of meeting Maxine Waters several times, years ago. She is racist and hates the police. her understanding of complex issues is very limited. imo.
I dislike getting drawn into political discussions but this is one of those few cases where there is a simple and obvious source of so many of these problems of governance; redistricting. The lack of competitive districts has resulted in the likes of Maxine Waters and pretty much any other pure partisan safe seat holder. I give you Laura Richardson. Failing apolitical districts maybe incumbency should require 55% then 60% and finally 65% for subsequent reelection.
I was watching a pretty interesting segment of Anderson Cooper last night, and there was an "expert" who said very simply: "The fundamental question facing the U.S. today is...are we willing to take short-term pain for long-term gain?"
Of course, they debated the question for half an hour. But it wasn't necessary. The question said it all.
In a mature democracy with so many diverse interests, I think the answer has to be...half.
Half short-term pain.
Half long-term gain.
Split it down the middle.
Of course, it's not split down the middle now. It's way slanted to short-term gain and long-term pain.
But change is a comin'. The people on this board are smarter and more articulate by a lot than the average. But they really aren't that far out of the mainstream.
The problem is...half short=term pain is gonna feel awful to tens of millions of people. Including a lot of stock market investors, I'm afraid.
I suppose this can be made to work--just increase the premiums so that the losses will be covered by the interest on the escrowed premiums instead of by the premiums themselves.
Oh, wait, that wouldn't be "affordable" any more....
mp wrote: To follow on from my comment above, I've read conservative writers who will tell you we should have no FDA. They say that the "marketplace," the "invisible hand" will ensure--in the long run-- that food and pharmaceutical companies make "good" products.
Thanks for your thoughts. I happen to work for Pfizer as a process engineer in a drug manufacturing plant. Most of us will do the right thing when it comes to patient safety. The FDA has created a framework for good manufacturing and lab practices. The danger in pharma comes from the non-scientist business side. They have no perspective on safety issues and will, as I said earlier, pathologically pursue profits at any cost. This is how you get supply chains that stretch to China where they have no problem adulterating stuff to make money. Google "heparin poison China" for good examples. There is no business ethic in America. This housing crisis has proven that.
So the Housing Bill is passed - and FHA got their wish - to axe the Seller funded downpayment assistance program. Which is a very large part of the current sales activity in the market. Because of claims about "possible" losses.
Once again - how about some math and real facts to support the claims?
From FHA - as of June 30:
Total Active Portfolio - 3,896,389 loans - Foreclosures total 58,876 - which makes the total foreclosure rate is 1.51% currently on the entire FHA portfolio.
The FHA added 68,588 new loans in June 2008, an annualized rate of appx 823,000
Various reports claim a foreclosure rate 2 times higher on the loans with Seller downpayment assistance and that appx 30% of FHA loans are current originated using Seller funded downpayment assistance.
At 30% - there would be appx 247,000 new loans this year that used Seller DAP.
The regular foreclosure rate of 1,51% on these loans would equal 3,728 foreclosures normally. With a doubled foreclosure rate of 3.02% on loans with Seller DAP appx 3,728 additional foreclosures would occur on this pool over the year. This represents just 0.45% of the total number of new FHA loans for the year.
Using a median home price in the US in June 2008 of $215,100 that would represent $801.99 million in additional loans foreclosed due to Seller DAP. The FHA loose appx 25% as each of these loans are sold after foreclosure - which would mean on these additional 3,728 foreclosures over the next year a total loss of $200.49 million.
So - 247,000 homeowners are helped overall by the Seller downpayment Assistance Program. A total of 3,728 over the standard foreclosure rate for all loans with and without downpayment assistance would be foreclosed out of these 247,000.
Which means 243,000+ homebuyers were helped by the Seller downpayment assistance program who were NOT foreclosed.
The total costs to help those 243,000+ homeowners is appx $200 million (the loss on the additional foreclosures due to the program.) If we divide $200 million by the total 247,000 loans that received Seller DAP this loss comes out to $812 per loan. Why would we NOT simply increase the FHA mortgage Insurance premium for Seller funded Downpayment assistance loans by $812 - and continue to help the 99.55% of people who used the Seller DAP and did not get foreclosed?
More ridiculous yet - the FHA MIP is financed - added into the loan. At 6.75% interest over 30 years that $812 costs $5.97 per month
The Seller DAP helps people buy homes. Some will default, and at a higher rate than loans without it. Instead of simple rational effort to assess those costs to benefiting borrowers - who would gladly trade $812 in insurance premium for their downpayment - we throw out the entire program.
Why is it smart folks - with excellent insight - like Tanta and Calculated Risk - do not make the effort to drill down to the facts regarding these issues?
Don't these people pay income taxes? -
Fair Economist
Yes and no. When you have self employment income or operate on a cash basis, it tends to be in your best interest to pay an accountant large sums of money to reduce your tax exposure (via legal deductions.) A good accountant can save you a bundle on taxes but doing so lowers your income down to a point where it really limits what loans you qualify for.
So, it isn't that those people don't have the income, it is that their accountant has reduced it via deductions for tax purposes. In order to qualify for larger loans they have to go stated income and pay a higher interest rate, otherwise the lender looks at the taxable income line on their 1040 and limits the loan amount based on that.
Excellent post, VoiceFromTheWilderness. There needs to be a lot more depth and critical thinking about the cause of these issues than simple self righteous ranting.
Anti congress people ranting is utterly simplistic and, in fact, stealthily supports the status quo in the current, badly broken system in that it individualizes the complaint instead of attacking it at its root, THE SYSTEM.
When a lawyer has a dirty client, he/she attacks the system--same with lawyers turned pols. The difference is in scale--not morality. The defendant/pol with more money gets the better mouthpieces.
As ASG keeps posting in these threads, it may be necessary to note some of the issues with his calculations. In the first place, he is calculating an annual foreclosure rate. People tend to own homes for more than 1 year. He may wish to note the figures in the GAO study that show that about 20% of DAP loans go bad in the first 4 years in cities with modest rates of house price appreciation. Since loans often take more than 4 years to go bad (go bad here is defined as going all the way to foreclosure, obviously these loans go delinquent much faster, but it can take more than a year from delinquency to foreclosure), and some loans refinance and then go bad (so the original loan doesn't look like a bad loan - the foreclosure gets attributed to the refi, not the purchase), that is obviously a lower bound on how many homebuyers end up in foreclosure when house prices are rising about 4% per year.
The other thing to note is that ASG is using the 2007 claim rate, which reflects a time when house prices had still been rising. I think we'll all be curious to see the 2008 and 2009 foreclosure rates, and I'd be willing to give substantial odds that they will be more than twice the 2007 foreclosure rates (I actually think 2009 will be at least 4x 2007, but if I'm going to give long odds I want some kind of margin for myself).
When you have self employment income or operate on a cash basis, it tends to be in your best interest to pay an accountant large sums of money to reduce your tax exposure (via legal deductions.) A good accountant can save you a bundle on taxes but doing so lowers your income down to a point where it really limits what loans you qualify for.
Horrors! I guess somebody will have to decide which is in their best interest: avoiding taxes or qualifying for a mortgage.
Fannie, Freddie seen boosting loss estimates, again Fri Aug 1, 7:41 PM ET
NEW YORK (Reuters) - U.S. mortgage market giants, Fannie Mae and Freddie Mac , may report further downgrades to their forecasts for credit losses in their upcoming second-quarter results, starting next week.
CHICAGO (Reuters) - Analysts at Standard & Poor's Rating Services warned against mortgage-related debt products in internal e-mails that, in one case, called the complex financial deals "ridiculous," the Wall Street Journal reported in its weekend edition.
"Let's hope we are all wealthy and retired by the time this house of card falters."
Closing the FDA and waiting for the "invisible hand" to fix things is a bit like lifting the ban on kidnappings in the hopes that the market will eventually settle the problem.
It won't. Just like we benefit from certain common frameworks, like language (English), currency, justice system, etc., we all benefit from a legal framework to regulate food and drugs.
Note that if you want to go outside the framework you can still get a lot of "herbal" medicines for whatever ails you, so long as they don't make a claim on the packaging that it cures some disease. Just don't count on any miracles from such drugs.
Site problems. Just hit the stop button as soon as the page loads.
IE7
click: Tools
click: Internet options
click: Security
click: Restricted sites
click: Sites
In add website to this zone type http://js.sitemeter.com
click add
click: close
Worked for me, may want to remove it in a couple days to see if flaw has been fixed
Horrors! I guess somebody will have to decide which is in their best interest: avoiding taxes or qualifying for a mortgage.- Yalt
Exactly. Although, back before housing prices went insane, you could do both. I was able to when I bought in 2002, but I just barely squeaked by the income threshold for a $150k loan. No way you can do that kind of juggling with prices today and lenders ratcheting down on no doc loans. Either a someone self-employed takes the hit on taxes for two years so they can qualify or they aren't going to be buying.
The DAP program helps sell homes - period - and is used by a lot of buyers today ... lost in all the frankly uneducated attacks are the the facts
Yes default rates are as much as 3 times that of regular FHA loans - and foreclosure rates are doubled ...
But even at a 2 times higher foreclosure rate - increasing from 1.51% to 3.02% that still means 97% of those who use the program are NOT foreclosed ... if FC rates increased to 3 times you get a 4.5% foreclosure rate - which means that 95.5% of DAP borrowers do NOT get foreclosed
The risk based pricing as I showed above is a simple, effective solution - and does not cause a huge increase in premium - even if only applied to loans using DAP
On the other hand, if the increased risk is spread across all FHA loans the premium increase is a few hundred dollars - a couple dollars a month
Many say the good loans should not subsidize the bad ... yet a case can pretty easily be made that something that increases buyers in the marketplace - increases demand - is good for all homeowners
I'd think a combination - a slight increase in premiums for all FHA loans - even a $100 increase would add appx $80 million annually to the insurance fund - coupled with a the majority of the risk being priced into a higher premium for DAP loans - makes a lot of sense
The fact is the loans with DAP do have higher foreclosure rates - doubled - than std FHA loans - but doubling means 3% vs 1.5% - which also, again, means the vast majority are not foreclosed
Adding a risk based premium, which as I showed adds a relatively small amount, allows the increased risk to be covered and allows a program with very big benefits - to buyers and the industry (and since housing is so important a part of our economy, helpoing the industry is helping all of us) to continue and thrive.
DAP programs work - and the vast majority of these loans 95%+ are not problems. DAP provides big benefits starting with helping people own homes - and the small percent that fail should not be a reason to penalize the 95+% that do not ....
I'll keep respectfully asking the fair question - Tanta and Calc Risk ... you are usually very detailed in your analysis - why is it this issue (and a few others) don't get this level of review? Why not verify/do the research as I did above and find out the real story - the real numbers - so folks can make educated, informed judgments .... ?
mp writes:
I've read conservative writers who will tell you we should have no FDA. They say that the "marketplace," the "invisible hand" will ensure--in the long run-- that food and pharmaceutical companies make "good" products.
I think you are confusing conservative and extremist libertarian. Regular Libs accept an absolute minimum of governance. Conservatives generally promote regulatory government and liberals advocate interventionist (activist) government.
By helping promote fraud we have higher housing prices and higher risk to lenders using DAP. This results in more costs to those of us who gasp save up to have a down payment.
Right now we've got a lot of neo-conservatives in control and they want to dismantle everything. Even Clinton played along, which may be why he observed of himself, "I'm acting like a god-damned Republican," or words to that effect.
Glass-Steagall was destroyed, the FDA budget is an abomination, yada yada.
IMO, some of what we're seeing is the direct result of de-regulation and conservative neutering of otherwise worthwhile governmental agencies.
ASG,
You are quoting annualized numbers from historically low FC rates. I'm not the first person to try and get you to acknowledge these points. When so many people are telling you your analysis is flawed it isn't the best strategy to call them frankly uneducated.
Paul writes:
mp wrote: To follow on from my comment above, I've read conservative writers who will tell you we should have no FDA. They say that the "marketplace," the "invisible hand" will ensure--in the long run-- that food and pharmaceutical companies make "good" products.
Thanks for your thoughts. I happen to work for Pfizer as a process engineer in a drug manufacturing plant. Most of us will do the right thing when it comes to patient safety. The FDA has created a framework for good manufacturing and lab practices. The danger in pharma comes from the non-scientist business side. They have no perspective on safety issues and will, as I said earlier, pathologically pursue profits at any cost. This is how you get supply chains that stretch to China where they have no problem adulterating stuff to make money. Google "heparin poison China" for good examples. There is no business ethic in America. This housing crisis has proven that.
Paul | 08.02.08 - 2:05 pm | #
Similar situation - I was a process engineer went into sales (industrial mechanical stuff)... you have NO IDEA how much the biz side will sell out the future to make the numbers today (taking a chance future liability to keep the show going even though they KNOW it is likely to blow up later) until you have sat in those meetings.
You really have to see it to believe it.
Anyone who says we don't need regulation is 100% completely FOS or is dishonest. Pick your poison.
The one legit argument the invisible handers can make and be right on is that almost all regulatory processes involving high margin profitable products will eventually become owned by the people (and their money) whom they regulate. Revolving door rules.
I don't have an answer to that except constant vigilance & free speech - exposing the corruption & sweeping out the bums before too much damage has occurred.
New Hampshire banking officials accuse Mortgage Specialists Inc. of more than 60 violations, including forging signatures and destroying documents. Massachusetts banking officials on Thursday accused the company of unfair and deceptive business practices. Gill maintains the problems concerned disclosure of information to the state, not cheating customers. And he said the company will pay a fine.
Banking Commissioner Peter Hildreth said allegations include photocopying signatures and moving them from one document to another.
The Massachusetts Division of Banks said a review prompted the same conclusions.
In New Hampshire, the Banking Department issued a cease-and-desist order, which Hildreth said would make any repeat of the 50 violations a criminal, rather than a civil, matter.
Massachusetts also ordered the company to stop doing business as a mortgage broker.
IMO, some of what we're seeing is the direct result of de-regulation and conservative neutering of otherwise worthwhile governmental agencies.
mp | 08.02.08 - 2:58 pm | #
So when we write in 'MP for President'... do we have to write in 'Conjure bag' for VP... or is it an automatic?
The banks receiving cease-and-desist orders in June were MetroPacific Bank in Irvine, California; Bank Haven in Haven, Kansas; Clarkston State Bank in Clarkston, Michigan; and Hastings State Bank in Hastings, Nebraska.
Non-performing loans in Clarkston States portfolio nearly doubled to 4.6 per cent between the close of 2007 and the end of the first quarter of 2008, according to first-quarter earnings report released in April.
Clarkston States chief executive, J. Grant Smith, said in a statement accompanying first quarter earnings that business conditions remain weak and commercial loan demand is anemic.
As ASG keeps posting in these threads, it may be necessary to note some of the issues with his calculations. In the first place, he is calculating an annual foreclosure rate. People tend to own homes for more than 1 year. He may wish to note the figures in the GAO study that show that about 20% of DAP loans go bad in the first 4 years in cities with modest rates of house price appreciation. Since loans often take more than 4 years to go bad, and some loans refinance and then go bad (so the original loan doesn't look like a bad loan - the foreclosure gets attributed to the refi, not the purchase), that is obviously a lower bound on how many homebuyers end up in foreclosure when house prices are rising about 4% per year.
The other thing to note is that ASG is using the 2007 claim rate, which reflects a time when house prices had still been rising.
If you have challenges with my posts then feel free to present your own hard data to correct them ...
I'll suggest you also re-read my post - I used the JUNE 2008 data directly from FHA Servicing Portfolio Summary - NOT 2007 numbers - the 1.51% foreclosure rate is calculated directly from the June 2008 numbers (which I included in my post).
And it is absolutely proper to compare annual foreclosure rates in this exercise ... overall frequency of foreclosure between DAP and non-DAP loans is the issue
If foreclosures are doubled on DAP loans - then the rate is going to go from 1.51% of all loans to 3.02% of all DAP loans. I did the math and showed the difference - with hard data - from the FHA and the GAO report noted.
Dryfly, you're a businessman, so am I, so you know that, in the "real" world, neither one of us can afford the luxury of having any politics that "show."
You know what I mean.
Conjure and I have a fairly good idea of what's going on, and we'd be stupid if we didn't work it.
Mortgage application volume fell 14 percent during the week ending July 25, the Mortgage Bankers Association said, even as interest rates on fixed-rate mortgages retreated from sharp increases a week earlier.
The culprit behind the drop: refinance volume, which plunged almost 23 percent during the week. Purchase application volume also fell, but was off about 8 percent.
Mortgage broker John Stearns, vice president at Robbins and Lloyd Mortgage in Mequon, Wis., said the appraisals for many homes are coming in close to or below the value of the existing mortgages.
"[The appraisal issue] is a problem that will take a long time to straighten out," Mr. Stearns said, especially as home prices continue to fall, eroding equity.
So far, nationwide home prices have dropped more than 18 percent from their peak in July 2006, according to Standard & Poor's/Case-Shiller 20-city index.
Also, interest rates aren't low enough to benefit some homeowners, said Ritch Workman, co-owner of Workman Mortgage Co. in Melbourne, Fla.
"Rates have been at about the same levels for the past five years, so there's no interest rat
ASG has not provided a link for his June 2008 data. So I don't know the definitions for anything that he has posted. But if his number of foreclosures is 2008 TODATE, then his annual foreclosure rate would be double the 1.5% that he cites. Without a link or precise definitions I can't honestly say what his numbers are supposed to represent.
ASG - I have no problem if DAPs are used as long as (1) they truly are arms length charitable aid and (2) with no strings attached and (3) the people qualify regardless.
So for example, if builders want to give money to the Catholic Church and the church is COMPLETELY FREE to use as it see's fit but does give some DAP aid to poor folks needing shelter (maybe here in US or maybe in Mexico City - whatever)... then fine, let them do it & let them deduct.
I don't think that is what Maxine's contributors are looking for - helping squatters in Manila - do you?
Tanta's money laundering poke was maybe a little too close to home?
mp writes:
Dryfly, you're a businessman, so am I, so you know that, in the "real" world, neither one of us can afford the luxury of having any politics that "show."
You know what I mean.
Conjure and I have a fairly good idea of what's going on, and we'd be stupid if we didn't work it.
Re: Money laundering is the practice of engaging in financial transactions in order to conceal the identity, source, and/or destination of money, and is a main operation of the underground economy.
In the past, the term "money laundering" was applied only to financial transactions related to organized crime. Today its definition is often expanded by government regulators (such as the United States Office of the Comptroller of the Currency) to encompass any financial transaction which generates an asset or a value as the result of an illegal act, which may involve actions such as tax evasion or false accounting.
One thing I've noticed over the last several years is the increasing number of shysters wearing religion on their sleeves.
Sometimes I wonder: are these people religious types being rewarded with easy marks by the current regime for their support, or is this a case of born shysters using the "religion" badge, or both? Both, probably.
First, the excess foreclosure from DAP are about 1/3 of total FHA foreclosures but the total is TWO-THIRDS. In other words, most of the cost of the FHA program is from this subset of buyers!
Second, as house prices drop, recovery rates will collapse. Those losses will double or triple in the near future.
If you wanted to put on a premium for DAP, it would need to be the two or three times the $812 you mentioned, and it has to be every year since the $812 only pays one year of foreclosures. So the premium would be about $2,000/year, or $250/month. Considering this is targeted at low-income buyers, obviously at those rates there would be essentially no honest needy borrowers - nobody would borrow with that premium except to commit fraud.
DAP doesn't work for the basic reason that 0% down doesn't work. You can't have a deal where one side has all the potential for gain and the other has all the potential for loss.
Anyone who says we don't need regulation is 100% completely FOS or is dishonest. Pick your poison.
Neither nor. What we need is not regulation, per se, but transparency. I've been in precisely those same meetings you mention, where the sales side pushes for what sales gets paid for, selling stuff, to the ultimate detriment of the firm. And I'm fine by it. They are often enough killing the company, but that's a-okay. Companies come and go. If the assets or people are worth anything, another will come along to pick 'em up on the cheap. The only question is whether the reported metrics are transparent enough for somebody to make an informed decision on whether to put their money there or not. Capitalism requires epic failures as much as anything else.
I've read conservative writers who will tell you we should have no FDA.
According to Milton Friedman, government regulation wasn't needed if civil litigation was effective.
What would you rather have: an FDA or a extremely punitive torts system? Currently, we have the worse of all situations: the FDA has been captured by industry, the citizenry is complacent, and litigation is preempted. To get a drug or device approved, it just needs to be shown to be minimally "safe and effective." Already, Congress has preempted negligence or fraud lawsuits for medical devices. The Supreme Court decides in October whether ALL suits involving pharmaceutical drugs will be preempted as well.
Neither nor. What we need is not regulation, per se, but transparency.
Just like we don't need cops and courts - I mean, hey everyone can see that car was mine and that dude stole it... so why do we need cops and courts to get it back?
And then what do we do with him?
Same difference except FAR more complicated - how do we PREVENT or deter someone from doing it again?
I have a right to swing my fist about but I don't have a right smack it into your face... nor do I have a right to swing it about and imply to or threaten to smack it into your face.
Where do we draw the line? Who decides how close I can swing it? You? Me? The strongest & scariest of the two of us decides? Or do we work it out after I smash your face?
It was the inability of 'Libertarians' to answer & more importantly operationalize those issues that made me give up on Libertarians as much as I have given up on 'Marxists'.
Good regulation enforced by honest and accountable people WITH TRANSPARENCY is the answer - anything else is BS.
According to Milton Friedman, government regulation wasn't needed if civil litigation was effective.
Everyone a lawyer - I respected some of Friedman's ideas but that's nonsense in a world of complexity like we have now. Maybe it would have worked at around the time of the Magna Carta - not today.
Yeah, just one year is involved, and yeah, we aren't in normal times now, but isn't it true that in normal times these things get "seasoned". After a while, people, even scoundrels, get attached to their house, and want to keep it. After, say 4 years, or 5, I betcha the experience approaches "normal" FHA loans. Again we are in a declining mkt, so it may mean that the huge (snark) 3% downpayment which is supposed to make all the difference, may become less and less significant.
Or maybe in 2 or 3 years we will go back to normal, after the mkt really does bottom out. I certainly hope so. I don't want to see a death spiral in 2 or 3 years still.
That said, I NEVER give legal advice for free. If someone is really poor and really needs advice, I'll charg'em 25 bucks or whatever. People do not appreciate free advice.
People do not heed free advice. The people who have treated me the worst were the "pro bono" people. For that reason, I don't do pro bono.
A friend thought he ought to do pro bono and ended up with a lot of dads who wanted to get out of paying child support for their kids. Not what he had in mind.
I suppose this is true of "free" houses, also. People appreciate what they have to fight for. So attending those seminars may be a psychological equivalent of fighting to put money in the bank. maybe.
We got some help from the hub's rich old aunt when we bought our first 2 houses. We paid our payments. I don't see it made a difference in our behavior. Except we felt we had to be really nice to the aunt. Whom we liked anyhow.
The_scum - You are quoting annualized numbers from historically low FC rates. I'm not the first person to try and get you to acknowledge these points. When so many people are telling you your analysis is flawed it isn't the best strategy to call them frankly uneducated.
First - 2 people have comment on my numbers - including you - and neither offered any factual support
Historically low foreclosure rates?
Again - I as noted used the latest JUNE 2008 numbers directly from the FHA Servicing Portfolio Summary - which list current up to date stats for every lender in the FHA portfolio.
As of June 30, 2008 there were a total 3.896 million loans in FHA portfolio. There were 68,588 new FHA loans in June 2008 - an annualized rate of appx 823,000. The foreclosure "count" as of June 30 2008 was 58,876 loans.
Simple math shows the foreclosure count divided by total loans yields a 1.51% number for all loans all vintages.
The same report shows the FHA Foreclosure Rate for the US over last 5 years was 1.94% - which put to rest the claim that current overall portfolio foreclosure rates are actually BELOW the historic norm - not above as implied.
And once again - when comparing - using annualized numbers is completely proper and correct.
If you disagree then post your own data and sources that refute ....
Rowan writes: What would you rather have: an FDA or a extremely punitive torts system?
Aside from the fact that the conservatives want to de-fang the courts with respect to torts, the problem is that without regulation you can only sue after you are dead. Think Ford and gas tanks. Compared to the scale of fraud and corruption involved in this housing bubble, very few are actually going to jail. The legal system is ill-equiped to deal with fraud on this scale. The only remedy is regulation to PREVENT injury.
Frankly, I think we need Agent Conjure Bag at every real estate closing. The meeting would start something like the following.
"Good morning! My name is Agent Conjure Bag, and I'm here to remind you that you're free to do anything you want, so long as it's transparent.
"The rules are simple. If I discover you've violated the transparency rule, I visit your home during the middle of the night and relieve you of your man/woman-hood with my sharp teeth."
"And what is the transparency rule? I leave it for you to figure out what I know it to be."
According to Milton Friedman, government regulation wasn't needed if civil litigation was effective.
If bringing back the dead was part of what he meant by "effective civil litigation" I might be inclined to agree. Otherwise, the payoff in a wrongful death action never quite seems to offset the loss.
"So what exactly is wrong with renting in general?"
Nothing as long as the landlord is paying the mortgage.
An entire neighborhood is vanishing by way of a little-known effect of the foreclosure crisis: owners of small apartment houses defaulting on their payments.
Myrtle Court, a cul de sac near Demaree Road and Highway 198, is losing its residents as lenders foreclose on a string of attractive fourplexes built in the late 1990s and evict those living inside. Lenders have repossessed or in the process of taking back at least eight of the 12 apartment houses that occupy the block-long street, all from the same owner.
Neighbors Charles Head and Larry Thomas have witnessed the exodus and know they will soon be packing their own bags. Head's fourplex is scheduled for a trustee sale on Tuesday, and Thomas, whose unit was reclaimed by a lender July 14, plans to be gone by next month.
The lender, Countrywide, offered Thomas a "cash for keys" deal that pays him $1,500 if he moves out before the 60 days he is entitled to by law. "I don't want to move," Thomas said. "But Countrywide doesn't want the liability of someone living here."
Total Active Portfolio - 3,896,389 loans - Foreclosures total 58,876 - which makes the total foreclosure rate is 1.51% currently on the entire FHA portfolio.
The total FHA portfolio only has a 1.51% foreclosure rate?? Ever?
Or is this a yearly rate that includes vintages of up to 15 year old mortgages?
Can you cite a source for the 3.02% foreclosure rate? If not, I can use the current time of day, 3:54PM and make it 3.45%...that's my source.
More lender stupidity. What is wrong with getting some cashflows? Countryfried isn't buying insurance?
Couldn't they get tenants who want to stay they to pay for some insurance? The whole neighborhood is gonna get infested with crackheads and bums with this stupidity and NO ONE will be punished for this.
Ok, can't local gov't pass a law saying that you can't have more than a certain percentage vacant?? Oh, ok, I guess that is an ex post facto law.
Can't the local govt do something, anything about this?
ASG still can't be bothered to provide a link or define his cumulative foreclosure number. Foreclosures from Jan to June 08? In that case, his 1.5% is a 6-month rate? Foreclosures from July 07 to June 08? In which case, his foreclosure rate is not an 08 rate as he claims, since half the time period is 07. Foreclosures from Jan 08 to Dec 08? In which case how the hell does he know how many foreclosures there will be next month?
Comparing annual rates may very well be appropriate for getting at relative differences. But ASG keeps insisting that the complement of the foreclosure rate constitutes a success rate. If he's using annual rates, then he's claiming that making it for 1 year (or refininacing and then failing) is good enough to be considered a "success." I still beg to differ.
ASG writes:
The_scum - You are quoting annualized numbers from historically low FC rates. I'm not the first person to try and get you to acknowledge these points. When so many people are telling you your analysis is flawed it isn't the best strategy to call them frankly uneducated.
Not my post dude. My post was more like: I have a down payment and what you propose will increase costs to me so SCREW YOU, ASSFACE.
ASG, when someone posts in the style that you do I immediately become suspicious.
When I encounter such in day-to-day life I check to see if my car is still in the driveway, log on to get my bank balance, look at my last Am Exp statement (the only credit card I have), etc.
Not saying anything is wrong I just automatically become suspicious. Being burned a couple dozen times in the past makes me that way, nothing personal you understand.
The only remedy is regulation to PREVENT injury.
Paul | 08.02.08 - 3:54 pm | #
If you look back over time most regulation came about because industry wanted to protect the 'reputation & viability' of their market from the rogue participants who knew no limits, no bottom... they did not typically come from 'do gooders' trying to hand cuff legitimate producers...
But after a generation of regulation market participants forget how low the rogues would go if un-fettered... and so we de-regulate and we have to re-learn exactly why the regs were put in place in the first place.
We are doing it again.
In some ways it isn't a bad thing to go through these cycles - the regs get bureaucratic & obsolete (conditions have changed)... so new regs are probably necessary and the only good way to craft them is let the rogues find the holes weaknesses after de-reg. I wish we were smarter than that but probably not.
Hazard writes:
ASG, when someone posts in the style that you do I immediately become suspicious.
We all do.
I haven't read the whole thread - been on the road & am still a bit of a zombie - but askin' the question...
So ASG, who do you work for? A builder, an originator or broker, one of the DAP conduit money launderers or one of their 'astroturf grassroots' organizations?
You obviously have skin in this game - just from reading your posts that much is obvious. Which?
The_Scum writes:
ASG writes:
The_scum - You are quoting annualized numbers from historically low FC rates. I'm not the first person to try and get you to acknowledge these points. When so many people are telling you your analysis is flawed it isn't the best strategy to call them frankly uneducated.
Not my post dude. My post was more like: I have a down payment and what you propose will increase costs to me so SCREW YOU, ASSFACE.
To rent or own? I'm getting pissed that I have to pay more and more to a homeowner association, who is basing future cost increases on prior bubble year growth, i.e, they think that revenues should always be parabolic and that reserves should explode at the expense of those now caught in the web of inflation. It seems whether or not you rent or own, your screwed these days!
mort_fin writes:
ASG has not provided a link for his June 2008 data. So I don't know the definitions for anything that he has posted. But if his number of foreclosures is 2008 TODATE, then his annual foreclosure rate would be double the 1.5% that he cites. Without a link or precise definitions I can't honestly say what his numbers are supposed to represent.
Select "Servicing" Menu - then Portfolio Summary - for United States
The data set is not "to date" it is "as of" June 30, 2008 - representing totals.
There are a total 3,896,389 loans currently in FHA portfolio - the current Foreclosure "Count" is 58,876 loans - divide the FC into total loans and it is 1.51%
The URL that ASG posted just goes to the Neighborhood Watch homepage. There are no figures there. Presumably one would have to dig deeper to find numbers or definitions, but I think that's ASG's job, not mine. I've already posted the relevant figure - 20% foreclosures over the first 4 years, for moderately appreciating MSAs.
But I do have one question about what ASG has stridently posted in the most recent post. He says:
The data set is not "to date" it is "as of" June 30, 2008 - representing totals. ... the current Foreclosure "Count" is 58,876 loans
If this is not "to date" for some time period, does he maintain that for the whole course of FHA's history, going back to 1938, the total foreclosure count is only 58.876? That would be very impressive indeed. If not, then that figure must represent a total over some time period. I'll ask yet again - over what time period is the "total"?
And on review the 1.51% rate - the 58,876 loans listed under Foreclosure Default Count - is actually not ONLY completed foreclosures
The definition shows in addition to completed foreclosures it includes loans where FC has been legally started (as opposed to only a delinquency notice filed)
So this number over reports actual foreclosures
Total number of loans where the default status code was reported as a 1A (Foreclosure Sale Held), 1G (Eviction Completed), 77 (Deed Recorded), 43 (foreclosure started), 45 (foreclosure completed), 46 (property conveyed to insurer), or 68 (first legal action to commence foreclosure); and the insurance status code is active.
I'll ask yet again - over what time period is the "total"?
mort_fin | 08.02.08 - 4:31 pm |
Oops, sorry Mort. I duplicated your question. So, that makes 3 times it's been asked. BTW, his first link went nowhere either.
ASG, I think you're in the wrong sandbox if you think you can toss numbers around and not be challenged.
ASG-
How is putting people into homes that are overpriced (and hence their note is higher) "helpful" to them?
I mean, specifically???
Generally, lower wealth folks have more volatile earning streams throughout their lives and the hard number of the fixed payments continually upsets the percentage allocated to housing due to the aforementioned variations in income.
IOWs, how does one plan for a stable economic future for their family when their fixed liabilities are consuming highly variable amounts of their budget from year to year?
Which, I would contend, adds a significant amount of stress to their personal lives.
You'd term that "helpful"? Not being mean-spirited, but, that's a heck of a definition of "charity".
Amen dryfly and mp (+conjure). The problem is you'll rarely see or hear such insightful rebuttal to anti-regulation, and anti-Gubbmint demagoguery in the media, especially the type of media consumed by the average American (i.e. radio, TV and cable news).
Instead we get Rush, Hannity, and a million others. Driving across country, it's amazing how many Rush wannabees there are (in addition to "Christian" programming), all saying mostly the same thing. Confidence artists, supported by business (advertisers).
You are right about cycles of regulation and deregulation.
I watched in the 60's and 70's how the regulators became out of touch with the way the world worked.
If memory serves, The Carter phone decision paved the way for tel. dereglation. Probably a good thing. I also watched the airlines be deregulated and it has been a disaster.
I still can't see how the deregulation of utilities has been helpful.
Some areas of the economy need regulation. Some need none. It's just 'who decides'.
There are 1.159 million loans less than 2 years old and there are 2760 FC claims paid (completed foreclosures) against them - a foreclosure rate of just 0.24%
There are also a total of 1.964 million loans from 2 to 5 years old which have 56,085 FC claims against them - a rate of 2.86%
Once again - the report indicates the total average foreclosure rate on ALL FHA loans less than 5 years old is 1.94%
The MBA Natl Delinq Survey shows similar numbers - the most recent (q1 2008) from memory I believe had FHA FC rates at 2.2% of ALL outstanding FHA loans
"Can't the local govt do something, anything about this?"
Here's my guess. The people on the city council have their R/E buddies or surrogates down at the courthouse steps bidding on these things for them. I saw it in the last bust in the early eighties and wouldn't be a bit surprised to see it go on now. Those guys made a killing on that deal although it was a different city.
I did some digging and we finally have a definition.
Total number of loans where the default status code was reported as a 1A (Foreclosure Sale Held), 1G (Eviction Completed), 77 (Deed Recorded), 43 (foreclosure started), 45 (foreclosure completed), 46 (property conveyed to insurer), or 68 (first legal action to commence foreclosure); and the insurance status code is active.
Note that it includes cases where the insurance status code is "active." These are not loans that have completed the foreclosure process - they are loans in the process of foreclosure. This can either overstate the number of foreclosures, since some are rescued on the courthouse steps (not many these days, but some) or seriously understate the number of foreclosures, since the foreclosure process takes less than a year on average (it's over a year from first delinquency to foreclosure, since foreclosure can't BEGIN until the borrower is at least 90 days delinquent, and even after that FHA requires the servicer to repeatedly contact the borrower and offer loss mitigation before initiating foreclosure, but the foreclosure process itself is usually under a year). ASG kept referring to this as some sort of foreclosure rate, and did not object when people assumed it meant an annual rate. In fact, his number is just the % in the foreclosure process at the end of June, and can't be interpreted as a foreclosure rate, annual, cumulative, or otherwise.
I said "includes cases ... code is "active." I meant to say "includes ONLY cases ... code is active." Once FHA has recorded the claim the insurance status code is set to inactive, and these cases would drop out. I don't have time for all this searching, but if someone wants to get the definition of that thing, just Google "insrnc_status_cd" and FHA's data dictionary will pop up.
Phrased a bit differently, ASG seems willing to count as a "success" anyone who isn't in the process of foreclosure on the date he queries the database. If you go under a month before his query or a month after, but are OK at the moment of the query, you are a "success" in his world.
"The one legit argument the invisible handers can make and be right on is that almost all regulatory processes involving high margin profitable products will eventually become owned by the people (and their money) whom they regulate. Revolving door rules."
When the concept of an invisible hand was originally proposed, even those who rejected any transcendent origin for morality believed in the objective, necessary, given nature of moral behavior.
What we have now is beginning to resemble Hobbes' war of all against all, modified by the legal, functional arrangements necessary to prevent outright anarchy. Even non-objective moral systems have to be formal and legally normative or a society begins to disintegrate.
Present economic troubles aren't simply the result of malfunction, error and wrong-doing. I think what we're seeing is a result of social and therefor moral breakdown. No doubt a new equilibrium will be established. God knows what that will look like. It may be that a new order will be established by force. It won't have been the first time.
Still on my OT GDP bender - BR at Big Picture adresses the conundrum (nominal rate of change in GDP growth rate of -11.6% QoQ translates into 'real' annualized rate of change in growth rate of 111% increase) - I will definitely be capturing revisions in the distant future...
/rant
One last "surprise" -- Bill King observes that the GDP Price Index inexplicably tanked to 1.1% in Q2; 2.4% was expected. Nominal GDP declined to 3% from Q1's 3.5%. Thus, the Q2 GDP benefited by 1.5% points, thanks to the mysteriously collapsing GDP Price Index, down to 1.1% from Q1's 2.6%.
Fair Economist writes:
Two more things ASG is missing:
First, the excess foreclosure from DAP are about 1/3 of total FHA foreclosures but the total is TWO-THIRDS. In other words, most of the cost of the FHA program is from this subset of buyers!
Second, as house prices drop, recovery rates will collapse. Those losses will double or triple in the near future.
If you wanted to put on a premium for DAP, it would need to be the two or three times the $812 you mentioned, and it has to be every year since the $812 only pays one year of foreclosures. So the premium would be about $2,000/year, or $250/month. Considering this is targeted at low-income buyers, obviously at those rates there would be essentially no honest needy borrowers - nobody would borrow with that premium except to commit fraud.
DAP doesn't work for the basic reason that 0% down doesn't work. You can't have a deal where one side has all the potential for gain and the other has all the potential for loss.
I split out ONLY the subset of current new loans that are using DAP and carried the cals thru on those loans ...
Appx 68,000 new FHA loans in June 2008 - or appx 823,000 per year - various reports, including GAO, indicate appx 30% used DAP - or appx 247,000 loans total annually
At 1.51% there would be appx 3728 foreclosures without DAP. Reports indicate the foreclosure rate with DAP is doubled - which means out of this pool of 823,000 loans there would likely be an additional 3718 foreclosures because of DAP
With a median home price of $215,100 the 3728 addtl foreclosures would be appx $802 million total - if the lender loses 25% on each when they sell that is a total $200.5 million loss due to DAP on this group of 823,000 loans
Divided by the 247,000 total loans that used DAP the $200 million loss equals $812 for each loan
A home can only foreclose once per loan - I showed the total possible losses for this group of loans - other loans in other years collect their own premiums to offset their own risks. There would not need to be multiple or annual premiums.
As to the question of why I care about this - I am like every other American affected daily by the effects of the housing and credit meltdown - which while certainly real is largely the result of a crisis of confidence - that is in many cases as here - NOT supported by a review of the real actual numbers ...
Question for LawyerLiz and others, and a comment on the ASG thread
1.My neighborhood, where I rent, is collapsing. Empty houses, yards quickly dying, critters taking up residence (dang skunk family next door!)... What's happening is not that the families weren't paying mortgages, but the landlords weren't. So the renters get booted. (In southern California people who'd be homeowners in other places have to rent, unless they've drunk the kool aid) The homeowners associations are frantic--graffiti, deadlawns, general decay. The neighbors aren't thrilled, either. People trying to sell their houses get hurt--who wants to live next to an empty house with a dead yeard? So...if renters and homeowner associations and other interested parties were to ignore the landlords banks and renters were to stay put, assuming they're willing to keep on paying rent, how hard would it be to force banks to just pick up those leases? That's all most renters really want, it keeps the neighborhoods alive, it keeps the town from becoming crummy looking.
Regarding the ASG thread--CR is a really good blog. Voice your opinions, for sure, but when you disagree, please consider holding back on some of the vehemence. Just as a way of being nice to the rest of us that you're not mad at. Thanks!
ASG said "A home can only foreclose once per loan - I showed the total possible losses for this group of loans" Yes, but a home can foreclose on any date after it is originated. You can't just query a database, get the % that are in the process on a particular date, and claim that the result gives you a number you can use to calculate foreclosure probabilities or expected costs. Unless you're claiming that the only possible date on which these loans could be in foreclosure status is the date you queried the database then you most certainly did not calculate the "total possible losses."
"lama writes:
I'll ask yet again - over what time period is the "total"?
mort_fin | 08.02.08 - 4:31 pm |
Oops, sorry Mort. I duplicated your question. So, that makes 3 times it's been asked. BTW, his first link went nowhere either.
ASG, I think you're in the wrong sandbox if you think you can toss numbers around and not be challenged."
I have - as I;ve said - no problem with anyone challenging my numbers - I've provided the source - and if mort_fin had read my post a little closer he would have found the instructions to find the data:
Select "Servicing" Menu - then Portfolio Summary - for United States
And I answered - the time period was "as of Jun 30 2008"
ASG - for a "time period" you need a beginning date and an end date. "As of June 30" is only an end date. There has been enormous confusion here because of your misuse of an "in process" count, treating it as if it were some sort of cumulative count over a time period.
A corrupt Chinese official has been condemned to death after a leaky toilet led to the discovery of his huge hoard of illicit cash, Xinhua news agency reported on Saturday.
"moo goo writes:
ASG-
How is putting people into homes that are overpriced (and hence their note is higher) "helpful" to them?
I mean, specifically???"
The numbers show that 95+% of people who use DAP have not been foreclosed -
95% of those who have used DAP have benefited from it - have kept the homes they were able to buy
There is another important benefit as well - that many buyers are usuing DAP that might have had the minimum cash downpayment - 3% - that FHA requires. By using DAP they keep that cash in reserves - which makes them a stronger buyer better able to weather problems - that the buyer who exhausted their cash to pay the downpayment
ASG wrote "There is another important benefit as well - that many buyers are usuing DAP that might have had the minimum cash downpayment - 3% - that FHA requires. By using DAP they keep that cash in reserves - which makes them a stronger buyer better able to weather problems - that the buyer who exhausted their cash to pay the downpayment"
so you're saying this won't have that big an impact on the housing market, since many of the buyers could buy without these programs? Then lets just get rid of them - they are higher cost, game the system, and apparently aren't all that necessary.
"mort_fin writes:
I did some digging and we finally have a definition.
Total number of loans where the default status code was reported as a 1A (Foreclosure Sale Held), 1G (Eviction Completed), 77 (Deed Recorded), 43 (foreclosure started), 45 (foreclosure completed), 46 (property conveyed to insurer), or 68 (first legal action to commence foreclosure); and the insurance status code is active.
Note that it includes cases where the insurance status code is "active." These are not loans that have completed the foreclosure process - they are loans in the process of foreclosure. This can either overstate the number of foreclosures, since some are rescued on the courthouse steps (not many these days, but some) or seriously understate the number of foreclosures, since the foreclosure process takes less than a year on average (it's over a year from first delinquency to foreclosure, since foreclosure can't BEGIN until the borrower is at least 90 days delinquent, and even after that FHA requires the servicer to repeatedly contact the borrower and offer loss mitigation before initiating foreclosure, but the foreclosure process itself is usually under a year). ASG kept referring to this as some sort of foreclosure rate, and did not object when people assumed it meant an annual rate. In fact, his number is just the % in the foreclosure process at the end of June, and can't be interpreted as a foreclosure rate, annual, cumulative, or otherwise."
If you check you'll not I said that in the post at 4:36 above
The 1.51% rate includes foreclosures completed AND those started but not done - so the 1.51% rate is actually HIGHER than the real foreclosure rate
And no it can't be low - for that period - since it reports all foreclosures legally started in that period
Jes wondered: "So...if renters and homeowner associations and other interested parties were to ignore the landlords banks and renters were to stay put, assuming they're willing to keep on paying rent, how hard would it be to force banks to just pick up those leases?"
Eviction.
The bank will evict the tenant if s/he doesn't leave. Banks don't want to be landlords, and I really can't say that I blame them.
Um no, It doesn't include loans that have finished the process and are no longer active. notice the "And" in that definition. "AND an insurance status code of active."
ASG wrote "And no it can't be low - for that period - since it reports all foreclosures legally started in that period"
NO. It does not tell you anything for a "period." It tells you that status "on the date the query was run." There is no "PERIOD" involved in the definition.
Too nice a day to keep arguing with someone who can't tell the difference between "in process" and "total." If someone else wants to carry on the valiant yet probably futile effort be my guest.
"Anonymous writes:
ASG - for a "time period" you need a beginning date and an end date. "As of June 30" is only an end date. There has been enormous confusion here because of your misuse of an "in process" count, treating it as if it were some sort of cumulative count over a time period."
The numbers I used show the current status of the FHA portfolio which is an excellent measure of - you guessed it the current status
Current status is absolutely relevant
I also noted as have others the MBA National Delinquency Survey - which shows quarterly rates and comparasion to prior quarter and to prior year
The current FC rate as shown in my data shows 1.51% of all loans currently in the FHA portfolio have been or are in foreclsoure. the National Delinq Survey MBA numbers show Q1 2008 vs Q4 and Q1 2007:
From Q4 2007 to Q1 208 the FHA loans saw a six basis point increase in foreclosure inventory rate (from 2.34 percent to 2.4 percent) The foreclosure inventory rate increased 21 basis points for FHA loans over Q1 2007 from 2.19 percent Q1 2007 to 2.4 percent Q1 2008
Additionally you can look at the data in my link and get FC CLAIMS performance for 0-2 year vintage (which is 0.45%) and for 2 yr to 5 yr old vintage (2.46% - which is exactly in line with the MBA numbers)
Judging by the posts I'd say 95% of CR readers are against DAPs, and 5% are for. I doubt anyone in the 5% is going to be changing their mind, although a few in the 95% might change their mind if given a persuasive argument...
mort_fin writes:
OK - show some evidence that "95% of those who have used DAP have benefited from it - have kept the homes they were able to buy"
I'd love to see your evidence for that statement.
My numbers above - estimated annual rate of 832,000 new FHA loans - 30% appx use DAP = appx 247,000 - of the 247,000 at 1.51% there would normally be appx 3728 foreclosures in this group w/o DAP - with DAP they would double
Means there would be 3728 more foreclosures due to use of DAP
Addtl 3728 foreclosures out of 247,000 total loans using DAP is 0.45% - which actually means that 99+% of the loans using DAP were not foreclosed
The 95% number was using the higher 2.45% foreclosure number on ALL FHA loans from 2 to 5 years old - and then doubling it - to 5% - which is actually wrong as its the total foreclosure rate on loans with DAP and ignores the foreclosures that would have occurred even without DAP
The bottom line is the DAP program has many benefits - helping people buy homes which helps the sellers which overall helps the economy
If we can do something that allows all the positives of this program to continue - while addressing increased risks so DAP loans pay for adttl risk - then why wouldn't we want to do so?
If the risk is addressed - which is easy by using a risk based premium - why wouldn't we support this program?
People are too quick to look at and focus on the negatives - without looking at the bigger picture - the benefits - to eager to ignore the good and penalize the vast majority who use the program responsibly rather than find a way to keep it
ASG - you didn't address either point. 1.5% is the portion of ALL loans currently in foreclosure. The risk for a loan is the cumulative risk over the lifetime of the loan. If you want to use the current number of foreclosures as an approximation you have to you the total number of foreclosures for ALL loans, not just an estimate of the DAP loan this year.
To put it another way, 58,876 loans are in foreclosure right now. About 1/3 are DAP excess, so 20,000. Foreclosure takes about 6 months, so there will be about 40,000 DAP-excess foreclosures. At 50,000 each, the FHA will lose 2 BILLION on the DAP excess this year. If this is paid for by once-off fees, then the 250,000 DAP loans will have to have an additional fee of 8,000, not 800. Mind you, this is an underestimate since both foreclosure rates and loss rates are likely to climb further from the present.
You're proposing the FHA lose 2 billion a year on excess foreclosures and make 200 million a year on fees. Nope, not gonna work.
Since the 8,000 fee is larger than the usual 3% down payment, the DAP trivially doesn't work.
It used to be that shamed foreclosees would slink out in dead of nite.
Now they stay until the last minute. I don't know if it's gaming the system or a sign of increased desperation.
I do evictions. It used to be once you got your writ of possession the sheriff would be out there in 1-2 weeks depending on the season (few to no evictions accomplished over Christman, e.g.). Now the sheriff is taking 3-4weeks, or even longer and the landlords, who have to make mtg payments out of their income stream are tearing their hair out. I don't know why the sheriff can't just hire more people. They get paid for each eviction. Maybe the money goes down some budgetary black hole.
Anyway, what can be done, is that the Condo and HO Associations need to hop on these things posthaste. The minute the loan goes back to the bank, the assns should start the collection process. Likewise, the municipalities should start fining banks Immediately for dead lawns, green pools etc. In Miami-Dade, you get offensive enough and they start with the $50-200 dollar a day fines, and there is no upper limit. The thing is, they don't start this right away. So the minute the bank gets the property a letter should go out and the fines start, in, say a month or 2. Banks have already started evading this by almost finishing the foreclosure and then stopping. Altho, I'm not sure if this is deliberate or not. Usually they are too stupid to think of stuff like that, and too cheap to hire the necessary personell, since you can't outsource this sort of thing to India.
So I think, since the Assn is in judicial foreclosure states almost always part of the foreclosure, that the Assn atty should appear (usually they don't, 'cause it costs money) and demand that the foreclosure proceed apace or be dismissed. And that his or her fees be assessed against the foreclosing lawfirms (which are really bottom tier in ability; they're trying to do stuff just paying paralegals and the slightest money wrench puts the kibosh on things, usually for months and months) or the banks. That'll get their attention.
I think I posted that I have a small developer for a client who'd like to bid on a couple of properties, but the process got almost done, and then stopped last February, for no particular reasons.
By the way, in Florida, if you don't file some sort of pleading within a year, your case is subject to being dismissed, and I think we are going to see that start to happen. The clerk generates a show cause order and if nobody sez the case should continue, it gets dismissed.
Both the gov't and the assns are able to file what amounts to a foreclosure themselves. They should start doing it en masse.
I have no sympathy for institutional lenders whatsoever. They shot themselves in the foot and continue shooting over and over.
By the way, there's an article in Slate about a ummm New Jersey (?) bank that continued to issue mtges the old fashioned way, and now is simply rolling in money.
ASG
Would you consider it fair to have a risk premium just for the subset of borrowers who get a DAP?
If not it becomes a transfer tax, a subsidy for those who do qualify for the DAP.
Also you do not make the case for home-ownership. Since people have to live somewhere eventually the fact is that a space would have to be built for renter or buyer.
The psychology of having to work and save for the down payment or skin in the deal, does seem to have some merit.
The wording of Rights is Life Liberty and the Pursuit of Happiness. Nowhere is it written the Entitlement of Happiness.
You are terminally infected with the entitlement virus.
This is too funny today. Contrast Lawyerliz detailing how money is literally evaporating from institutional lenders and how foreclosees are getting a free ride with ASG trying desperately to justify the fraud continuing.
ASG is like those folks at the congressional hearings. They quote number after number, percentages - page after page of nothings that attempt to show progress of whatever they are trying to defend. And yet, what they try so hard to defend is an absolute mind-boggling disaster.
BTW, if you go to enough sites you see a few posters EXACTLY like ASG. Wordy with heavy, heavy over-reliance on sets of statistics slanted toward their argument.
Yes, evictions eventually happen. That's not quite what I'm asking. Given that houses aren't selling, and that a foreclosed house plummets in sellability as it loses any curb appeal it might have had, and given that forcing out paying renters is turning ones back on a steady income stream, then why aren't banks reconsidering their stance on holding the leases, especially in really hard hit areas like southern California?
Thats a whole lot of math without any verification. ASG, you are a fool. Obviously you are working for someone. He did make my point, which was well justified by many of you, that 30% of FHA purchases were done by DAP programs. Given FHA loans are a significant portion of loan originations today and going forward, you just cut 30% of 50% of loan originations, or an automatic 15% decrease in eligible homeowners. Think that's going to help? I'm not saying it's ok to have a DAP, I'm saying I'm not sure people recognize the signficance of removing this particular loophole...given there is full documentation of income and credit within government insured standards. If there is another solution to get a homeonwer into a house without a downpayment, you show me one that works, but eliiminating this one is going to have a dramatic impact.
LawyerLiz - the reason they can't just hire more Sheriffs is that it's a dang long process. In my town, we're not allowed to recruit cops unless we have vacant positions - which we always do 'cause we can't hire them fast enough.
From the moment we begin recruiting until an officer completes the background process, the academy, and field training, is about 18 months. Every agency is competing for a very small pool of qualified candidates, and only a tiny fraction of those make it all the way through.
Yes, and because of his longevity, he offers a multi-generational guarantee.
"...trying to type 7 eat a popcycle."
Conjure says, "LawyerLiz, it's P-O-P-S-I-C-L-E, and I have the entire collection of Popsicle riddles and Scrooge McDuck videos. Can anyone here top that? No, I don't think so."
Fair Economist writes:
ASG - you didn't address either point. 1.5% is the portion of ALL loans currently in foreclosure. The risk for a loan is the cumulative risk over the lifetime of the loan. If you want to use the current number of foreclosures as an approximation you have to you the total number of foreclosures for ALL loans, not just an estimate of the DAP loan this year.
To put it another way, 58,876 loans are in foreclosure right now. About 1/3 are DAP excess, so 20,000. Foreclosure takes about 6 months, so there will be about 40,000 DAP-excess foreclosures. At 50,000 each, the FHA will lose 2 BILLION on the DAP excess this year. If this is paid for by once-off fees, then the 250,000 DAP loans will have to have an additional fee of 8,000, not 800. Mind you, this is an underestimate since both foreclosure rates and loss rates are likely to climb further from the present.
You're proposing the FHA lose 2 billion a year on excess foreclosures and make 200 million a year on fees. Nope, not gonna work.
Since the 8,000 fee is larger than the usual 3% down payment, the DAP trivially doesn't work."
sorry - but you're wrong ... the numbers provided are NOT a 6 month total year to date for the year 2008 - they are a current number of all loans in the current FHA portfolio
And the historical data is available - the MBA Nat'l Delinquency Survey has extensive data
It shows FHA foreclosure inventory rates by quarter
FHA Quarterly FC Inventory rate from MBA NATL DEL SURVEY Q4 2007\t
(all avg annual except 2008)
\t
2002\t 2.50 \t
2003\t 2.82 \t
2004\t 2.72 \t
2005\t 2.36 \t
2006\t 2.21 \t
2007\t 2.23 \t
2008\t 2.40 \tQ1
The graph in the NDS shows FC inventory rates ranged from just over 2% in 1998, to just under 2% in 2000, back up to almost 2.5% in 2001 - 2002 onward are as above
The current portfolio, from the HUD data link I provided - as of June 30, 2008 - shows a 1.94% Foreclosure claims rate - which is just completed foreclosures - on loans 2 to 5 years old - to be appx 2.46% almsot exactly the number reported by the MBA
So ignore if you want the numbers from my link - which were hard data direct from HUD - and go with the MBA Natl Delinq Survey historical numbers if you want - it doesn't really change a thing - HISTORICALLY - at least back to 1998 - foreclosure rates have averaged between 2% and 3% of the total loans in the FHA portfolio
At end of Q1 2008 the rate was 2.4% - basically flat with the 2.34% in Q4 2007 and essentially the same as back to 2002 and earlier
Doesn't really make any major change - the vast majority of FHA loans using DAP assistance will still not be foreclosed
68,000 new loans in Jun 2008 = app 823,000 new FHA annually - if 30% use DAP its 247,000 loans - 2.4%, or 5,926 of which would be foreclosed even without DAP
If DAP causes the FC rate to double then and additional 2.4% of these 247,000 loans using DAP would be foreclosed - another 5,926 loans - or 0.72% of all 823,000 loans
At an avg price of $215,100 if these extra 5,926 loans that were foreclsoed becaue of using DAP lost 25% when sold the total loss is $318 million - dfivided by 247,000 loans using DAP = $1,290 per loan
"One who knows writes:
Thats a whole lot of math without any verification. ASG, you are a fool. "
Interesting - a lot of math without verification? I provided direct sources so you or anyone else can verify or recreate - I posted the math in the thread - and I said I'm happy to have anyone refute my numbers.
That would include you - if my numbers are wrong then refute them - with facts - instead of insults wholly unsupported by a shred of fact.
I note you agree with my position that eliminating DAP, right or wrong, will have a large and significant impact on home sales - and a resultant big impact on our economy
ASG,
"Current status is absolutely relevant"
No it isn't.
Sorry kid, your 1.51% is not a rate. You do not divide a static number into anything and get a "rate".
Tonight, 99%+ of drunk drivers will get home safely. According to you, it's a good idea to get hammered and hop in the old pickup.
Wait a minute. Did you just say that Hud foreclosures were historically 2-3%?? Sorry, my brain cells need wiping off my computer screen because a few exploded out my ear by reading the same boring stuff over and over, which didn't seem to get anywhere. Isn't that awfully, awfully high (to use the proper legal terminalogy?). Isn't the kick 'em out total historically about a half a percent when things are good to a percent when they are bad? Now not being normal. Far from convincing me that DAP is not a bad thing, I think you've proved that FHA loans in total are a very bad thing, forgetting DAP entirely.
My head already exploded (thank glod there's nothing inside to make a mess).
You know this routine, sprinkle in a misused fact (representing a time-static number as a rate) with a dash of license on another fact (apply a factor to the rate with no basis).
When I'm in a meeting and someone starts this crap, I tell them "I don't understand, can you write it down?" Then, just point to items "where did this come from?" "who told you that, I'll send him an email".
"lama writes:
ASG,
Thanks for these two links that go to some homepage with no data: U.S. GAO - File Not Found d071033t.pdf
http://tinyurl.com/hud-fha"
I answered this for you at 5:14 above for the HUD link - in a couple of posts actually:
Select "Servicing" Menu - then Portfolio Summary - for United States
Haloscan has screwed up the 2nd link to the GAO numbers - I'll try to find the link if you really want it
Lawyerliz writes:
Wait a minute. Did you just say that Hud foreclosures were historically 2-3%?? Sorry, my brain cells need wiping off my computer screen because a few exploded out my ear by reading the same boring stuff over and over, which didn't seem to get anywhere. Isn't that awfully, awfully high (to use the proper legal terminalogy?). Isn't the kick 'em out total historically about a half a percent when things are good to a percent when they are bad? Now not being normal. Far from convincing me that DAP is not a bad thing, I think you've proved that FHA loans in total are a very bad thing, forgetting DAP entirely.
I don't know if you - or most of the rest here - really even care what the facts are - but on the chance you do - again from the MBA's Natl Delinquency Survey - Q1 2008:
The foreclosure inventory rate increased 26 basis points for prime loans (from 0.96 percent to 1.22 percent), and increased 209 basis points for subprime loans (from 8.65 percent to 10.74 percent).
FHA loans saw a six basis point increase from 2.34 percent to 2.4 percent)in foreclosure inventory rate (, while the foreclosure inventory rate for VA loans increased 12 basis points (from 1.12 percent to 1.24 percent).
The FHA rate has pretty much always been above the FC rate for PRIME fixed rate loans and for VA loans
The FC rate on FHA loans for 2002-2008 is above - here are the FC rates from 1988 - 1997
From reading a poor qual chart the rates for 1998 to 2001 are appx:
1998 2.1
1999 2.0
2000 1.9
2001 2.1
FHA foreclosure rates saw a recent peak at appx 2.8% avg from late 2002 to early 2004 - dropped to appx 2.2 in early 2006 and has climbed slightly since then
So to answer your question - no the current FC rate is not historically high compared to last 15 years history - FHA loans have been in the same current range since 1994
"lama writes:
ASG,
Thanks for these two links that go to some homepage with no data:"
I've seen you repeatedly denigrate and attack my comments - ignore answers to your questions (ie: on where to find data from the HUD link) and continue to post the same question anyway ...
I've seen you offer nothing in the way of a factual response or one that provides anything to support your comments
I've ignored your taunts and denigrating comments and answered you anyway - and you respond with more insults
What I have found is that people like you are usually unable to offer intelligent, rational, factually supported responses - and you cover for that by making rude comments with no facts instead
I will repeat - contrary to your claim - the math is quite simple - if there are currently 3.96 million loans in the FHA portfolio and there are 58,000 in foreclosure then the FC rate on the portfolio is the product of dividing foreclosures into total loans - which comes out to 1.51%
You can - and many do - look at that formula on numerous days - which is what the MBA NDS does - and find out the rate on multiple days - Quarterly for MBA - and that collection of individual FC rates makes up the history - which I posted above ...
If you have believe I am wrong how about actually making the effort to provide your own facts to support your claim instead of the childish name calling?
Wanta buy a SUV? Fords got one for you. How 'bout a Chevy?
Sorry, these numbers you quote are just numbers. Sorta like the UE rate. Except, I know people w/o a job, in my part of the world I look around see things aren't going so well. I know someone personally that got foreclosed this week.
Your numbers mean something until they don't.
Reality strikes, intrudes on your percentages. People everywhere are seeing reality strike watching it come closer and closer. Happening at first around town, then to a couple of friends, then on to their relatives ...
Quote anything you wish, pull stuff from everywhere, sorry I'm not buying. I don't believe you for one minute.
Ok, so FHA loans have always been, not to put to fine a point to it and having just read the squirrel discussion one thread up, squirrelly.
Nothing new historically, just always. . . bad.
Which is not to say, that knowing this, we might want to do them anyway.
However, spending many hours every week counseling/consoling poor souls being foreclosed--real peoples, you know?--being foreclosed is at best truly horrible. It is emotionally equivalent to a death of a close relative. Not good. Baaaad. It is far, far better to rent than to experience foreclosure. If you have a divorce, loss of job or illness, at least you know you were just not lucky. If you did this to yourself, you get to feel stupid as well as everything else.
ASG, old chap, go one thread up and read the squirrel discussion, and have some yoiks. But don't count squirrels, just go with the flow and can the pedantry.
So, lets see there are 3.96 mil loans in the FHA portfolio. When did the 1st of these 3.96 mil loans start? How many loans foreclosed since that date? Add those foreclosures to the 3.96 mil, divide that addition into the total ltd (life-to-date) foreclosures and then you get a rate. I suspect though that you'd need multiple rates calculated based on the circumstances (ie, categories) of each foreclosure type.
What is the date range of the 58,000 currently in foreclosure? Uniformly spread from 30 years ago until today? And again, their foreclosure category?
Are the foreclosures accelerating? As well as their corresponding categories? If you are dealing with the 1st derivative, you must take into account the 2nd.
Something doesn't quite fit here.
You are trying to impute a current rate based on inconclusive data. In short, mixing apples and oranges.
It is a rate but how valid is it? It only fits into your argument because you wish it so. You'd have to show much more before your discussion hangs togather.
Gosh, Lama, what Holden said.
One out of 6. Even half that. That's a lotta anguish. Probably with all the underwater people, it will be worse than one in 6.
Hazard - then ignore my orig numbers and posts and go with the later ones where I simply quoted the Mortgage Bankers Association Foreclosure Inventory rates
I assume you'll admit that they might have a clue or two on the accurate numbers?
If you review my posts immed above using the MBA rates you'll see the difference is minimal
If you ONLY talk about newly originated loans - loans going forward - the data shows appx 68,000 in June - or appx 823,000 anually at Junes rate - you can then do the same calcs as I did above
-30% of new loans are reportedly using DAP
-the GAO reports foreclosure rates are appx double on FHA loans with DAP
-the historical foreclosure rate on all FHA loans since 2002 is appx 2.46% according to MBA
The end result is a projection that appx 247,000 loans in one year will use DAP and those loans - using a 2.4% foreclosure rate - will see an additional appx 5,900 foreclosures vs if these same loans did not use DAP
ASG, I won't dignify your numbers with my own. I do not acknowledge that you numbers are applied rationally. They have no relevance to anything (hence the drunk driving comment).
Liz, bingo. I like your posts btw.
Night all. My wife is going to unplug the computer now.
ASG (and others): Let's continue a world where home prices are not actually paid by the "buyers". It's the only way we can keep home prices very high and rising, and that all of us can continue to make money.
Trouble is, it's clearly not a sustainable way to manage an economy. We appear to have reached a tipping point where the HPA font of effortless wealth creation can only bubble on by expropriating wealth from taxpayers in general to homeowners in particular. Any more programs to keep house prices high are just transfer programs from people who don't own a home to people who already do.
But you see ASG, I don't necessarily believe ANY numbers posted by any of these associations. Like yourself, they post what they wish ignoring the fact that they are far outside the realm of experience.
For example, UE rates? You believe those, the CPI, the GDP, etc, etc then your gullibility knows no bounds.
As I stated your 1.51% rate is meaningless. You'll have to do much better than that.
Lets start with that and go forward. Do the calcs as I suggested in the manner that I suggested (and BTW, look for more info on the topic than just one source) and I think you might have a better discussion.
What you've posted so far just doesn't have mathematical credibility.
You're new here. Do you know what I do for a living? If you believe what you're shoveling, good for you. Just don't expect me to buy any."
I have no clue what you do for a living - nor should it have any bearing in civility or be an excuse for boorishness ... and if you are in the industry then you could certainly provide some fact based responses to refute my comments - which I have said I would welcome
As to your link - that is a story from 2004 judging by the URL - it is also inaccurate - for example positing the "what if" '17% of zero down borrowers would be foreclosed upon' and then offering the current comparison "In contrast the estimated cumulative default rate for all FHA loans this fiscal year is 6.96%" ... comparing foreclosures to defaults - apples and oranges
This article actually reinforces that 100% loans have in reality been no where near what the FHA commissioner expected for FC rates - he told the legislators 17% would be foreclosed - today we know - according to the GAO -the real rate is appx "double" the normal FC rate on FHA loans - which is appx 2.4% - so appx 4.8% vs 17%
An appx 4.8% FC rate on loans using DAP vs a FC rate of 2.4% on ALL loans (without DAP) ... 97+ out of 100 people who use DAP to buy a home with FHA loan will benefit - yes 2 or 3 more out of 100 will have a problem ... but that is hardly a reason to eliminate an important and beneficial program - that works for the vast majority - almost all - of the people who use it ....
So lama - share with us why you think DAP is a problem
Hazard - I indicated ignore the 1.51% rate - use the MBA Natl Delinquency Survey numbers - which are considered one of the industry standards for this reporting
The current rate they report is 2.4% To answer your question ap from 2.34% Q4 2007
As to the current 3.96 million loans -appx 1.159 million are less than 2 years old, another 1.96 million are 2 to 5 years old and the remaining are more than 5 years old
So? Show your numbers in rates by date and by category. Also, how are these rates changing? You must show that And you must get the foreclosure flushed out numbers (they can not be ignored). Be nice to have some values attached to these numbers as well.
Sorry, industry standards don't impress me. I want to see the real thing (and multi-source confirmation)or not at all.
That 1.51% rate, you just expounded on how clear and conceptual it was.
You've got to be precise. Else all your postings today are for naught.
ASG, you're confusing the % of loans currently in FC with a lifetime claims rate, which is the relevant metric, as mort_fin tried to point out. think of it this way: if a given vintage of loans will have lifetime cumulative defaults of 10% which is spread out evenly over 5 years, and you continually originate loans at the same pace and they always perform the same (2% of the original balance default per year), after your portfolio has seasoned a few years, the number of loans in default as a % of the current outstanding balance will always be 3.33% (assuming loans enter and leave the default bucket at the same pace and that loans pay down over 5 years). but the insurance premium still has to cover the losses on 10% defaults, not 3.33%.
As to the question of why I care about this - I am like every other American affected daily by the effects of the housing and credit meltdown - which while certainly real is largely the result of a crisis of confidence - that is in many cases as here - NOT supported by a review of the real actual numbers ...
ASG | Homepage | 08.02.08 - 5:08 pm | #
Bullshit. Don't insult or patronize us that way.
You've got an axe to grind [which is fine - we all do]... folks don't jump into these discussions with that kind of background work - then stay all day - without extreme motivation. Civic pride & concern for the well being of the country doesn't cut it for an answer. We know better.
So what's your angle? Transparency might actually improve the appeal of your argument... before Tanta was CR's partner she just commented here... everyone knew she was up to her eyeballs in mortgage finance & she didn't hide it (though she still maintained her anonymity). She has her angle & we respect that.
Everyone who cares knows I'm in mfg [that's my buzz]... others have theirs. It in part answers why we are passionate about what we believe.
So where do you work that DAP is so damned important to YOU that you spend all day here doing the boiler room reply gig? It smells awfully 'astroturffy' to me.
Like I said - it would improve the discourse with a little transparency.
BTW - I meant it when I said I have no problem w/ DAP if truly arms length & transparent & not a profit center for big builders. I have a real problem if its just a money laundering tax deductible sales promotion for same. If that is all it is then let 'em cut price & insure the loans themselves.
ASG, a zillion people have tried to explain the difference between a rate and an accumulation. Sorry for the personal attack, but you're either very dense, pretending to be very dense, or hope we are very dense. 1.5% of the loans go bad EVERY YEAR (leaving aside many other smaller issues like how representative 2008 is, what to attribute to DAP, and what proportion of 2008 total foreclosure are in foreclosure now). Assessing 2008 loans ONLY for the cost they will incur in 2009 will leave the FHA very broke, because they will also incur similar costs for the 2008 vintage in 2010, 2011, etc. But that's what you've done. Your 200 million estimates ONLY what the 2008 vintage will cost in 2009. You neglect the rest of the lifetime of these loans.
Are Waters, Shays, etc. similarly dense? Or do they think they can get political advantage from pushing this program while they know it's death for the FHA? I'm not sure which possibility is worse.
After reading this whole thread and trying my best to get my mind around the titanic argument staging ASG versus everyone else, I have a few thoughts.
Everyone who has donated time to analyze those numbers deserves a thank you.
ASG, I appreciate the Herculean efforts you made to prove your point. You took an unpopular POV and defended it gamely.
Kudos to "everyone else" for their well-considered attacks on ASG's arguments.
Any member of Congress voting to support DAP should be required to read this thread and then shown some basic level of comprehension.
No members of Congress will.
DAP is another government-sponsored, Ponzi-reinforcing scam that will continue to allow a small subset of people in the know to remove wealth from poorer citizens, even as some of those same people think they are getting a leg up.
When it comes to RE, this is the best damn blog on the Web in large part because of these threads.
Bacon ... your post actually made the effort to include useful straightforward input - which led me to looking for the correct data ...
Cumulative foreclosure rates do not seem easy to come across however a directly useful resource is the FHA's proposed rule - as published in the Federal Register here:
More important to the discussion are the Expected Lifetime Claim rates by credit score - this is where the FHA could have actually made this work
The FHA writes loans even below 500 credit scores ... 53.2% of all 2007 loans were 620-850 credit score - the loans within this credit score group that used DAP represents 14.6% of the total 2007 loans - it also represents appx 44% of all 2007 loans that used DAP (33.2% of all loans)
The projected 2009 book claims rates are
FICO w/o DAP w/DAP Diff
850-680 3.9% 8.9% 5.0%
679-640 8.9% 18.6% 9.7%
639-620 9.3% 19.4% 10.1%
Using the June 2008 new originations of 68,000 and the annualized rate of appx 823,000 new loans ...
If the DAP was limited to this group -those with good to excellent credit - there would be appx 120,166 loans of the 823,000 that used DAP .... and of these there would be appx 9,857 additional lifetime foreclosures
Using the guesstimate of 215,000 average loan amount and a 25% loss exposure on sale the total losses on these 9,857 addtl foreclosures would amount to appx $530 million.
To get the total loss on this book of 120,166 loans using DAP you have to take the base claims rate for loans w/o DAP of 8,772 foreclosures - for a total of 18,629 ... which using the same 215,000 avg loan and 25% loss ($53,775 on the 215,000 avg loan) on each sale would represent a total combined cumulative loss for this book of 120,166 loans using DAP of $1.002 billion
The total value of the 120,166 loans using DAP at same 215,000 avg loan would be appx $25.85 billion
If the FHA charged the current 1.5% up front premium and the 0.55% annual premium, the total insurance collected over 5 years on this book of 120,166 loans using DAP would be $1.098 billion
Again, if DAP was offered only to those with 620 or higher credit scores there would be a net revenue positive of $96.8 million in loss coverage vs insurance collected.
Bottom line is the FHA could by all appearances - using their numbers - keep the DAP program but restrict to 620 and higher credit scores - and it would be revenue positive
By all appearances they could provide something like 120,000 DAP loans to those with 620+ credit scores without raising premiums at all
dryfly, I recommend the book "Jennifer Government" for a view of a fictional relative of Agent Conjures. An interesting (and hopefully entertaining) read!
"All it would take is a couple of these in the US and there might be a few changes. Guess we'll have to wait until after the revelation.
Anonymous | 08.02.08 - 5:18 pm"
Simon Bolivar was able to completely stamp out corruption in the big swath of South and Central America where he operated by making a bribe of anything over 10 pesos a capital crime. And he didn't even have to put very many people in front of firing squads.
I'd love to see this applied to congress critters and lobbyists.
OT - why is it DAP when the program is called Down Payment Assistance?
Bacon ... your post actually made the effort to include useful straightforward input - which led me to looking for the correct data ...
...so, I'm going to type a bunch of numbers in paragraph form. I will use a current, static (that means "point in time") number and call it a rate. Also, I will ignore the fact that almost every DAP is sponsored by the corporate seller and built into the sales price.
ASG, has this exercise helped you refine your sales pitch?
I'm with LawyerLiz - MY god, this thread is still going?
OK, ASG finally concedes that FHA has double digit lifetime claim rates. But he's still way off on his loss given default figure. It's more like 35%, not 25% (go to hud.gov and Search for "Actuarial Review" and look at the loss section, or go to OMB's website and look at the Credit Supplement to the Budget for credit subsidy rate assumptions). ASG also doesn't take into account the difference in loss given default for DAP vs. non-DAP loans - it's low 30's for non-DAP and high 30's for DAP. Finally, I don't see how he comes up with his revenue figure for DAP loans. What assumption is he making about prepayments in order to calculate expected revenue?
One in six is, in fact 3.02% if I had only started with 18.12%. What was I thinking?
OK, here's my full disclosure why I was hard on ASG. His sales pitch reminds me (in fact, he uses the same vocabulary) of those I used to hear from various charletons who got ahold of a naive client when I worked at a smallish CPA firm.
OK, I'm leaving to read Tanta's new thread. I'll be more polite.
PS: Liz, I have a serious question for you that I'll type on the open thread.
"The Secretary shall provide for a refund of a portion or all of the higher premiums"
This isn't as bad as you make it sound. What I read that as is: We decided based on a credit profile that you were probably a deadbeat, but after all these years, turns out you made all your payments on time, so we were wrong about you and we should have been charging you the SuburbanWASP rate, not the UrbanReefer rate, so sorry, here's your refund for the difference.
I wouldn't assume the rating of risk of homebuyers is all that accurate, and this keeps then honest. People whose numbers don't look all that hot, but dutifully pay their bills, should not be penalized for that.
And people wonder how we got in to this mess in the first place...
I mean come on people....
................
And after 3 days, the DAP shall rise from the dead.
DING DONG THE DAP IS RESURRECTED!
I'm surprised Laura Richardson, Dem-CA didn't cosponsor. She's in debt up to her earballs.
That Maxine Waters chick, there isn't a government entitlement program on earth that she isn't a big fan of.
Years ago, didn't you gets some FHA premiums back? (Premia?) Seems to mre--this was the 80s now and long and long ago, if the risk pool you were asigned to didn't have many losses, after some number of years you got some money back when you paid the loan off?
Those are the days when dinosaurs ruled the earth and at least some underwriters tried to do a good job.
Fraud still existed tho. I remember at one closing, I needed a piece of paper to scrawl something on. There appeared to be a blank one and I picked it up to see if the other side had something on it. Yep, it shure did. It was a note back to the Seller. Everybody acted very embarrassed, 'cause they weren't supposed to do that. Frankly I don't remember what I did; it was 25 years ago.
Hey, I thought we weren't supposed to get fooled again?
I'm gonna go smash all my old Who albums.
Is the XLF protected by shorting rules? As I understand it if you short an index you short the underlying. Is this a loophole?
Naked Capitalism still has that computer glitch; Housing Wire doesn't.
Maxine Waters,"Man of the People".The congresscritter who brought Bloviation to new depths.Her Bottom rests firmly on her shoulders.
Now there's a mental image I can appreciate ... Sheila Bair storming Congress on a Friday with an army of FDIC agents, declaring it a "failed institution".
I volunteer to take down the web site and replace it with a new one !
Years ago, didn't you gets some FHA premiums back? (Premia?) Seems to mre--this was the 80s now and long and long ago, if the risk pool you were asigned to didn't have many losses, after some number of years you got some money back when you paid the loan off?
I think you are thinking of "UFMIP netting."
There are two kinds of FHA premiums you pay: an up-front lump sum premium that is usually financed, and a monthly pay-as-you-go premium.
Borrowers who refinanced an FHA loan into a conventional loan used to be able to get a refund of pro-rated UFMIP. You never got a refund of monthy premiums. The refund of UFMIP in this case is no longer allowed.
If you refinance an FHA loan into a new FHA loan, you can get a credit of prorated UFMIP from the old loan to apply to the UFMIP on the new loan in some cases. (Depends on when the original loan was made and all kinds of complicated shit.) But you can't get an actual cash refund of UFMIP paid.
Sorry for OT but wondering if anyone else is getting an "operation aborted" window after pulling up up ml-implode.com - my tin-foil-ier half is wondering if this is a hack...
/OT -- You just can't describe this as an 'entitlement program' without irony. The only people this seems to entitle are re-shearers of the sheep.
I guess my wager on DAP was a sure thing. Took them only 15 minutes to bend to builders, real estate lobbies, and DAP companies' request. Simply amazing.
Sorry for OT but wondering if anyone else is getting an "operation aborted" window
I've gotten that on seven out of nine blogs I tried to visit this morning. Fortunately, my own blog was in the two that I could view.
I've heard a bunch of theories about that, such as that it's some bug in sitemeter code that got pushed yesterday. Beats me.
Concerning the computer glitch, see here.
These congresscum aren't really helping their constituents. It is far more painful to get foreclosed on your house, than to keep on renting.
"Now that I think about it, though, a borrower who scorns being counseled by the seller's money launderer is probably smarter than a box of rocks."
BWAHAHAHAHHAHAHAHAHAHAHA!
Oh OK. DAP sponsored counseling:
DAP Counselor (DC): So, you want to buy a house?
FB: Yes.
DC: And you wonder if taking dap from a homebuilder's charity is a bad thing?
FB: Yes.
DC: Good...you're sooo smart to ask. However taking that DAP is to buy a house is even smarterer.
FB: It is?
DC: Oh yes.
FB: Oh!
Estate Agent: Would you like to sign now?
FB: OK.
Cheers,
Al Green - Top Contributor = Finance/Insur/RealEst $21,000 21.2 %
Gary Miller - Top Contributor = Finance/Insur/RealEst $83,950 41.2 %
Maxine Waters - Top Contributor = Finance/Insur/RealEst $28,650 29.7 %
Christopher Shays - Top Contributor = Finance/Insur/RealEst $291,571 37.5 %
Source: Not Found! - OpenCongress
Apparently, it's not good enough for Congress that any borrower who makes two years or so worth of on-time mortgage payments (and, um, isn't upside down) can qualify for a streamlined FHA refinance that would lower the monthly insurance premium to the level of a "good credit" borrower.
actually, you can be upside down. there's no appraisal required for FHA to FHA streamlined refis.
An honest politican is one who stays bought.
Now who said that? Plunkett maybe???
On the page loading failure OT, I went and found a good host file (being technically semi-literate) which has allowed me to view all the blogs that were 'bonking'...
Alternatively, one could follow Misean's ...mumble grumgle eff'n Firefox grumble mumble... advice, this seems to be limited to IE users.
What's a host file?
What's IE?
What's Foxfire? I think I have it on one of my computers somewhere. Somebody else chose and installed it.
Surely there others such as I?
Maybe I am not following. Is the FHA insuring GSE loans? The government (taxpayer) selling insurance to the government (taxpayer)? Sounds like a shell game. The rube is the person in the mirror.
GSEs report this week. Could be fireworks, for the financials. They have been way too optimistic with their loss assumptions/projections...
Damn, if these people ever lose an election, they can always start writing material for Jon Stewart.
What a country. We mindlessly spent our way into this mess and we'll damn well mindlessly spend our way out of it! I can just hear Ronald Reagan making that courageous speech at the Mall of America.
Connecticut has one of the best educated populations in the country and yet they elect some of the biggest idiots in Congress.
For Firefox:
Mozilla | Firefox web browser & Thunderbird email client
I've had no problems. And I'm on Linux to boot.
Now that "Nehemiah" is back, how about a "Moses Moratorium(40 years)" on FHA foreclosures?
While "Mad Max" Waters is in a safe House seat, Chris Shays (R) is in a Democratic district and very vulnerable this November. He's going to flip like a pancake if any constituents raise hell.
Anyone in CT please call this clown and let him get a whiff of burning kerosene and pitchforks.
actually, you can be upside down. there's no appraisal required for FHA to FHA streamlined refis.
OK, I changed that to "standard" refi. Which term is a bit vague but I'm not getting into FHA refi details today.
I was under the impression that you could do a streamlined-with-appraisal and reduce the risk-based premium on the new loan under the new LTV/FICO-based premium structure. But apparently you can only do that under a full-qualifying rate/term. Sorry about that.
My point with reference to upsidedownness was not that FHA borrowers can't refi if they're upside down; I didn't mean to give that impression. I meant to point out that they can lower the premiums they are paying if their FICO and/or LTV improves from origination of first loan to origination of refinance. If those things don't improve, they can still refi but their premiums would be based on the terms of the old loan.
Thanks Weather Helm. I clicked on that, but it wasn't really helpful.
It assumes one has attained some degree of literacy.
I don't really understand what a browser is. I guess from context it is something that allows you to access the web.
You are talking to someone who computer-wise, doesn't know her ABCs. She's heard that letters exist and they are helpful in all kinds of ways, but that's about it. I have a way to go to become illiterate.
I suppose I need something aimed at kindergardeners. Nope. They're ahead of me. 3 year olds.
Maybe I am not following. Is the FHA insuring GSE loans?
No. FHA insures FHA loans. Conforming conventional loans--the speciality of the GSEs--are either 80% or less LTV with no insurance or they are insured by private mortgage insurers.
DAPs--a form of money-laundering
gloves = off. Love it.
My grandmother writes: What is Foxfire?
That's what the kids use to cruise teh Interwebz.
Tanta, are you talking about the new housing bill or something that exists aready?
Since virtually no lending is available in South Florida, I think I'll be advising future clients, they have 2 choices--FHA, and hard equity lenders. (And oh, yeah, there's the VA, too.)
Can you cash out in this type of loan?
It's fair, I think top have the premia credit; after all, unless you cash out or raise the balance by financing closing costs, no new risk is involved.
CT representation in congress -
Christopher J. Dodd
Joe Lieberman
Christopher Shays
Oh, your FICO score has to improve.
(LTV sure isn't going to!!!)
LL, Tanta - OT: host file does some helping/tranlslation to get to a web page when you are online, IE is the blue e lots of people use to go to web pages and is included with windows, Firefox/Mozilla/fox fire is a better program for going to web pages, it is free and safer to use
On topic- We have the best congress money can buy, and they will stop at nothing to keep things the way they were. Remember, all they have to do is keep patching the holes so the bubble can hold air again. Then it will all be fine once more, long live the ownership society.
Lawyerliz,
Go to this site:
Firefox Browser | Faster & Safer Internet | Free Download
.
Click the big green Free Download. It will download the software and take you to an instruction page.
Cheers,
I really don't know what "cruise the interwebs" means. I do it, but I don't know how or what's happening. It's as if a boat didn't know what water was.
P. S. I wish I were a grandma, but the kids aren't cooperating yet.
Oh, IE is the big E icon? It seems to have a swoosh now, I wonder why.
"No. FHA insures FHA loans" Good. Dodged 1 bullet. I'll celebrate with another mojito.
Lawyerliz, the new FHA risk-based premium schedule didn't go into effect until this year (the one with the LTV/FICO grid).
So there wouldn't be older loans that paid those higher premiums. Therefore, people with older loans would probably just want to do a regular old streamlined refi, because they have no need to try to lower their premiums.
It will be when these new FHA borrowers who pay the risk-based premium go to refi at some point in the future that they might be able to lower their premiums.
It's awfully early to be drinking sez
non-grandma Liz.
Shakes finger.
Thx, Tanta.
Thanks, Misean, but my hub would kill me if I did anything to change the set up on the machine. But I will ask him when he gets back.
Almost everyone agrees Congress is a joke, but then we look at FHA and expect wonders. "Congress created FHA in its own image."
In case anyone's keepin' score the Iranians blew off the Sat deadline. Would have been a shock if they actually pretended to care.
Please barely, I didn't need to be reminded of that.
Miss deadline -> Oil prices UP. What's not to like if you're only export is oil ?
People are extended credit on the basis of various assumption. Character and some basic intelligence are core fundamentals. This latest action calls into question the creditworthyness of the US goverment.
Money laundering?
Kickbacks?
What part of racketeering is missing here.
Government sponsered racketeering. I've seen it all. Pass the thorozine.
I believe Lawyerliz was thinking of FHA "distributive shares." Remember FHA is supported by something called the MUTUAL mortgage insurance fund. Long ago (pre 1990) after several years had passed, if it looked like an annual cohort of loans was going to be "profitable" FHA would pay back a portion of the premia paid in by borrowers from that cohort. In other words, the succesful 1977 mortgages still supported the unsuccesful 1977 mortgages, but if 1977 was a winner overall the 1977 winners could get a little bit back, and 1977 winners didn't support 1980 losers. That was the "mutual" part of FHA insurance. It's still in the law, but the Secretary had the right to suspend it, which happened back about 1990, and no one has ever wanted to unsuspend it.
No one should be surprised that Congresscritters want to bring this back. As I've urged several times before, if you really want to lose your lunch just go the House Housing subcommittee (I think, maybe it's the Banking and Urban Affairs committee) site at house.gov, look at hearings, and watch the video on the DAP hearings held in July of last year.
I expect the DAPs will lay low for awhile, but their PR machines will still be cranking out press releases and sending shills to blogs to blather about distorted statistics for awhile, and that a big push to revive them will come next spring with a new administration, a new Senate, and a homebuilding sector deep in the doldrums.
Among other big problems this country has, the extremely entrenched tendency to use higly personal and judgemental language, which in addition is completely free of insight as to cause, when discussing the activities of the federal government is a significant contributor to our complete lack of ability to make useful change.
In plainer language, 1) blaming individual members of congress as if there actions spring from the void, and 2) doing so in derogatory and insulting language is neither helpful, nor frankly insightful.
The idea that congress 'just does stuff', out of the blue, for no reason, other than there is quite frankly naive and more importantly does not provide insight into why and how the american political situation is what is. We have seen this kind of commentary for years now with regard to the administration, who we are routinely informed by certain parties, are 'stupid', and 'incompetent'. Left unexplained in such analysis is why and how a bunch of stupid incompetent people are in control of the most powerful institution in the world.
In this particular case, the idea that a bunch of congress-people just up and did something out of thin air, is quite frankly naive. Congress doesn't 'just do stuff'. Congress does things because some group of people have convinced them that it is in their interests to do so. The fact, and it is a fact, that it has become common place for congress to do things that are not in the best interests of the general citizenry, but rather in the best interest of some powerful economic actor does not show that the individual congress people are rather it shows that this country has given up any interest in, belief in, or valueing of, the common good, and has instead come to believe that the role of government is to make the world safe for large corporate interests. Golly, you think maybe there's some real estate, or mortgage lending group that believes (rightly or wrongly) that it is in their interests to have DAPs? hmmmm, sure seems likely.
Your diatribe would be much more helpful, and in closer harmony with the truth, if you directed it at the actual agents responsible. If such a direction led you to begin to question the entire modern arrangement of government, in which billions of dollars are spent attempting to manipulate congress, (such as for example fannie and freddie's lobbying -- using taxpayer paid for resources to manipulate the the legal process for the private gain of individuals in control of those corporations), we might actually begin to change something.
In any event, knee jerk blame of proximate causative actors is no more insightful than the knee jerk printing of the talking points of spin meisters so prevalent in other publicly presented material.
Whatever the delinquency rates, wait till you see what the elimination of daps does to further drive down home sales. In my market (suburban PA, halfway between Philadelphia and NY) we've been screwed by the increased FNMA/FHA limit only going up to 420k from 417k. Houses in the 5's, 6's, 7's are flat out not moving because the rates are so unaffordable relative to conventional and fha rates. And, below 420k, in this particular market, you are usually talking about 1st time homebuyers and middle class families. We seem to be turning down lots of people who fit one of two classes:
Class 1: Great credit, lots of money to put down, can't verify income....dead deals today. No lenders around who will even do 80 percent no doc loans at a premium.
Class 2: Bad to average credit, FHA candidate verifiable income, no money. Needs DAP or family gift. Without DAP, these folks are renters.
No one thinks that 100% no doc or stated deals are a good idea. No one things giving FHA loans to people who are going to go bad immediately are a good idea. Just understand the implications...this decision will make a bad situation much worse when it goes into effect.
[the bill requires that these DAP programs offer optional "homebuyer counseling" to all borrowers prior to closing]
If the counseling is as high-quality as that offered to BK filers, then this is clearly a difference-maker.
BTW, I wonder if FHA-insured loans will be able to qualify for the new FHA short refi's... that would be fun!
All this I.T. talk finally makes me feel smart around here!
FINALLY, ERROR MESSAGES WE CAN ACTUALLY UNDERSTAND
Old Bill
I was having trouble with my computer. So I called Bill the computer guy, to come over. Bill clicked a couple of buttons and solved the problem.
He gave me a bill for a minimum service call. As he was walking away, I called after him, "So, what was wrong?" He replied, "It was an ID ten T error." I didn't want to appear stupid, but nonetheless inquired, "An, ID ten T error? What's that .. in case I need to fix it again?"
Old Bill grinned.... "Haven't you ever heard of an ID ten T error before?"
"No," I replied.
"Write it down," he said, "and I think you'll figure it out."
So I wrote down . I D 1 0 T
I used to like Bill.
VoiceFromTheWilderness | 08.02.08 - 10:36 am | # translated...
"Its the system, boys, don't blame the operators."
Myabe - but the operators get to catch hell too. And should.
Even more OT ...
Firefox browser is stable, but that's not the only thing that can come crashing down.
VoiceFromTheWilderness - you rock. Thank you.
Follow the money.
It seems like there are two reasons for having/requiring a downpayment:
Downpayment assistance, depending on the source of the assistance, gets around both objectives. Even in the case of a gift/loan from the buyer's family, the 'obligation' seems weak. It is non-existent if the payment is coming from the seller.
There is NO reason for the government to prefer/encentivize home 'ownership' over renting, especially as a way of creating a financial investment (prices always go up). Homes are housing, and nothing more.
The turmoil that has been created by the crazy 'finance' programs for ownership hurts every US resident/citizen and it isn't worth the positive aspects of 'owning' a home. The phrase 'home ownership' is propaganda, when most people never actually own their dwelling.
I'm madder than hell that we keep on making what should be a low-key aspect of life (entering into a purchase contract for a house that will only be paid off in decades, if at all) as the center of the nation's financial life. I'd forbid securitization of mortgages. Banks should lend only what they have in the way of deposits that are long term. F**k the money lenders in the temple courtyard and their fraudulent practices and usurious ways.
So if I don't have any car accidents while I own my car, can I get my car insurance premiums back when I trade in the car? And my house hasn't burned down, so can I have my fire insurance premiums back? And if Congress passes a law that says we're all immortal, do we get all our life insurance premiums back? 'Cause if we do, I'm gonna get some life insurance.
I love the smell of insanity in the mornin'.
one who knows--
you make the comment that, without DAP 'these people are renters' for your second class of applicants routinely denied credit, as though there is something wrong with being a renter.
The old paradigm--the ownership society--was premised on that belief. And maybe that belief makes some sense, at some level, if you take the mortgage out of the picture. But a mortgaged house is a mortgaged property and not owned the same way something the occupier can stay in as long as the taxes are paid, without a monthly installment coming due on a note, is owned.
But it's a lousy basis for policy.
Big believers in capitalism and the free market--most of the realtors and home builders, all of the mortgage originators, packagers and distributors--should, if they are honest, welcome an unfettered price discovery process, complete with the inevitable overshoot, that destroys those sectors of the economy as they currently exist and creates the opportunity in the ruins and destruction to create new enterprises and amass new fortunes, by meeting the needs of society as expressed through the market choices of a the public composed of free individuals.
I think Freidrich Hayek called it the creative destruction of capitalism, though his sentences were twice as long as that one. Most people don't have the stomach for it. And bonus driven winners driving leased luxury imports go from winner to whiner in about 4.1 seconds when the concept is applied to people living in Tribeca rather than in Flint, Michigan.
Plan A: destroy FHA, this is not my plan this is where this leads. The FHA can only sustain losses for so long, then look out below.
Um, One who knows - who ever said houses in the '5's, 6's, 7's' should be "affordable"? If the buyer can't afford the loan - guess what? Don't buy!
Your implicit premise is that being a renter is inferior to being a housedebtor, which, if you've been paying any attention, isn't particularly tenable on this site.
To reverse the "Driving down (of) home sales" is also not a rational reason to Frankenstein DAP. First, it's a house, not a home. Second, if - when - prices drop to affordable levels, houses WILL sell. Third, putting a buyer's skin into the game is proven to reduce the percentage of foreclosure.
Tic-tock-tic-tock..............
...This is certainly a curious view of what "insurance" is
So much for pooling of risk. How would you price for this?
VFTW
If I understand you correctly, are you saying: Congress is populated by evil and stupid perverts. But let's not hurt their feelings in case their wives and mothers read this site?
heh,
old IT humor - also like the PEBCAK error message
I would not mind gifts as part of a down payment on one condition. The giftor co-signs the note and carries it on their balance sheet as a contingent liability.
It would add a measure of true risk which might lead to a higher level of responsibility.
The honey pot idea of so-called non profits and NGE's is simply politics.
We should prepare for the greatest wealth re-distribution schemes since FDR.
So would this work like a return of premium insurance policy? That would mean higher rates and a poor return on the premium refunded. On the face, a much more regressive policy
"Left unexplained in such analysis is why and how a bunch of stupid incompetent people are in control of the most powerful institution in the world."
Good people skills. This is why personable idiots rise to the top and brainiacs do not.
IMO, most human institutions (schools, churches, governments) and the social rules they spawn are designed by and for the majority - people of average intelligence. The brightest people are outsiders who have to fight to get their needs met and are less likely to obey social rules. They cause (gasp) conflict.
Watch any political campaign and you'll see it in action. Campaigning is not about who's smartest, it's about people skills. Voters don't plan to vote for somebody smarter than they are. They vote for somebody they relate to.
I've seen it over and over. Happy shiny people rising to the level of their incompetence while their smarter, abler peers do all the work.
It's a game, folks. Anybody can play.
My new aspriation is to become a low income, bad credit DAP qualifier. With my new low income status I will not have to pay for my food or utilities. Within the next 6-12 months there will probably be a new "charity" that will make my past due mortgage payments current for me and also pay all my future mortgage payments. I will then be free to spnd all my low income that I will earn on hairdos, nails, cell phones, and shiney new rims for my car. This will also free up my time to whine loudly, publicly & elouquently about my sorry plight. With any luck, I can then become an elected Congresswoman to make sure the freebies continue. I live in a great country!!!! ( sarcasm)
it has become common place for congress to do things that are not in the best interests of the general citizenry... and has instead come to believe that the role of government is to make the world safe for large corporate interests.
Thoughtful analysis, but just how do we cut off these large corporate interests (who have bought our government) without first throwing out their tools in Congress?
Your argument seems circular - it's not really Congress's fault that they're bought and paid for - it's the pigmens' fault. But unless we elect a government that stands up to the pigmen, and says "enough!", we're going to be stuck in this situation for a long time.
The first step is to get people to look beyond typical left/right Dem/GOP divisions. These divisions are a diversionary tactic, or a "divide and conquer" strategy used by empires to keep the people from rising up and claiming their government back.
C_S,
Left unanswered is why I would feel more connection with disenfranchised losers than with the corporate interests that pay my salary, dividends, etc, and which I own small chunks of via equity and who owe me money via bonds. Of course, I'd like to find a better way to handle the "agency problem" and have management slaving away exclusively for me rather than themselves, but that's an entirely different issue. Back on point, I perforce feel little solidarity with minimum-wagers and the unskilled.
Steve Pearlstein had a great column in the Wash post yesterday. He seems to be on a roll - nailing the root causes of a lot of our problems.
Specifically, "As market failures go, however, few have been more spectacular than the massive misallocation of credit and mispricing that led to the giant housing and credit bubble of recent years.
These bubbles had their roots in deregulated credit markets that were hailed as models of innovation and market-driven efficiency. Now that the bubbles have burst, it is more than a bit ironic that government has had to step in to rescue the markets from their excesses and prevent a meltdown of the financial system. And it is simply outrageous that in the past few days, free-market apologists have tried to divert attention from the colossal screw-ups by builders, bankers and hedge fund managers by trying to shift the blame to two government-sponsored enterprises, Fannie Mae and Freddie Mac, which had only a minor role in the subprime debacle."
Most commenters here on CR love to bash the poor subprime slime and flippers but seem to be less critical - in general - of builders, bankers, and hedge fund managers. I believe in personal responsibility too. The individual home buyers and speculators share the blame, but they only used the tools (easy money and lax due diligence) that were given them. In America, our capitalist values tell us to pathologically pursue profits so these home buyers did what they've been trained to do by free market types for 30 years. It is this profit at all costs ethic that is destroying the financial system, not some silly down payment assistance program for poor folks. We are now seeing the costs of this ethic - corruption at all levels of the financial system have created havoc. When will we learn this lesson?
to be less critical - in general - of builders, bankers, and hedge fund managers
Are you kidding? I don't know of a single non-Tanta thread where commenters don't talk about SRS and SKF. Show us a way to short "poor subprime slime and flippers" and we stop bitching about them.
Sorry, Too Cool:
Officials tackle a baffling case of 'dirty' dollars
http://www.shanghaidaily.com/article/?id=369115&type=Feature
THE businessman arrived at the United States Treasury Department carrying a suitcase stuffed with about US$5.2 million in petrified, nearly unrecognizable bills. He asked to swap it for a cashier's check.
I think you mean DPA (down payment assistance). The effect of the bill would still do away with DPA, and replace it with a risk based insurance premium for financing up to 100%. The deadbeats would still not qualify. Currently ALL borrowers are lumped into the same risk pool and pay the same amount. As long as the risk premia are adequate this is a good idea. It is the same thing that the private mortgage insurers do.
Some belated thread music... the Dap Kings...
YouTube
- Dap Kings - Casella Walk
Most commenters here on CR love to bash the poor subprime slime and flippers but seem to be less critical - in general - of builders, bankers, and hedge fund managers.
What do you expect when the hosts of the site are Countrywide shills and the like? I expect the term 'pigmen' is one of affection, like mortgage pig.
I think instead of bemoaning the rebirth of DAP, we should be looking at setting up organizations so that we, too, can feed from this trough of free money. I plan on using Misean's four sentence counseling program.
central_scrutinizer,
I used to believe that all it would take was "people ... rising up and claiming their government back" until I realized the only folks involved in local governance issues were those who could afford to make it to the various meetings held between 9-5. They could afford to get to the meetings because they didn't have to be at work.
In the last year, I've missed three public meetings that I very much wanted to attend. I'm not my own boss and while I do have a great deal of flexibility, I can't be out of office for hours.
Government seems to be slipping further and further out of our hands, assuming it was ever there to begin with.
FT Woods - good point. And yet so many admire the workaholics who stay at the office till 8:00 pm or later. Was a badge of honor for some of my friends when I worked in DC. Society can't function when people don't have time or energy for family or civic duties.
This will also free up my time to whine loudly, publicly & elouquently about my sorry plight.
You seem to have plenty of time for that already.
"Golly, you think maybe there's some real estate, or mortgage lending group that believes (rightly or wrongly) that it is in their interests to have DAPs? hmmmm, sure seems likely."
Yep, like, for example, the Holy Trinity Church of Chicago, handing out DAPs to constituents from grants recieved via the USG. Something no one wants to even mention.
Posted yesterday, but appropriate here. Sent the following to my Representative, Barbare Lee (D-(Oakland) CA),
While there is probably a time for the DAP, it is not now!
Nearly everyone who received a DAP benefit in the last three years (especially in CA)now is in far greater debt than they ever imagined they could be. If they haven't lost their home already, they are in danger of losing both it and their credit rating (which will affect their ability to rent when they do lose their home).
The same is very likely to apply to those who buy a home in CA using a DAP during the next few years. Home prices are still dropping and if history is followed they are not likely to stabilize for several years. For example, check out:
LACaseShiller3PriceReal.jpg (image)
for the story of Los Angeles home prices after the bust in the early 1990's.
The in the current market, allowing a DAP to be used to qualify for a home purchase will be doing a disservice to the homebuyer.
REBear - yes there is talk bashing builders etc, but I think the general tone of the comments here blame the individual home buyers rather than the easy money that enabled them. I have a friend who works for WaMu and he finally started getting defensive about his company's role. He said the Wall Streeters were forcing them to move the money at any cost. He claimed they were driving the money flow to subprime slime.
And, of course, stdfs wrote: What do you expect when the hosts of the site are Countrywide shills and the like?
So there is some disagreement on this issue. Thanks for replying to my posting.
Kid Clu writes:
My new aspriation is to become a low income, bad credit DAP qualifier. With my new low income status I will not have to pay for my food or utilities."
Sorry, but I doubt "those" people you envy would appreciate your sarcasm. If you think they're living life better than you are, then you're either stupid, blind, or bigoted. I suspect the latter--and your handle "kid clu" reminds me of the klu klux klan.
Class 1: Great credit, lots of money to put down, can't verify income....dead deals today.
Don't these people pay income taxes?
The real problem we have had is the financing system. The system generated enormous rewards - hundreds of thousands for homeowners, millions for RE professionals, billions for financiers - to perform actions that only very financially astute individuals would recognize as foolish or fraudulent. The core has been these insanely complicated high finance deals that take a PhD of work to understand. It's crazy to expect people to behave properly under that kind of pressure.
WTF does anyone expect from The Worst Congress, Senate, President, Treasury, FOMC, SEC, FTC, FDIC..... ????
America wanted The Bush Coup and they will pay for decades!
Paul, IMO (which is not worth much), the fault lies with the people and their representatives. I take it as a given that everyone is ready to succumb to the rewards of fraud whenever the opportunity is presented to them. In order to prevent that, you must have regulation.
What this country needs, but will never get, is a coherent and rational national policy or strategy for housing. We need the same for manufacturing, energy, yada yada.
Everyone has abrogated responsibility in the name of the invisible hand. As a result, everyone is gaming what passes for a system in this country.
The idea that Americans might suffer any pain is so abhorent to professional polticians that they are prepared to do any crazy thing to try to fend it off. This is a sort of the political version of that drug that Limbaugh, the reactionary radio guy got hooked on (I have blotted out the name of the drug for some reason. Is it drug oxycontin or something like that?).
Actually, to get the representatives from urban minority neighborhoods to stop seeking this kind of program, you need a different kind of leverage.
Community organizers, and the kind of churches and temples that actually run soup kitchens, are behind this because they believe that home ownership is a route out of poverty for working people.
In this case, industry is selling them and the people they try to help down the river.
Get the leaders in the neighborhood to believe that down payment assistance is a trap, and it will be harder for Ms. Waters and others to support it.
By the way, in this economy, we are likely to need soup kitchens and tent cities. It's better not to trash the people who give money and time to provide them.
Mortgage Applications Decrease in Latest MBA Weekly Survey
Mortgage Applications Decrease in Latest MBA Weekly Survey | RISMedia
The Mortgage Bankers Association (MBA) released its Weekly Mortgage Applications Survey for the week ending July 25, 2008. The Market Composite Index, a measure of mortgage loan application volume, was 420.8, a decrease of 14.1% on a seasonally adjusted basis from 489.6 one week earlier. On an unadjusted basis, the Index decreased 13.7% compared with the previous week and was down 30.3% compared with the same week one year earlier.
The Refinance Index decreased 22.9% to 1074.4 from 1392.7 the previous week and the seasonally adjusted Purchase Index decreased 7.8% to 309.5 from 335.6 one week earlier. The Conventional Purchase Index decreased 7.1% while the Government Purchase Index (largely FHA) decreased 9.5%.
Swedish Chef @ 1:28 pm
Bravo!
To follow on from my comment above, I've read conservative writers who will tell you we should have no FDA. They say that the "marketplace," the "invisible hand" will ensure--in the long run-- that food and pharmaceutical companies make "good" products.
The problem is, in the short run, thousands will die because of tainted food and pharmaceuticals.
Is society willing to pay that price?
Site problems. Just hit the stop button as soon as the page loads. you have to be fast. Then no problem.
I have had the displeasure of meeting Maxine Waters several times, years ago. She is racist and hates the police. her understanding of complex issues is very limited. imo.
I dislike getting drawn into political discussions but this is one of those few cases where there is a simple and obvious source of so many of these problems of governance; redistricting. The lack of competitive districts has resulted in the likes of Maxine Waters and pretty much any other pure partisan safe seat holder. I give you Laura Richardson. Failing apolitical districts maybe incumbency should require 55% then 60% and finally 65% for subsequent reelection.
I was watching a pretty interesting segment of Anderson Cooper last night, and there was an "expert" who said very simply: "The fundamental question facing the U.S. today is...are we willing to take short-term pain for long-term gain?"
Of course, they debated the question for half an hour. But it wasn't necessary. The question said it all.
In a mature democracy with so many diverse interests, I think the answer has to be...half.
Half short-term pain.
Half long-term gain.
Split it down the middle.
Of course, it's not split down the middle now. It's way slanted to short-term gain and long-term pain.
But change is a comin'. The people on this board are smarter and more articulate by a lot than the average. But they really aren't that far out of the mainstream.
The problem is...half short=term pain is gonna feel awful to tens of millions of people. Including a lot of stock market investors, I'm afraid.
I suppose this can be made to work--just increase the premiums so that the losses will be covered by the interest on the escrowed premiums instead of by the premiums themselves.
Oh, wait, that wouldn't be "affordable" any more....
mp wrote: To follow on from my comment above, I've read conservative writers who will tell you we should have no FDA. They say that the "marketplace," the "invisible hand" will ensure--in the long run-- that food and pharmaceutical companies make "good" products.
Thanks for your thoughts. I happen to work for Pfizer as a process engineer in a drug manufacturing plant. Most of us will do the right thing when it comes to patient safety. The FDA has created a framework for good manufacturing and lab practices. The danger in pharma comes from the non-scientist business side. They have no perspective on safety issues and will, as I said earlier, pathologically pursue profits at any cost. This is how you get supply chains that stretch to China where they have no problem adulterating stuff to make money. Google "heparin poison China" for good examples. There is no business ethic in America. This housing crisis has proven that.
I'll repeat my comments from the earlier thread:
So the Housing Bill is passed - and FHA got their wish - to axe the Seller funded downpayment assistance program. Which is a very large part of the current sales activity in the market. Because of claims about "possible" losses.
Once again - how about some math and real facts to support the claims?
From FHA - as of June 30:
Total Active Portfolio - 3,896,389 loans - Foreclosures total 58,876 - which makes the total foreclosure rate is 1.51% currently on the entire FHA portfolio.
The FHA added 68,588 new loans in June 2008, an annualized rate of appx 823,000
Various reports claim a foreclosure rate 2 times higher on the loans with Seller downpayment assistance and that appx 30% of FHA loans are current originated using Seller funded downpayment assistance.
U.S. GAO - File Not Found d071033t.pdf
At 30% - there would be appx 247,000 new loans this year that used Seller DAP.
The regular foreclosure rate of 1,51% on these loans would equal 3,728 foreclosures normally. With a doubled foreclosure rate of 3.02% on loans with Seller DAP appx 3,728 additional foreclosures would occur on this pool over the year. This represents just 0.45% of the total number of new FHA loans for the year.
Using a median home price in the US in June 2008 of $215,100 that would represent $801.99 million in additional loans foreclosed due to Seller DAP. The FHA loose appx 25% as each of these loans are sold after foreclosure - which would mean on these additional 3,728 foreclosures over the next year a total loss of $200.49 million.
So - 247,000 homeowners are helped overall by the Seller downpayment Assistance Program. A total of 3,728 over the standard foreclosure rate for all loans with and without downpayment assistance would be foreclosed out of these 247,000.
Which means 243,000+ homebuyers were helped by the Seller downpayment assistance program who were NOT foreclosed.
The total costs to help those 243,000+ homeowners is appx $200 million (the loss on the additional foreclosures due to the program.) If we divide $200 million by the total 247,000 loans that received Seller DAP this loss comes out to $812 per loan. Why would we NOT simply increase the FHA mortgage Insurance premium for Seller funded Downpayment assistance loans by $812 - and continue to help the 99.55% of people who used the Seller DAP and did not get foreclosed?
More ridiculous yet - the FHA MIP is financed - added into the loan. At 6.75% interest over 30 years that $812 costs $5.97 per month
The Seller DAP helps people buy homes. Some will default, and at a higher rate than loans without it. Instead of simple rational effort to assess those costs to benefiting borrowers - who would gladly trade $812 in insurance premium for their downpayment - we throw out the entire program.
Why is it smart folks - with excellent insight - like Tanta and Calculated Risk - do not make the effort to drill down to the facts regarding these issues?
Don't these people pay income taxes? -
Fair Economist
Yes and no. When you have self employment income or operate on a cash basis, it tends to be in your best interest to pay an accountant large sums of money to reduce your tax exposure (via legal deductions.) A good accountant can save you a bundle on taxes but doing so lowers your income down to a point where it really limits what loans you qualify for.
So, it isn't that those people don't have the income, it is that their accountant has reduced it via deductions for tax purposes. In order to qualify for larger loans they have to go stated income and pay a higher interest rate, otherwise the lender looks at the taxable income line on their 1040 and limits the loan amount based on that.
Excellent post, VoiceFromTheWilderness. There needs to be a lot more depth and critical thinking about the cause of these issues than simple self righteous ranting.
Anti congress people ranting is utterly simplistic and, in fact, stealthily supports the status quo in the current, badly broken system in that it individualizes the complaint instead of attacking it at its root, THE SYSTEM.
When a lawyer has a dirty client, he/she attacks the system--same with lawyers turned pols. The difference is in scale--not morality. The defendant/pol with more money gets the better mouthpieces.
As ASG keeps posting in these threads, it may be necessary to note some of the issues with his calculations. In the first place, he is calculating an annual foreclosure rate. People tend to own homes for more than 1 year. He may wish to note the figures in the GAO study that show that about 20% of DAP loans go bad in the first 4 years in cities with modest rates of house price appreciation. Since loans often take more than 4 years to go bad (go bad here is defined as going all the way to foreclosure, obviously these loans go delinquent much faster, but it can take more than a year from delinquency to foreclosure), and some loans refinance and then go bad (so the original loan doesn't look like a bad loan - the foreclosure gets attributed to the refi, not the purchase), that is obviously a lower bound on how many homebuyers end up in foreclosure when house prices are rising about 4% per year.
The other thing to note is that ASG is using the 2007 claim rate, which reflects a time when house prices had still been rising. I think we'll all be curious to see the 2008 and 2009 foreclosure rates, and I'd be willing to give substantial odds that they will be more than twice the 2007 foreclosure rates (I actually think 2009 will be at least 4x 2007, but if I'm going to give long odds I want some kind of margin for myself).
When you have self employment income or operate on a cash basis, it tends to be in your best interest to pay an accountant large sums of money to reduce your tax exposure (via legal deductions.) A good accountant can save you a bundle on taxes but doing so lowers your income down to a point where it really limits what loans you qualify for.
Horrors! I guess somebody will have to decide which is in their best interest: avoiding taxes or qualifying for a mortgage.
I missed the Friday nite pizza party. Here are a few FDIC updates below:
Financial Times
FDIC warns four US banks over liquidity
By Sarah Mishkin in New York
FT.com / In depth - FDIC warns four US banks over liquidity
FDIC issues cease and desist order against BankHaven
FDIC issues cease and desist order against BankHaven - Wichita Business Journal:
FDIC Orders Changes at BankHaven
FDIC Orders Changes at BankHaven - The Kansas CW |
Some major housing related stories:
Fannie, Freddie seen boosting loss estimates, again Fri Aug 1, 7:41 PM ET
NEW YORK (Reuters) - U.S. mortgage market giants, Fannie Mae and Freddie Mac , may report further downgrades to their forecasts for credit losses in their upcoming second-quarter results, starting next week.
S&P emails slammed mortgage debt products: report 1 hour, 33 minutes ago
CHICAGO (Reuters) - Analysts at Standard & Poor's Rating Services warned against mortgage-related debt products in internal e-mails that, in one case, called the complex financial deals "ridiculous," the Wall Street Journal reported in its weekend edition.
"Let's hope we are all wealthy and retired by the time this house of card falters."
Closing the FDA and waiting for the "invisible hand" to fix things is a bit like lifting the ban on kidnappings in the hopes that the market will eventually settle the problem.
It won't. Just like we benefit from certain common frameworks, like language (English), currency, justice system, etc., we all benefit from a legal framework to regulate food and drugs.
Note that if you want to go outside the framework you can still get a lot of "herbal" medicines for whatever ails you, so long as they don't make a claim on the packaging that it cures some disease. Just don't count on any miracles from such drugs.
Site problems. Just hit the stop button as soon as the page loads.
IE7
click: Tools
click: Internet options
click: Security
click: Restricted sites
click: Sites
In add website to this zone type http://js.sitemeter.com
click add
click: close
Worked for me, may want to remove it in a couple days to see if flaw has been fixed
Horrors! I guess somebody will have to decide which is in their best interest: avoiding taxes or qualifying for a mortgage.- Yalt
Exactly. Although, back before housing prices went insane, you could do both. I was able to when I bought in 2002, but I just barely squeaked by the income threshold for a $150k loan. No way you can do that kind of juggling with prices today and lenders ratcheting down on no doc loans. Either a someone self-employed takes the hit on taxes for two years so they can qualify or they aren't going to be buying.
And to followup ...
The DAP program helps sell homes - period - and is used by a lot of buyers today ... lost in all the frankly uneducated attacks are the the facts
Yes default rates are as much as 3 times that of regular FHA loans - and foreclosure rates are doubled ...
But even at a 2 times higher foreclosure rate - increasing from 1.51% to 3.02% that still means 97% of those who use the program are NOT foreclosed ... if FC rates increased to 3 times you get a 4.5% foreclosure rate - which means that 95.5% of DAP borrowers do NOT get foreclosed
The risk based pricing as I showed above is a simple, effective solution - and does not cause a huge increase in premium - even if only applied to loans using DAP
On the other hand, if the increased risk is spread across all FHA loans the premium increase is a few hundred dollars - a couple dollars a month
Many say the good loans should not subsidize the bad ... yet a case can pretty easily be made that something that increases buyers in the marketplace - increases demand - is good for all homeowners
I'd think a combination - a slight increase in premiums for all FHA loans - even a $100 increase would add appx $80 million annually to the insurance fund - coupled with a the majority of the risk being priced into a higher premium for DAP loans - makes a lot of sense
The fact is the loans with DAP do have higher foreclosure rates - doubled - than std FHA loans - but doubling means 3% vs 1.5% - which also, again, means the vast majority are not foreclosed
Adding a risk based premium, which as I showed adds a relatively small amount, allows the increased risk to be covered and allows a program with very big benefits - to buyers and the industry (and since housing is so important a part of our economy, helpoing the industry is helping all of us) to continue and thrive.
DAP programs work - and the vast majority of these loans 95%+ are not problems. DAP provides big benefits starting with helping people own homes - and the small percent that fail should not be a reason to penalize the 95+% that do not ....
I'll keep respectfully asking the fair question - Tanta and Calc Risk ... you are usually very detailed in your analysis - why is it this issue (and a few others) don't get this level of review? Why not verify/do the research as I did above and find out the real story - the real numbers - so folks can make educated, informed judgments .... ?
mp writes:
I've read conservative writers who will tell you we should have no FDA. They say that the "marketplace," the "invisible hand" will ensure--in the long run-- that food and pharmaceutical companies make "good" products.
I think you are confusing conservative and extremist libertarian. Regular Libs accept an absolute minimum of governance. Conservatives generally promote regulatory government and liberals advocate interventionist (activist) government.
Thanks ASG.
By helping promote fraud we have higher housing prices and higher risk to lenders using DAP. This results in more costs to those of us who gasp save up to have a down payment.
I understand completely now!
Right now we've got a lot of neo-conservatives in control and they want to dismantle everything. Even Clinton played along, which may be why he observed of himself, "I'm acting like a god-damned Republican," or words to that effect.
Glass-Steagall was destroyed, the FDA budget is an abomination, yada yada.
IMO, some of what we're seeing is the direct result of de-regulation and conservative neutering of otherwise worthwhile governmental agencies.
ASG,
You are quoting annualized numbers from historically low FC rates. I'm not the first person to try and get you to acknowledge these points. When so many people are telling you your analysis is flawed it isn't the best strategy to call them frankly uneducated.
Paul writes:
mp wrote: To follow on from my comment above, I've read conservative writers who will tell you we should have no FDA. They say that the "marketplace," the "invisible hand" will ensure--in the long run-- that food and pharmaceutical companies make "good" products.
Thanks for your thoughts. I happen to work for Pfizer as a process engineer in a drug manufacturing plant. Most of us will do the right thing when it comes to patient safety. The FDA has created a framework for good manufacturing and lab practices. The danger in pharma comes from the non-scientist business side. They have no perspective on safety issues and will, as I said earlier, pathologically pursue profits at any cost. This is how you get supply chains that stretch to China where they have no problem adulterating stuff to make money. Google "heparin poison China" for good examples. There is no business ethic in America. This housing crisis has proven that.
Paul | 08.02.08 - 2:05 pm | #
Similar situation - I was a process engineer went into sales (industrial mechanical stuff)... you have NO IDEA how much the biz side will sell out the future to make the numbers today (taking a chance future liability to keep the show going even though they KNOW it is likely to blow up later) until you have sat in those meetings.
You really have to see it to believe it.
Anyone who says we don't need regulation is 100% completely FOS or is dishonest. Pick your poison.
The one legit argument the invisible handers can make and be right on is that almost all regulatory processes involving high margin profitable products will eventually become owned by the people (and their money) whom they regulate. Revolving door rules.
I don't have an answer to that except constant vigilance & free speech - exposing the corruption & sweeping out the bums before too much damage has occurred.
We need a sweep right now - major league sweep.
New Hampshire banking officials accuse Mortgage Specialists Inc. of more than 60 violations, including forging signatures and destroying documents. Massachusetts banking officials on Thursday accused the company of unfair and deceptive business practices. Gill maintains the problems concerned disclosure of information to the state, not cheating customers. And he said the company will pay a fine.
Banking Commissioner Peter Hildreth said allegations include photocopying signatures and moving them from one document to another.
The Massachusetts Division of Banks said a review prompted the same conclusions.
In New Hampshire, the Banking Department issued a cease-and-desist order, which Hildreth said would make any repeat of the 50 violations a criminal, rather than a civil, matter.
Massachusetts also ordered the company to stop doing business as a mortgage broker.
IMO, some of what we're seeing is the direct result of de-regulation and conservative neutering of otherwise worthwhile governmental agencies.
mp | 08.02.08 - 2:58 pm | #
So when we write in 'MP for President'... do we have to write in 'Conjure bag' for VP... or is it an automatic?
The banks receiving cease-and-desist orders in June were MetroPacific Bank in Irvine, California; Bank Haven in Haven, Kansas; Clarkston State Bank in Clarkston, Michigan; and Hastings State Bank in Hastings, Nebraska.
Non-performing loans in Clarkston States portfolio nearly doubled to 4.6 per cent between the close of 2007 and the end of the first quarter of 2008, according to first-quarter earnings report released in April.
Clarkston States chief executive, J. Grant Smith, said in a statement accompanying first quarter earnings that business conditions remain weak and commercial loan demand is anemic.
Sorry. Page not found.
As ASG keeps posting in these threads, it may be necessary to note some of the issues with his calculations. In the first place, he is calculating an annual foreclosure rate. People tend to own homes for more than 1 year. He may wish to note the figures in the GAO study that show that about 20% of DAP loans go bad in the first 4 years in cities with modest rates of house price appreciation. Since loans often take more than 4 years to go bad, and some loans refinance and then go bad (so the original loan doesn't look like a bad loan - the foreclosure gets attributed to the refi, not the purchase), that is obviously a lower bound on how many homebuyers end up in foreclosure when house prices are rising about 4% per year.
The other thing to note is that ASG is using the 2007 claim rate, which reflects a time when house prices had still been rising.
If you have challenges with my posts then feel free to present your own hard data to correct them ...
I'll suggest you also re-read my post - I used the JUNE 2008 data directly from FHA Servicing Portfolio Summary - NOT 2007 numbers - the 1.51% foreclosure rate is calculated directly from the June 2008 numbers (which I included in my post).
And it is absolutely proper to compare annual foreclosure rates in this exercise ... overall frequency of foreclosure between DAP and non-DAP loans is the issue
If foreclosures are doubled on DAP loans - then the rate is going to go from 1.51% of all loans to 3.02% of all DAP loans. I did the math and showed the difference - with hard data - from the FHA and the GAO report noted.
Apparently in ASGs world if someone goes a year without getting foreclosed they are a rip-roaring success. Others may beg to differ.
Dryfly, you're a businessman, so am I, so you know that, in the "real" world, neither one of us can afford the luxury of having any politics that "show."
You know what I mean.
Conjure and I have a fairly good idea of what's going on, and we'd be stupid if we didn't work it.
'Ya know?
Mortgage application volume drops to 2008 low
Post-Gazette NOW - 404 Error
Mortgage application volume fell 14 percent during the week ending July 25, the Mortgage Bankers Association said, even as interest rates on fixed-rate mortgages retreated from sharp increases a week earlier.
The culprit behind the drop: refinance volume, which plunged almost 23 percent during the week. Purchase application volume also fell, but was off about 8 percent.
Mortgage broker John Stearns, vice president at Robbins and Lloyd Mortgage in Mequon, Wis., said the appraisals for many homes are coming in close to or below the value of the existing mortgages.
"[The appraisal issue] is a problem that will take a long time to straighten out," Mr. Stearns said, especially as home prices continue to fall, eroding equity.
So far, nationwide home prices have dropped more than 18 percent from their peak in July 2006, according to Standard & Poor's/Case-Shiller 20-city index.
Also, interest rates aren't low enough to benefit some homeowners, said Ritch Workman, co-owner of Workman Mortgage Co. in Melbourne, Fla.
"Rates have been at about the same levels for the past five years, so there's no interest rat
ASG has not provided a link for his June 2008 data. So I don't know the definitions for anything that he has posted. But if his number of foreclosures is 2008 TODATE, then his annual foreclosure rate would be double the 1.5% that he cites. Without a link or precise definitions I can't honestly say what his numbers are supposed to represent.
When so many people are telling you your analysis is flawed it isn't the best strategy to call them frankly uneducated.
Ad hominem attacks make sense when the facts aren't on your side and you need to confuse matters. Can you suggest a better strategy?
ASG - I have no problem if DAPs are used as long as (1) they truly are arms length charitable aid and (2) with no strings attached and (3) the people qualify regardless.
So for example, if builders want to give money to the Catholic Church and the church is COMPLETELY FREE to use as it see's fit but does give some DAP aid to poor folks needing shelter (maybe here in US or maybe in Mexico City - whatever)... then fine, let them do it & let them deduct.
I don't think that is what Maxine's contributors are looking for - helping squatters in Manila - do you?
Tanta's money laundering poke was maybe a little too close to home?
mp writes:
Dryfly, you're a businessman, so am I, so you know that, in the "real" world, neither one of us can afford the luxury of having any politics that "show."
You know what I mean.
Conjure and I have a fairly good idea of what's going on, and we'd be stupid if we didn't work it.
'Ya know?
mp | 08.02.08 - 3:08 pm | #
Unfortunately I know all too well.
Qualifing for a loan should be more about cash flow that after tax reported income.
Just give them your tax statements and if they can't figure it out, you don't want to do business with them.
God, I'm so old school. Forget the above. It's all about Fica trees or something now.
Re: Money laundering is the practice of engaging in financial transactions in order to conceal the identity, source, and/or destination of money, and is a main operation of the underground economy.
In the past, the term "money laundering" was applied only to financial transactions related to organized crime. Today its definition is often expanded by government regulators (such as the United States Office of the Comptroller of the Currency) to encompass any financial transaction which generates an asset or a value as the result of an illegal act, which may involve actions such as tax evasion or false accounting.
See also: National Delinquency Survey
Ross writes:
Qualifing for a loan should be more about cash flow that after tax reported income.
Just give them your tax statements and if they can't figure it out, you don't want to do business with them.
I can see why this might be a problem, though, for someone running a "cash-based business" who's trying to conceal the cash flow from the government.
Here is an easy one....don't cheat on your taxes if you want the best mortgage rate.
If you want to cheat on your taxes accept that part of the cost of breaking the law is higher mortgage payments.
"Unfortunately I know all too well."
One thing I've noticed over the last several years is the increasing number of shysters wearing religion on their sleeves.
Sometimes I wonder: are these people religious types being rewarded with easy marks by the current regime for their support, or is this a case of born shysters using the "religion" badge, or both? Both, probably.
Oh, well. I digress.
Two more things ASG is missing:
First, the excess foreclosure from DAP are about 1/3 of total FHA foreclosures but the total is TWO-THIRDS. In other words, most of the cost of the FHA program is from this subset of buyers!
Second, as house prices drop, recovery rates will collapse. Those losses will double or triple in the near future.
If you wanted to put on a premium for DAP, it would need to be the two or three times the $812 you mentioned, and it has to be every year since the $812 only pays one year of foreclosures. So the premium would be about $2,000/year, or $250/month. Considering this is targeted at low-income buyers, obviously at those rates there would be essentially no honest needy borrowers - nobody would borrow with that premium except to commit fraud.
DAP doesn't work for the basic reason that 0% down doesn't work. You can't have a deal where one side has all the potential for gain and the other has all the potential for loss.
dryfly,
Anyone who says we don't need regulation is 100% completely FOS or is dishonest. Pick your poison.
Neither nor. What we need is not regulation, per se, but transparency. I've been in precisely those same meetings you mention, where the sales side pushes for what sales gets paid for, selling stuff, to the ultimate detriment of the firm. And I'm fine by it. They are often enough killing the company, but that's a-okay. Companies come and go. If the assets or people are worth anything, another will come along to pick 'em up on the cheap. The only question is whether the reported metrics are transparent enough for somebody to make an informed decision on whether to put their money there or not. Capitalism requires epic failures as much as anything else.
Class 2: Bad to average credit, FHA candidate verifiable income, no money. Needs DAP or family gift. Without DAP, these folks are renters.
OK. So what exactly is wrong with renting in general? And today with decling values is not renting the more astute choice.
Well, BG, I would say that the only way you get transparency is with regulation.
I've read conservative writers who will tell you we should have no FDA.
According to Milton Friedman, government regulation wasn't needed if civil litigation was effective.
What would you rather have: an FDA or a extremely punitive torts system? Currently, we have the worse of all situations: the FDA has been captured by industry, the citizenry is complacent, and litigation is preempted. To get a drug or device approved, it just needs to be shown to be minimally "safe and effective." Already, Congress has preempted negligence or fraud lawsuits for medical devices. The Supreme Court decides in October whether ALL suits involving pharmaceutical drugs will be preempted as well.
Milton Friedman was an idealist and I don't play well with those.
Neither nor. What we need is not regulation, per se, but transparency.
Just like we don't need cops and courts - I mean, hey everyone can see that car was mine and that dude stole it... so why do we need cops and courts to get it back?
And then what do we do with him?
Same difference except FAR more complicated - how do we PREVENT or deter someone from doing it again?
I have a right to swing my fist about but I don't have a right smack it into your face... nor do I have a right to swing it about and imply to or threaten to smack it into your face.
Where do we draw the line? Who decides how close I can swing it? You? Me? The strongest & scariest of the two of us decides? Or do we work it out after I smash your face?
It was the inability of 'Libertarians' to answer & more importantly operationalize those issues that made me give up on Libertarians as much as I have given up on 'Marxists'.
Good regulation enforced by honest and accountable people WITH TRANSPARENCY is the answer - anything else is BS.
According to Milton Friedman, government regulation wasn't needed if civil litigation was effective.
Everyone a lawyer - I respected some of Friedman's ideas but that's nonsense in a world of complexity like we have now. Maybe it would have worked at around the time of the Magna Carta - not today.
Yeah, just one year is involved, and yeah, we aren't in normal times now, but isn't it true that in normal times these things get "seasoned". After a while, people, even scoundrels, get attached to their house, and want to keep it. After, say 4 years, or 5, I betcha the experience approaches "normal" FHA loans. Again we are in a declining mkt, so it may mean that the huge (snark) 3% downpayment which is supposed to make all the difference, may become less and less significant.
Or maybe in 2 or 3 years we will go back to normal, after the mkt really does bottom out. I certainly hope so. I don't want to see a death spiral in 2 or 3 years still.
That said, I NEVER give legal advice for free. If someone is really poor and really needs advice, I'll charg'em 25 bucks or whatever. People do not appreciate free advice.
People do not heed free advice. The people who have treated me the worst were the "pro bono" people. For that reason, I don't do pro bono.
A friend thought he ought to do pro bono and ended up with a lot of dads who wanted to get out of paying child support for their kids. Not what he had in mind.
I suppose this is true of "free" houses, also. People appreciate what they have to fight for. So attending those seminars may be a psychological equivalent of fighting to put money in the bank. maybe.
We got some help from the hub's rich old aunt when we bought our first 2 houses. We paid our payments. I don't see it made a difference in our behavior. Except we felt we had to be really nice to the aunt. Whom we liked anyhow.
The_scum - You are quoting annualized numbers from historically low FC rates. I'm not the first person to try and get you to acknowledge these points. When so many people are telling you your analysis is flawed it isn't the best strategy to call them frankly uneducated.
First - 2 people have comment on my numbers - including you - and neither offered any factual support
Historically low foreclosure rates?
Again - I as noted used the latest JUNE 2008 numbers directly from the FHA Servicing Portfolio Summary - which list current up to date stats for every lender in the FHA portfolio.
As of June 30, 2008 there were a total 3.896 million loans in FHA portfolio. There were 68,588 new FHA loans in June 2008 - an annualized rate of appx 823,000. The foreclosure "count" as of June 30 2008 was 58,876 loans.
Simple math shows the foreclosure count divided by total loans yields a 1.51% number for all loans all vintages.
The same report shows the FHA Foreclosure Rate for the US over last 5 years was 1.94% - which put to rest the claim that current overall portfolio foreclosure rates are actually BELOW the historic norm - not above as implied.
And once again - when comparing - using annualized numbers is completely proper and correct.
If you disagree then post your own data and sources that refute ....
Rowan writes: What would you rather have: an FDA or a extremely punitive torts system?
Aside from the fact that the conservatives want to de-fang the courts with respect to torts, the problem is that without regulation you can only sue after you are dead. Think Ford and gas tanks. Compared to the scale of fraud and corruption involved in this housing bubble, very few are actually going to jail. The legal system is ill-equiped to deal with fraud on this scale. The only remedy is regulation to PREVENT injury.
Frankly, I think we need Agent Conjure Bag at every real estate closing. The meeting would start something like the following.
"Good morning! My name is Agent Conjure Bag, and I'm here to remind you that you're free to do anything you want, so long as it's transparent.
"The rules are simple. If I discover you've violated the transparency rule, I visit your home during the middle of the night and relieve you of your man/woman-hood with my sharp teeth."
"And what is the transparency rule? I leave it for you to figure out what I know it to be."
"Are there any questions?"
According to Milton Friedman, government regulation wasn't needed if civil litigation was effective.
If bringing back the dead was part of what he meant by "effective civil litigation" I might be inclined to agree. Otherwise, the payoff in a wrongful death action never quite seems to offset the loss.
"So what exactly is wrong with renting in general?"
Nothing as long as the landlord is paying the mortgage.
An entire neighborhood is vanishing by way of a little-known effect of the foreclosure crisis: owners of small apartment houses defaulting on their payments.
Myrtle Court, a cul de sac near Demaree Road and Highway 198, is losing its residents as lenders foreclose on a string of attractive fourplexes built in the late 1990s and evict those living inside. Lenders have repossessed or in the process of taking back at least eight of the 12 apartment houses that occupy the block-long street, all from the same owner.
Neighbors Charles Head and Larry Thomas have witnessed the exodus and know they will soon be packing their own bags. Head's fourplex is scheduled for a trustee sale on Tuesday, and Thomas, whose unit was reclaimed by a lender July 14, plans to be gone by next month.
The lender, Countrywide, offered Thomas a "cash for keys" deal that pays him $1,500 if he moves out before the 60 days he is entitled to by law. "I don't want to move," Thomas said. "But Countrywide doesn't want the liability of someone living here."
http://www.fresnobee.com/business/story/768332.html
Total Active Portfolio - 3,896,389 loans - Foreclosures total 58,876 - which makes the total foreclosure rate is 1.51% currently on the entire FHA portfolio.
The total FHA portfolio only has a 1.51% foreclosure rate?? Ever?
Or is this a yearly rate that includes vintages of up to 15 year old mortgages?
Can you cite a source for the 3.02% foreclosure rate? If not, I can use the current time of day, 3:54PM and make it 3.45%...that's my source.
More lender stupidity. What is wrong with getting some cashflows? Countryfried isn't buying insurance?
Couldn't they get tenants who want to stay they to pay for some insurance? The whole neighborhood is gonna get infested with crackheads and bums with this stupidity and NO ONE will be punished for this.
Ok, can't local gov't pass a law saying that you can't have more than a certain percentage vacant?? Oh, ok, I guess that is an ex post facto law.
Can't the local govt do something, anything about this?
And why are these landlords getting foreclosed?
Pay too much? Loans adjusting? What?
ASG still can't be bothered to provide a link or define his cumulative foreclosure number. Foreclosures from Jan to June 08? In that case, his 1.5% is a 6-month rate? Foreclosures from July 07 to June 08? In which case, his foreclosure rate is not an 08 rate as he claims, since half the time period is 07. Foreclosures from Jan 08 to Dec 08? In which case how the hell does he know how many foreclosures there will be next month?
Comparing annual rates may very well be appropriate for getting at relative differences. But ASG keeps insisting that the complement of the foreclosure rate constitutes a success rate. If he's using annual rates, then he's claiming that making it for 1 year (or refininacing and then failing) is good enough to be considered a "success." I still beg to differ.
Residential Real Estate Snapshot
These statistics give you a benchmark to compare specific locations and decide whether they are affordable to you.
Best Places to Live Colorado - Compare Cities Colorado - Relocation Advice Colorado - Cost of Living
Where can I find more current cost per square foot numbers???
ASG writes:
The_scum - You are quoting annualized numbers from historically low FC rates. I'm not the first person to try and get you to acknowledge these points. When so many people are telling you your analysis is flawed it isn't the best strategy to call them frankly uneducated.
Not my post dude. My post was more like: I have a down payment and what you propose will increase costs to me so SCREW YOU, ASSFACE.
But worded nicer.
Re: sharp teeth
That makes me a little squeamish, is there an alternative to sharp teeth?
ASG, when someone posts in the style that you do I immediately become suspicious.
When I encounter such in day-to-day life I check to see if my car is still in the driveway, log on to get my bank balance, look at my last Am Exp statement (the only credit card I have), etc.
Not saying anything is wrong I just automatically become suspicious. Being burned a couple dozen times in the past makes me that way, nothing personal you understand.
"That makes me a little squeamish, is there an alternative to sharp teeth?"
There is also Agent Conjure Bag's eagle-emblazoned Walther PPK, which he carries only for sentimental reasons.
The only remedy is regulation to PREVENT injury.
Paul | 08.02.08 - 3:54 pm | #
If you look back over time most regulation came about because industry wanted to protect the 'reputation & viability' of their market from the rogue participants who knew no limits, no bottom... they did not typically come from 'do gooders' trying to hand cuff legitimate producers...
But after a generation of regulation market participants forget how low the rogues would go if un-fettered... and so we de-regulate and we have to re-learn exactly why the regs were put in place in the first place.
We are doing it again.
In some ways it isn't a bad thing to go through these cycles - the regs get bureaucratic & obsolete (conditions have changed)... so new regs are probably necessary and the only good way to craft them is let the rogues find the holes weaknesses after de-reg. I wish we were smarter than that but probably not.
Hazard writes:
ASG, when someone posts in the style that you do I immediately become suspicious.
We all do.
I haven't read the whole thread - been on the road & am still a bit of a zombie - but askin' the question...
So ASG, who do you work for? A builder, an originator or broker, one of the DAP conduit money launderers or one of their 'astroturf grassroots' organizations?
You obviously have skin in this game - just from reading your posts that much is obvious. Which?
The_Scum writes:
ASG writes:
The_scum - You are quoting annualized numbers from historically low FC rates. I'm not the first person to try and get you to acknowledge these points. When so many people are telling you your analysis is flawed it isn't the best strategy to call them frankly uneducated.
Not my post dude. My post was more like: I have a down payment and what you propose will increase costs to me so SCREW YOU, ASSFACE.
But worded nicer.
Blushes.
HAH ahhhahahah!
To rent or own? I'm getting pissed that I have to pay more and more to a homeowner association, who is basing future cost increases on prior bubble year growth, i.e, they think that revenues should always be parabolic and that reserves should explode at the expense of those now caught in the web of inflation. It seems whether or not you rent or own, your screwed these days!
mort_fin writes:
ASG has not provided a link for his June 2008 data. So I don't know the definitions for anything that he has posted. But if his number of foreclosures is 2008 TODATE, then his annual foreclosure rate would be double the 1.5% that he cites. Without a link or precise definitions I can't honestly say what his numbers are supposed to represent.
The link is http://tinyurl.com/hud-fha
Select "Servicing" Menu - then Portfolio Summary - for United States
The data set is not "to date" it is "as of" June 30, 2008 - representing totals.
There are a total 3,896,389 loans currently in FHA portfolio - the current Foreclosure "Count" is 58,876 loans - divide the FC into total loans and it is 1.51%
Scumboy,
I agree 1000%
Moohawhahahahahabawhawhahaha
The URL that ASG posted just goes to the Neighborhood Watch homepage. There are no figures there. Presumably one would have to dig deeper to find numbers or definitions, but I think that's ASG's job, not mine. I've already posted the relevant figure - 20% foreclosures over the first 4 years, for moderately appreciating MSAs.
But I do have one question about what ASG has stridently posted in the most recent post. He says:
The data set is not "to date" it is "as of" June 30, 2008 - representing totals. ... the current Foreclosure "Count" is 58,876 loans
If this is not "to date" for some time period, does he maintain that for the whole course of FHA's history, going back to 1938, the total foreclosure count is only 58.876? That would be very impressive indeed. If not, then that figure must represent a total over some time period. I'll ask yet again - over what time period is the "total"?
And on review the 1.51% rate - the 58,876 loans listed under Foreclosure Default Count - is actually not ONLY completed foreclosures
The definition shows in addition to completed foreclosures it includes loans where FC has been legally started (as opposed to only a delinquency notice filed)
So this number over reports actual foreclosures
Total number of loans where the default status code was reported as a 1A (Foreclosure Sale Held), 1G (Eviction Completed), 77 (Deed Recorded), 43 (foreclosure started), 45 (foreclosure completed), 46 (property conveyed to insurer), or 68 (first legal action to commence foreclosure); and the insurance status code is active.
I'll ask yet again - over what time period is the "total"?
mort_fin | 08.02.08 - 4:31 pm |
Oops, sorry Mort. I duplicated your question. So, that makes 3 times it's been asked. BTW, his first link went nowhere either.
ASG, I think you're in the wrong sandbox if you think you can toss numbers around and not be challenged.
Who cares about the numbers when the whole PRINCIPLE of what he is arguing for is wrong?
ASG-
How is putting people into homes that are overpriced (and hence their note is higher) "helpful" to them?
I mean, specifically???
Generally, lower wealth folks have more volatile earning streams throughout their lives and the hard number of the fixed payments continually upsets the percentage allocated to housing due to the aforementioned variations in income.
IOWs, how does one plan for a stable economic future for their family when their fixed liabilities are consuming highly variable amounts of their budget from year to year?
Which, I would contend, adds a significant amount of stress to their personal lives.
You'd term that "helpful"? Not being mean-spirited, but, that's a heck of a definition of "charity".
Amen dryfly and mp (+conjure). The problem is you'll rarely see or hear such insightful rebuttal to anti-regulation, and anti-Gubbmint demagoguery in the media, especially the type of media consumed by the average American (i.e. radio, TV and cable news).
Instead we get Rush, Hannity, and a million others. Driving across country, it's amazing how many Rush wannabees there are (in addition to "Christian" programming), all saying mostly the same thing. Confidence artists, supported by business (advertisers).
@dryfly,
You are right about cycles of regulation and deregulation.
I watched in the 60's and 70's how the regulators became out of touch with the way the world worked.
If memory serves, The Carter phone decision paved the way for tel. dereglation. Probably a good thing. I also watched the airlines be deregulated and it has been a disaster.
I still can't see how the deregulation of utilities has been helpful.
Some areas of the economy need regulation. Some need none. It's just 'who decides'.
Further the report shows FC Claims by vintage
There are 1.159 million loans less than 2 years old and there are 2760 FC claims paid (completed foreclosures) against them - a foreclosure rate of just 0.24%
There are also a total of 1.964 million loans from 2 to 5 years old which have 56,085 FC claims against them - a rate of 2.86%
Once again - the report indicates the total average foreclosure rate on ALL FHA loans less than 5 years old is 1.94%
The MBA Natl Delinq Survey shows similar numbers - the most recent (q1 2008) from memory I believe had FHA FC rates at 2.2% of ALL outstanding FHA loans
"Can't the local govt do something, anything about this?"
Here's my guess. The people on the city council have their R/E buddies or surrogates down at the courthouse steps bidding on these things for them. I saw it in the last bust in the early eighties and wouldn't be a bit surprised to see it go on now. Those guys made a killing on that deal although it was a different city.
I did some digging and we finally have a definition.
Total number of loans where the default status code was reported as a 1A (Foreclosure Sale Held), 1G (Eviction Completed), 77 (Deed Recorded), 43 (foreclosure started), 45 (foreclosure completed), 46 (property conveyed to insurer), or 68 (first legal action to commence foreclosure); and the insurance status code is active.
Note that it includes cases where the insurance status code is "active." These are not loans that have completed the foreclosure process - they are loans in the process of foreclosure. This can either overstate the number of foreclosures, since some are rescued on the courthouse steps (not many these days, but some) or seriously understate the number of foreclosures, since the foreclosure process takes less than a year on average (it's over a year from first delinquency to foreclosure, since foreclosure can't BEGIN until the borrower is at least 90 days delinquent, and even after that FHA requires the servicer to repeatedly contact the borrower and offer loss mitigation before initiating foreclosure, but the foreclosure process itself is usually under a year). ASG kept referring to this as some sort of foreclosure rate, and did not object when people assumed it meant an annual rate. In fact, his number is just the % in the foreclosure process at the end of June, and can't be interpreted as a foreclosure rate, annual, cumulative, or otherwise.
Thank you for looking back at MBA Natl Delinq Survey!!! Details people!
I said "includes cases ... code is "active." I meant to say "includes ONLY cases ... code is active." Once FHA has recorded the claim the insurance status code is set to inactive, and these cases would drop out. I don't have time for all this searching, but if someone wants to get the definition of that thing, just Google "insrnc_status_cd" and FHA's data dictionary will pop up.
Some areas of the economy need regulation. Some need none. It's just 'who decides'.
Ross | 08.02.08 - 4:44 pm | #
Yup - that's why we elect 'deciders'. Not good but better than available alternatives.
Phrased a bit differently, ASG seems willing to count as a "success" anyone who isn't in the process of foreclosure on the date he queries the database. If you go under a month before his query or a month after, but are OK at the moment of the query, you are a "success" in his world.
"Yup - that's why we elect 'deciders'. Not good but better than available alternatives."
Agent Conjure Bag will be available on the 18th. Shall I tell him you'll be availing yourselves of his services?
"The one legit argument the invisible handers can make and be right on is that almost all regulatory processes involving high margin profitable products will eventually become owned by the people (and their money) whom they regulate. Revolving door rules."
When the concept of an invisible hand was originally proposed, even those who rejected any transcendent origin for morality believed in the objective, necessary, given nature of moral behavior.
What we have now is beginning to resemble Hobbes' war of all against all, modified by the legal, functional arrangements necessary to prevent outright anarchy. Even non-objective moral systems have to be formal and legally normative or a society begins to disintegrate.
Present economic troubles aren't simply the result of malfunction, error and wrong-doing. I think what we're seeing is a result of social and therefor moral breakdown. No doubt a new equilibrium will be established. God knows what that will look like. It may be that a new order will be established by force. It won't have been the first time.
Still on my OT GDP bender - BR at Big Picture adresses the conundrum (nominal rate of change in GDP growth rate of -11.6% QoQ translates into 'real' annualized rate of change in growth rate of 111% increase) - I will definitely be capturing revisions in the distant future...
/rant
Q2 GDP 1.9%; Q4 GDP = -0.2%; New Jobless Claim +448k
Posted by Barry Ritholtz on Thursday, July 31, 2008 | 09:02 AM
{snip}
One last "surprise" -- Bill King observes that the GDP Price Index inexplicably tanked to 1.1% in Q2; 2.4% was expected. Nominal GDP declined to 3% from Q1's 3.5%. Thus, the Q2 GDP benefited by 1.5% points, thanks to the mysteriously collapsing GDP Price Index, down to 1.1% from Q1's 2.6%.
{snip}
Fair Economist writes:
Two more things ASG is missing:
First, the excess foreclosure from DAP are about 1/3 of total FHA foreclosures but the total is TWO-THIRDS. In other words, most of the cost of the FHA program is from this subset of buyers!
Second, as house prices drop, recovery rates will collapse. Those losses will double or triple in the near future.
If you wanted to put on a premium for DAP, it would need to be the two or three times the $812 you mentioned, and it has to be every year since the $812 only pays one year of foreclosures. So the premium would be about $2,000/year, or $250/month. Considering this is targeted at low-income buyers, obviously at those rates there would be essentially no honest needy borrowers - nobody would borrow with that premium except to commit fraud.
DAP doesn't work for the basic reason that 0% down doesn't work. You can't have a deal where one side has all the potential for gain and the other has all the potential for loss.
I split out ONLY the subset of current new loans that are using DAP and carried the cals thru on those loans ...
Appx 68,000 new FHA loans in June 2008 - or appx 823,000 per year - various reports, including GAO, indicate appx 30% used DAP - or appx 247,000 loans total annually
At 1.51% there would be appx 3728 foreclosures without DAP. Reports indicate the foreclosure rate with DAP is doubled - which means out of this pool of 823,000 loans there would likely be an additional 3718 foreclosures because of DAP
With a median home price of $215,100 the 3728 addtl foreclosures would be appx $802 million total - if the lender loses 25% on each when they sell that is a total $200.5 million loss due to DAP on this group of 823,000 loans
Divided by the 247,000 total loans that used DAP the $200 million loss equals $812 for each loan
A home can only foreclose once per loan - I showed the total possible losses for this group of loans - other loans in other years collect their own premiums to offset their own risks. There would not need to be multiple or annual premiums.
As to the question of why I care about this - I am like every other American affected daily by the effects of the housing and credit meltdown - which while certainly real is largely the result of a crisis of confidence - that is in many cases as here - NOT supported by a review of the real actual numbers ...
Question for LawyerLiz and others, and a comment on the ASG thread
1.My neighborhood, where I rent, is collapsing. Empty houses, yards quickly dying, critters taking up residence (dang skunk family next door!)... What's happening is not that the families weren't paying mortgages, but the landlords weren't. So the renters get booted. (In southern California people who'd be homeowners in other places have to rent, unless they've drunk the kool aid) The homeowners associations are frantic--graffiti, deadlawns, general decay. The neighbors aren't thrilled, either. People trying to sell their houses get hurt--who wants to live next to an empty house with a dead yeard? So...if renters and homeowner associations and other interested parties were to ignore the landlords banks and renters were to stay put, assuming they're willing to keep on paying rent, how hard would it be to force banks to just pick up those leases? That's all most renters really want, it keeps the neighborhoods alive, it keeps the town from becoming crummy looking.
ASG said "A home can only foreclose once per loan - I showed the total possible losses for this group of loans" Yes, but a home can foreclose on any date after it is originated. You can't just query a database, get the % that are in the process on a particular date, and claim that the result gives you a number you can use to calculate foreclosure probabilities or expected costs. Unless you're claiming that the only possible date on which these loans could be in foreclosure status is the date you queried the database then you most certainly did not calculate the "total possible losses."
"lama writes:
I'll ask yet again - over what time period is the "total"?
mort_fin | 08.02.08 - 4:31 pm |
Oops, sorry Mort. I duplicated your question. So, that makes 3 times it's been asked. BTW, his first link went nowhere either.
ASG, I think you're in the wrong sandbox if you think you can toss numbers around and not be challenged."
I have - as I;ve said - no problem with anyone challenging my numbers - I've provided the source - and if mort_fin had read my post a little closer he would have found the instructions to find the data:
Select "Servicing" Menu - then Portfolio Summary - for United States
And I answered - the time period was "as of Jun 30 2008"
ASG - for a "time period" you need a beginning date and an end date. "As of June 30" is only an end date. There has been enormous confusion here because of your misuse of an "in process" count, treating it as if it were some sort of cumulative count over a time period.
oops - the last two "anonymous" posts were me.
A corrupt Chinese official has been condemned to death after a leaky toilet led to the discovery of his huge hoard of illicit cash, Xinhua news agency reported on Saturday.
Corrupt China official betrayed by leaky toilet
| Reuters
All it would take is a couple of these in the US and there might be a few changes. Guess we'll have to wait until after the revelation.
"moo goo writes:
ASG-
How is putting people into homes that are overpriced (and hence their note is higher) "helpful" to them?
I mean, specifically???"
The numbers show that 95+% of people who use DAP have not been foreclosed -
95% of those who have used DAP have benefited from it - have kept the homes they were able to buy
There is another important benefit as well - that many buyers are usuing DAP that might have had the minimum cash downpayment - 3% - that FHA requires. By using DAP they keep that cash in reserves - which makes them a stronger buyer better able to weather problems - that the buyer who exhausted their cash to pay the downpayment
OK - show some evidence that "95% of those who have used DAP have benefited from it - have kept the homes they were able to buy"
I'd love to see your evidence for that statement.
ASG wrote "There is another important benefit as well - that many buyers are usuing DAP that might have had the minimum cash downpayment - 3% - that FHA requires. By using DAP they keep that cash in reserves - which makes them a stronger buyer better able to weather problems - that the buyer who exhausted their cash to pay the downpayment"
so you're saying this won't have that big an impact on the housing market, since many of the buyers could buy without these programs? Then lets just get rid of them - they are higher cost, game the system, and apparently aren't all that necessary.
"mort_fin writes:
I did some digging and we finally have a definition.
Total number of loans where the default status code was reported as a 1A (Foreclosure Sale Held), 1G (Eviction Completed), 77 (Deed Recorded), 43 (foreclosure started), 45 (foreclosure completed), 46 (property conveyed to insurer), or 68 (first legal action to commence foreclosure); and the insurance status code is active.
Note that it includes cases where the insurance status code is "active." These are not loans that have completed the foreclosure process - they are loans in the process of foreclosure. This can either overstate the number of foreclosures, since some are rescued on the courthouse steps (not many these days, but some) or seriously understate the number of foreclosures, since the foreclosure process takes less than a year on average (it's over a year from first delinquency to foreclosure, since foreclosure can't BEGIN until the borrower is at least 90 days delinquent, and even after that FHA requires the servicer to repeatedly contact the borrower and offer loss mitigation before initiating foreclosure, but the foreclosure process itself is usually under a year). ASG kept referring to this as some sort of foreclosure rate, and did not object when people assumed it meant an annual rate. In fact, his number is just the % in the foreclosure process at the end of June, and can't be interpreted as a foreclosure rate, annual, cumulative, or otherwise."
If you check you'll not I said that in the post at 4:36 above
The 1.51% rate includes foreclosures completed AND those started but not done - so the 1.51% rate is actually HIGHER than the real foreclosure rate
And no it can't be low - for that period - since it reports all foreclosures legally started in that period
Jes wondered: "So...if renters and homeowner associations and other interested parties were to ignore the landlords banks and renters were to stay put, assuming they're willing to keep on paying rent, how hard would it be to force banks to just pick up those leases?"
Eviction.
The bank will evict the tenant if s/he doesn't leave. Banks don't want to be landlords, and I really can't say that I blame them.
Um no, It doesn't include loans that have finished the process and are no longer active. notice the "And" in that definition. "AND an insurance status code of active."
ASG wrote "And no it can't be low - for that period - since it reports all foreclosures legally started in that period"
NO. It does not tell you anything for a "period." It tells you that status "on the date the query was run." There is no "PERIOD" involved in the definition.
Too nice a day to keep arguing with someone who can't tell the difference between "in process" and "total." If someone else wants to carry on the valiant yet probably futile effort be my guest.
"Anonymous writes:
ASG - for a "time period" you need a beginning date and an end date. "As of June 30" is only an end date. There has been enormous confusion here because of your misuse of an "in process" count, treating it as if it were some sort of cumulative count over a time period."
The numbers I used show the current status of the FHA portfolio which is an excellent measure of - you guessed it the current status
Current status is absolutely relevant
I also noted as have others the MBA National Delinquency Survey - which shows quarterly rates and comparasion to prior quarter and to prior year
The current FC rate as shown in my data shows 1.51% of all loans currently in the FHA portfolio have been or are in foreclsoure. the National Delinq Survey MBA numbers show Q1 2008 vs Q4 and Q1 2007:
From Q4 2007 to Q1 208 the FHA loans saw a six basis point increase in foreclosure inventory rate (from 2.34 percent to 2.4 percent) The foreclosure inventory rate increased 21 basis points for FHA loans over Q1 2007 from 2.19 percent Q1 2007 to 2.4 percent Q1 2008
Additionally you can look at the data in my link and get FC CLAIMS performance for 0-2 year vintage (which is 0.45%) and for 2 yr to 5 yr old vintage (2.46% - which is exactly in line with the MBA numbers)
Judging by the posts I'd say 95% of CR readers are against DAPs, and 5% are for. I doubt anyone in the 5% is going to be changing their mind, although a few in the 95% might change their mind if given a persuasive argument...
Tell me America is not in terminal decline.
That makes me a little squeamish, is there an alternative to sharp teeth?
Chain saw? Rusty wood saw? Garden clippers? Forty whacks with an axe?
eh writes:
Tell me America is not in terminal decline.
Just based on recent travel overseas...I can't help you.
mort_fin writes:
OK - show some evidence that "95% of those who have used DAP have benefited from it - have kept the homes they were able to buy"
I'd love to see your evidence for that statement.
My numbers above - estimated annual rate of 832,000 new FHA loans - 30% appx use DAP = appx 247,000 - of the 247,000 at 1.51% there would normally be appx 3728 foreclosures in this group w/o DAP - with DAP they would double
Means there would be 3728 more foreclosures due to use of DAP
Addtl 3728 foreclosures out of 247,000 total loans using DAP is 0.45% - which actually means that 99+% of the loans using DAP were not foreclosed
The 95% number was using the higher 2.45% foreclosure number on ALL FHA loans from 2 to 5 years old - and then doubling it - to 5% - which is actually wrong as its the total foreclosure rate on loans with DAP and ignores the foreclosures that would have occurred even without DAP
The bottom line is the DAP program has many benefits - helping people buy homes which helps the sellers which overall helps the economy
If we can do something that allows all the positives of this program to continue - while addressing increased risks so DAP loans pay for adttl risk - then why wouldn't we want to do so?
If the risk is addressed - which is easy by using a risk based premium - why wouldn't we support this program?
People are too quick to look at and focus on the negatives - without looking at the bigger picture - the benefits - to eager to ignore the good and penalize the vast majority who use the program responsibly rather than find a way to keep it
ASG - you didn't address either point. 1.5% is the portion of ALL loans currently in foreclosure. The risk for a loan is the cumulative risk over the lifetime of the loan. If you want to use the current number of foreclosures as an approximation you have to you the total number of foreclosures for ALL loans, not just an estimate of the DAP loan this year.
To put it another way, 58,876 loans are in foreclosure right now. About 1/3 are DAP excess, so 20,000. Foreclosure takes about 6 months, so there will be about 40,000 DAP-excess foreclosures. At 50,000 each, the FHA will lose 2 BILLION on the DAP excess this year. If this is paid for by once-off fees, then the 250,000 DAP loans will have to have an additional fee of 8,000, not 800. Mind you, this is an underestimate since both foreclosure rates and loss rates are likely to climb further from the present.
You're proposing the FHA lose 2 billion a year on excess foreclosures and make 200 million a year on fees. Nope, not gonna work.
Since the 8,000 fee is larger than the usual 3% down payment, the DAP trivially doesn't work.
Yep. Eviction.
It used to be that shamed foreclosees would slink out in dead of nite.
Now they stay until the last minute. I don't know if it's gaming the system or a sign of increased desperation.
I do evictions. It used to be once you got your writ of possession the sheriff would be out there in 1-2 weeks depending on the season (few to no evictions accomplished over Christman, e.g.). Now the sheriff is taking 3-4weeks, or even longer and the landlords, who have to make mtg payments out of their income stream are tearing their hair out. I don't know why the sheriff can't just hire more people. They get paid for each eviction. Maybe the money goes down some budgetary black hole.
Anyway, what can be done, is that the Condo and HO Associations need to hop on these things posthaste. The minute the loan goes back to the bank, the assns should start the collection process. Likewise, the municipalities should start fining banks Immediately for dead lawns, green pools etc. In Miami-Dade, you get offensive enough and they start with the $50-200 dollar a day fines, and there is no upper limit. The thing is, they don't start this right away. So the minute the bank gets the property a letter should go out and the fines start, in, say a month or 2. Banks have already started evading this by almost finishing the foreclosure and then stopping. Altho, I'm not sure if this is deliberate or not. Usually they are too stupid to think of stuff like that, and too cheap to hire the necessary personell, since you can't outsource this sort of thing to India.
So I think, since the Assn is in judicial foreclosure states almost always part of the foreclosure, that the Assn atty should appear (usually they don't, 'cause it costs money) and demand that the foreclosure proceed apace or be dismissed. And that his or her fees be assessed against the foreclosing lawfirms (which are really bottom tier in ability; they're trying to do stuff just paying paralegals and the slightest money wrench puts the kibosh on things, usually for months and months) or the banks. That'll get their attention.
I think I posted that I have a small developer for a client who'd like to bid on a couple of properties, but the process got almost done, and then stopped last February, for no particular reasons.
By the way, in Florida, if you don't file some sort of pleading within a year, your case is subject to being dismissed, and I think we are going to see that start to happen. The clerk generates a show cause order and if nobody sez the case should continue, it gets dismissed.
Both the gov't and the assns are able to file what amounts to a foreclosure themselves. They should start doing it en masse.
I have no sympathy for institutional lenders whatsoever. They shot themselves in the foot and continue shooting over and over.
By the way, there's an article in Slate about a ummm New Jersey (?) bank that continued to issue mtges the old fashioned way, and now is simply rolling in money.
ASG
Would you consider it fair to have a risk premium just for the subset of borrowers who get a DAP?
If not it becomes a transfer tax, a subsidy for those who do qualify for the DAP.
Also you do not make the case for home-ownership. Since people have to live somewhere eventually the fact is that a space would have to be built for renter or buyer.
The psychology of having to work and save for the down payment or skin in the deal, does seem to have some merit.
The wording of Rights is Life Liberty and the Pursuit of Happiness. Nowhere is it written the Entitlement of Happiness.
You are terminally infected with the entitlement virus.
For you a song of great social and political import
YouTube - Janis Joplin - Mercedes Benz
This is too funny today. Contrast Lawyerliz detailing how money is literally evaporating from institutional lenders and how foreclosees are getting a free ride with ASG trying desperately to justify the fraud continuing.
We need a new post.
Lmfao!
ASG is like those folks at the congressional hearings. They quote number after number, percentages - page after page of nothings that attempt to show progress of whatever they are trying to defend. And yet, what they try so hard to defend is an absolute mind-boggling disaster.
BTW, if you go to enough sites you see a few posters EXACTLY like ASG. Wordy with heavy, heavy over-reliance on sets of statistics slanted toward their argument.
Coincidence? Hmmm, don't think so.
Again I'm suspicious.
"There is no business ethic in America."
Paul | 08.02.08 - 2:05 pm | #
Business ethic. Oxymoron.
Agent Conjure Bag will be available on the 18th. Shall I tell him you'll be availing yourselves of his services?
mp | 08.02.08 - 5:01 pm | #
"Agent Conjure - Regulator From Hell"
Sounds like a pretty good movie plot - helluva a lot better than the 'Terminator' series...
Yes, evictions eventually happen. That's not quite what I'm asking. Given that houses aren't selling, and that a foreclosed house plummets in sellability as it loses any curb appeal it might have had, and given that forcing out paying renters is turning ones back on a steady income stream, then why aren't banks reconsidering their stance on holding the leases, especially in really hard hit areas like southern California?
Thats a whole lot of math without any verification. ASG, you are a fool. Obviously you are working for someone. He did make my point, which was well justified by many of you, that 30% of FHA purchases were done by DAP programs. Given FHA loans are a significant portion of loan originations today and going forward, you just cut 30% of 50% of loan originations, or an automatic 15% decrease in eligible homeowners. Think that's going to help? I'm not saying it's ok to have a DAP, I'm saying I'm not sure people recognize the signficance of removing this particular loophole...given there is full documentation of income and credit within government insured standards. If there is another solution to get a homeonwer into a house without a downpayment, you show me one that works, but eliiminating this one is going to have a dramatic impact.
LawyerLiz - the reason they can't just hire more Sheriffs is that it's a dang long process. In my town, we're not allowed to recruit cops unless we have vacant positions - which we always do 'cause we can't hire them fast enough.
From the moment we begin recruiting until an officer completes the background process, the academy, and field training, is about 18 months. Every agency is competing for a very small pool of qualified candidates, and only a tiny fraction of those make it all the way through.
WELL, YOU COULD HIRE A TEMP TO HANG THE 24 HOU NOTICE. orry trying to type 7 eat a popcycle.
Feckless Ness writes:
"There is no business ethic in America."
Paul | 08.02.08 - 2:05 pm | #
Business ethic. Oxymoron.
Feckless Ness | 08.02.08 - 6:43 pm | #
I know - pathetic; isn't it?
"Agent Conjure - Regulator From Hell"
Yes, and because of his longevity, he offers a multi-generational guarantee.
"...trying to type 7 eat a popcycle."
Conjure says, "LawyerLiz, it's P-O-P-S-I-C-L-E, and I have the entire collection of Popsicle riddles and Scrooge McDuck videos. Can anyone here top that? No, I don't think so."
"Have a nice day."
As a kid I adored Scrooge McDuck. Those comics would be worth a pretty penny today! Except I reread them so much they became pretty shopworn.
Loved his vault bulldozer. Those comics often had classical references. One had Larkies instead of harpies, and was a riff on Jason and the Argonauts.
"has instead come to believe that the role of government is to make the world safe for large corporate interests"
So Maxine Waters wants to help corporate interests...???
Fair Economist writes:
ASG - you didn't address either point. 1.5% is the portion of ALL loans currently in foreclosure. The risk for a loan is the cumulative risk over the lifetime of the loan. If you want to use the current number of foreclosures as an approximation you have to you the total number of foreclosures for ALL loans, not just an estimate of the DAP loan this year.
To put it another way, 58,876 loans are in foreclosure right now. About 1/3 are DAP excess, so 20,000. Foreclosure takes about 6 months, so there will be about 40,000 DAP-excess foreclosures. At 50,000 each, the FHA will lose 2 BILLION on the DAP excess this year. If this is paid for by once-off fees, then the 250,000 DAP loans will have to have an additional fee of 8,000, not 800. Mind you, this is an underestimate since both foreclosure rates and loss rates are likely to climb further from the present.
You're proposing the FHA lose 2 billion a year on excess foreclosures and make 200 million a year on fees. Nope, not gonna work.
Since the 8,000 fee is larger than the usual 3% down payment, the DAP trivially doesn't work."
sorry - but you're wrong ... the numbers provided are NOT a 6 month total year to date for the year 2008 - they are a current number of all loans in the current FHA portfolio
And the historical data is available - the MBA Nat'l Delinquency Survey has extensive data
You can read the Q4 2007 version here:
http://tinyurl.com/MBA-NDS-Q42007
It shows FHA foreclosure inventory rates by quarter
FHA Quarterly FC Inventory rate from MBA NATL DEL SURVEY Q4 2007\t
(all avg annual except 2008)
\t
2002\t 2.50 \t
2003\t 2.82 \t
2004\t 2.72 \t
2005\t 2.36 \t
2006\t 2.21 \t
2007\t 2.23 \t
2008\t 2.40 \tQ1
The graph in the NDS shows FC inventory rates ranged from just over 2% in 1998, to just under 2% in 2000, back up to almost 2.5% in 2001 - 2002 onward are as above
The current portfolio, from the HUD data link I provided - as of June 30, 2008 - shows a 1.94% Foreclosure claims rate - which is just completed foreclosures - on loans 2 to 5 years old - to be appx 2.46% almsot exactly the number reported by the MBA
So ignore if you want the numbers from my link - which were hard data direct from HUD - and go with the MBA Natl Delinq Survey historical numbers if you want - it doesn't really change a thing - HISTORICALLY - at least back to 1998 - foreclosure rates have averaged between 2% and 3% of the total loans in the FHA portfolio
At end of Q1 2008 the rate was 2.4% - basically flat with the 2.34% in Q4 2007 and essentially the same as back to 2002 and earlier
Doesn't really make any major change - the vast majority of FHA loans using DAP assistance will still not be foreclosed
68,000 new loans in Jun 2008 = app 823,000 new FHA annually - if 30% use DAP its 247,000 loans - 2.4%, or 5,926 of which would be foreclosed even without DAP
If DAP causes the FC rate to double then and additional 2.4% of these 247,000 loans using DAP would be foreclosed - another 5,926 loans - or 0.72% of all 823,000 loans
At an avg price of $215,100 if these extra 5,926 loans that were foreclsoed becaue of using DAP lost 25% when sold the total loss is $318 million - dfivided by 247,000 loans using DAP = $1,290 per loan
Still far less than the DAP
"One who knows writes:
Thats a whole lot of math without any verification. ASG, you are a fool. "
Interesting - a lot of math without verification? I provided direct sources so you or anyone else can verify or recreate - I posted the math in the thread - and I said I'm happy to have anyone refute my numbers.
That would include you - if my numbers are wrong then refute them - with facts - instead of insults wholly unsupported by a shred of fact.
I note you agree with my position that eliminating DAP, right or wrong, will have a large and significant impact on home sales - and a resultant big impact on our economy
ASG,
"Current status is absolutely relevant"
No it isn't.
Sorry kid, your 1.51% is not a rate. You do not divide a static number into anything and get a "rate".
Tonight, 99%+ of drunk drivers will get home safely. According to you, it's a good idea to get hammered and hop in the old pickup.
"I note you .....significant impact on home sales - and a resultant big impact on our economy."
OK, a RE salesperson.
Wait a minute. Did you just say that Hud foreclosures were historically 2-3%?? Sorry, my brain cells need wiping off my computer screen because a few exploded out my ear by reading the same boring stuff over and over, which didn't seem to get anywhere. Isn't that awfully, awfully high (to use the proper legal terminalogy?). Isn't the kick 'em out total historically about a half a percent when things are good to a percent when they are bad? Now not being normal. Far from convincing me that DAP is not a bad thing, I think you've proved that FHA loans in total are a very bad thing, forgetting DAP entirely.
ASG,
d071033t.pdf
Thanks for these two links that go to some homepage with no data:
U.S. GAO - File Not Found
http://tinyurl.com/hud-fha
I have the feeling that someone here--I'm not saying who--just had his head handed to him.
My head already exploded (thank glod there's nothing inside to make a mess).
You know this routine, sprinkle in a misused fact (representing a time-static number as a rate) with a dash of license on another fact (apply a factor to the rate with no basis).
When I'm in a meeting and someone starts this crap, I tell them "I don't understand, can you write it down?" Then, just point to items "where did this come from?" "who told you that, I'll send him an email".
"lama writes:
ASG,
Thanks for these two links that go to some homepage with no data:
U.S. GAO - File Not Found d071033t.pdf
http://tinyurl.com/hud-fha"
I answered this for you at 5:14 above for the HUD link - in a couple of posts actually:
Select "Servicing" Menu - then Portfolio Summary - for United States
Haloscan has screwed up the 2nd link to the GAO numbers - I'll try to find the link if you really want it
Lawyerliz writes:
Wait a minute. Did you just say that Hud foreclosures were historically 2-3%?? Sorry, my brain cells need wiping off my computer screen because a few exploded out my ear by reading the same boring stuff over and over, which didn't seem to get anywhere. Isn't that awfully, awfully high (to use the proper legal terminalogy?). Isn't the kick 'em out total historically about a half a percent when things are good to a percent when they are bad? Now not being normal. Far from convincing me that DAP is not a bad thing, I think you've proved that FHA loans in total are a very bad thing, forgetting DAP entirely.
I don't know if you - or most of the rest here - really even care what the facts are - but on the chance you do - again from the MBA's Natl Delinquency Survey - Q1 2008:
The foreclosure inventory rate increased 26 basis points for prime loans (from 0.96 percent to 1.22 percent), and increased 209 basis points for subprime loans (from 8.65 percent to 10.74 percent).
FHA loans saw a six basis point increase from 2.34 percent to 2.4 percent)in foreclosure inventory rate (, while the foreclosure inventory rate for VA loans increased 12 basis points (from 1.12 percent to 1.24 percent).
The FHA rate has pretty much always been above the FC rate for PRIME fixed rate loans and for VA loans
The FC rate on FHA loans for 2002-2008 is above - here are the FC rates from 1988 - 1997
1988\t 1.47
1989\t 1.84
1990\t 1.73
1991\t 1.72
1992\t 1.79
1993\t 1.90
1994\t 2.22
1995\t 2.12
1996\t 2.31
1997\t 2.47
From reading a poor qual chart the rates for 1998 to 2001 are appx:
1998 2.1
1999 2.0
2000 1.9
2001 2.1
FHA foreclosure rates saw a recent peak at appx 2.8% avg from late 2002 to early 2004 - dropped to appx 2.2 in early 2006 and has climbed slightly since then
So to answer your question - no the current FC rate is not historically high compared to last 15 years history - FHA loans have been in the same current range since 1994
"lama writes:
ASG,
Thanks for these two links that go to some homepage with no data:"
I've seen you repeatedly denigrate and attack my comments - ignore answers to your questions (ie: on where to find data from the HUD link) and continue to post the same question anyway ...
I've seen you offer nothing in the way of a factual response or one that provides anything to support your comments
I've ignored your taunts and denigrating comments and answered you anyway - and you respond with more insults
What I have found is that people like you are usually unable to offer intelligent, rational, factually supported responses - and you cover for that by making rude comments with no facts instead
I will repeat - contrary to your claim - the math is quite simple - if there are currently 3.96 million loans in the FHA portfolio and there are 58,000 in foreclosure then the FC rate on the portfolio is the product of dividing foreclosures into total loans - which comes out to 1.51%
You can - and many do - look at that formula on numerous days - which is what the MBA NDS does - and find out the rate on multiple days - Quarterly for MBA - and that collection of individual FC rates makes up the history - which I posted above ...
If you have believe I am wrong how about actually making the effort to provide your own facts to support your claim instead of the childish name calling?
So what ASG? Babble, babble, babble.
Wanta buy a SUV? Fords got one for you. How 'bout a Chevy?
Sorry, these numbers you quote are just numbers. Sorta like the UE rate. Except, I know people w/o a job, in my part of the world I look around see things aren't going so well. I know someone personally that got foreclosed this week.
Your numbers mean something until they don't.
Reality strikes, intrudes on your percentages. People everywhere are seeing reality strike watching it come closer and closer. Happening at first around town, then to a couple of friends, then on to their relatives ...
Quote anything you wish, pull stuff from everywhere, sorry I'm not buying. I don't believe you for one minute.
Ok, so FHA loans have always been, not to put to fine a point to it and having just read the squirrel discussion one thread up, squirrelly.
Nothing new historically, just always. . . bad.
Which is not to say, that knowing this, we might want to do them anyway.
However, spending many hours every week counseling/consoling poor souls being foreclosed--real peoples, you know?--being foreclosed is at best truly horrible. It is emotionally equivalent to a death of a close relative. Not good. Baaaad. It is far, far better to rent than to experience foreclosure. If you have a divorce, loss of job or illness, at least you know you were just not lucky. If you did this to yourself, you get to feel stupid as well as everything else.
ASG, old chap, go one thread up and read the squirrel discussion, and have some yoiks. But don't count squirrels, just go with the flow and can the pedantry.
So, lets see there are 3.96 mil loans in the FHA portfolio. When did the 1st of these 3.96 mil loans start? How many loans foreclosed since that date? Add those foreclosures to the 3.96 mil, divide that addition into the total ltd (life-to-date) foreclosures and then you get a rate. I suspect though that you'd need multiple rates calculated based on the circumstances (ie, categories) of each foreclosure type.
What is the date range of the 58,000 currently in foreclosure? Uniformly spread from 30 years ago until today? And again, their foreclosure category?
Are the foreclosures accelerating? As well as their corresponding categories? If you are dealing with the 1st derivative, you must take into account the 2nd.
Something doesn't quite fit here.
You are trying to impute a current rate based on inconclusive data. In short, mixing apples and oranges.
It is a rate but how valid is it? It only fits into your argument because you wish it so. You'd have to show much more before your discussion hangs togather.
Here ASG, just read this from our friend Holden:
Zero-down FHA loans may bring more foreclosures
You're new here. Do you know what I do for a living? If you believe what you're shoveling, good for you. Just don't expect me to buy any.
Gosh, Lama, what Holden said.
One out of 6. Even half that. That's a lotta anguish. Probably with all the underwater people, it will be worse than one in 6.
Hazard - then ignore my orig numbers and posts and go with the later ones where I simply quoted the Mortgage Bankers Association Foreclosure Inventory rates
I assume you'll admit that they might have a clue or two on the accurate numbers?
If you review my posts immed above using the MBA rates you'll see the difference is minimal
If you ONLY talk about newly originated loans - loans going forward - the data shows appx 68,000 in June - or appx 823,000 anually at Junes rate - you can then do the same calcs as I did above
-30% of new loans are reportedly using DAP
-the GAO reports foreclosure rates are appx double on FHA loans with DAP
-the historical foreclosure rate on all FHA loans since 2002 is appx 2.46% according to MBA
The end result is a projection that appx 247,000 loans in one year will use DAP and those loans - using a 2.4% foreclosure rate - will see an additional appx 5,900 foreclosures vs if these same loans did not use DAP
ASG, I won't dignify your numbers with my own. I do not acknowledge that you numbers are applied rationally. They have no relevance to anything (hence the drunk driving comment).
Liz, bingo. I like your posts btw.
Night all. My wife is going to unplug the computer now.
ASG (and others): Let's continue a world where home prices are not actually paid by the "buyers". It's the only way we can keep home prices very high and rising, and that all of us can continue to make money.
Trouble is, it's clearly not a sustainable way to manage an economy. We appear to have reached a tipping point where the HPA font of effortless wealth creation can only bubble on by expropriating wealth from taxpayers in general to homeowners in particular. Any more programs to keep house prices high are just transfer programs from people who don't own a home to people who already do.
But you see ASG, I don't necessarily believe ANY numbers posted by any of these associations. Like yourself, they post what they wish ignoring the fact that they are far outside the realm of experience.
For example, UE rates? You believe those, the CPI, the GDP, etc, etc then your gullibility knows no bounds.
As I stated your 1.51% rate is meaningless. You'll have to do much better than that.
Lets start with that and go forward. Do the calcs as I suggested in the manner that I suggested (and BTW, look for more info on the topic than just one source) and I think you might have a better discussion.
What you've posted so far just doesn't have mathematical credibility.
"lama writes:
Here ASG, just read this from our friend Holden:
Bankrate.com: Let us help you find what you're looking for 20040826b1.asp
You're new here. Do you know what I do for a living? If you believe what you're shoveling, good for you. Just don't expect me to buy any."
I have no clue what you do for a living - nor should it have any bearing in civility or be an excuse for boorishness ... and if you are in the industry then you could certainly provide some fact based responses to refute my comments - which I have said I would welcome
As to your link - that is a story from 2004 judging by the URL - it is also inaccurate - for example positing the "what if" '17% of zero down borrowers would be foreclosed upon' and then offering the current comparison "In contrast the estimated cumulative default rate for all FHA loans this fiscal year is 6.96%" ... comparing foreclosures to defaults - apples and oranges
This article actually reinforces that 100% loans have in reality been no where near what the FHA commissioner expected for FC rates - he told the legislators 17% would be foreclosed - today we know - according to the GAO -the real rate is appx "double" the normal FC rate on FHA loans - which is appx 2.4% - so appx 4.8% vs 17%
An appx 4.8% FC rate on loans using DAP vs a FC rate of 2.4% on ALL loans (without DAP) ... 97+ out of 100 people who use DAP to buy a home with FHA loan will benefit - yes 2 or 3 more out of 100 will have a problem ... but that is hardly a reason to eliminate an important and beneficial program - that works for the vast majority - almost all - of the people who use it ....
So lama - share with us why you think DAP is a problem
Nitey nite.
Thx lama. What do you do?
Hazard - I indicated ignore the 1.51% rate - use the MBA Natl Delinquency Survey numbers - which are considered one of the industry standards for this reporting
The current rate they report is 2.4% To answer your question ap from 2.34% Q4 2007
As to the current 3.96 million loans -appx 1.159 million are less than 2 years old, another 1.96 million are 2 to 5 years old and the remaining are more than 5 years old
So? Show your numbers in rates by date and by category. Also, how are these rates changing? You must show that And you must get the foreclosure flushed out numbers (they can not be ignored). Be nice to have some values attached to these numbers as well.
Sorry, industry standards don't impress me. I want to see the real thing (and multi-source confirmation)or not at all.
That 1.51% rate, you just expounded on how clear and conceptual it was.
You've got to be precise. Else all your postings today are for naught.
ASG, you're confusing the % of loans currently in FC with a lifetime claims rate, which is the relevant metric, as mort_fin tried to point out. think of it this way: if a given vintage of loans will have lifetime cumulative defaults of 10% which is spread out evenly over 5 years, and you continually originate loans at the same pace and they always perform the same (2% of the original balance default per year), after your portfolio has seasoned a few years, the number of loans in default as a % of the current outstanding balance will always be 3.33% (assuming loans enter and leave the default bucket at the same pace and that loans pay down over 5 years). but the insurance premium still has to cover the losses on 10% defaults, not 3.33%.
As to the question of why I care about this - I am like every other American affected daily by the effects of the housing and credit meltdown - which while certainly real is largely the result of a crisis of confidence - that is in many cases as here - NOT supported by a review of the real actual numbers ...
ASG | Homepage | 08.02.08 - 5:08 pm | #
Bullshit. Don't insult or patronize us that way.
You've got an axe to grind [which is fine - we all do]... folks don't jump into these discussions with that kind of background work - then stay all day - without extreme motivation. Civic pride & concern for the well being of the country doesn't cut it for an answer. We know better.
So what's your angle? Transparency might actually improve the appeal of your argument... before Tanta was CR's partner she just commented here... everyone knew she was up to her eyeballs in mortgage finance & she didn't hide it (though she still maintained her anonymity). She has her angle & we respect that.
Everyone who cares knows I'm in mfg [that's my buzz]... others have theirs. It in part answers why we are passionate about what we believe.
So where do you work that DAP is so damned important to YOU that you spend all day here doing the boiler room reply gig? It smells awfully 'astroturffy' to me.
Like I said - it would improve the discourse with a little transparency.
BTW - I meant it when I said I have no problem w/ DAP if truly arms length & transparent & not a profit center for big builders. I have a real problem if its just a money laundering tax deductible sales promotion for same. If that is all it is then let 'em cut price & insure the loans themselves.
So what's your angle?
bacon, that was one of the points I was trying to get ASG to realize (but from a mathematical point-of-view).
Unless and until (if ever) he recognizes that, his postings today are meaningless.
ASG, a zillion people have tried to explain the difference between a rate and an accumulation. Sorry for the personal attack, but you're either very dense, pretending to be very dense, or hope we are very dense. 1.5% of the loans go bad EVERY YEAR (leaving aside many other smaller issues like how representative 2008 is, what to attribute to DAP, and what proportion of 2008 total foreclosure are in foreclosure now). Assessing 2008 loans ONLY for the cost they will incur in 2009 will leave the FHA very broke, because they will also incur similar costs for the 2008 vintage in 2010, 2011, etc. But that's what you've done. Your 200 million estimates ONLY what the 2008 vintage will cost in 2009. You neglect the rest of the lifetime of these loans.
Are Waters, Shays, etc. similarly dense? Or do they think they can get political advantage from pushing this program while they know it's death for the FHA? I'm not sure which possibility is worse.
After reading this whole thread and trying my best to get my mind around the titanic argument staging ASG versus everyone else, I have a few thoughts.
Automated
Syphax Shill
Generator 2.0
He's a bot! Sent from the future to defeat the blogs!
Those congresspersons who sponsored the bill are an embarassment, which probably doesn't bother them.
Bacon ... your post actually made the effort to include useful straightforward input - which led me to looking for the correct data ...
Cumulative foreclosure rates do not seem easy to come across however a directly useful resource is the FHA's proposed rule - as published in the Federal Register here:
http://tinyurl.com/FHA-DAP-Proposed
To date the cumulative claim rates are as follows for the various vintages - first column is no DAP and 2nd column is with DAP:
2000 6.29 16.07
2001 5.67 16.23
2002 4.45 13.27
2003 3.31 11.22
2004 2.21 8.89
2005 1.61 6.29
2006 0.73 2.91
2007 0.08 0.41
More important to the discussion are the Expected Lifetime Claim rates by credit score - this is where the FHA could have actually made this work
The FHA writes loans even below 500 credit scores ... 53.2% of all 2007 loans were 620-850 credit score - the loans within this credit score group that used DAP represents 14.6% of the total 2007 loans - it also represents appx 44% of all 2007 loans that used DAP (33.2% of all loans)
The projected 2009 book claims rates are
FICO w/o DAP w/DAP Diff
850-680 3.9% 8.9% 5.0%
679-640 8.9% 18.6% 9.7%
639-620 9.3% 19.4% 10.1%
Using the June 2008 new originations of 68,000 and the annualized rate of appx 823,000 new loans ...
If the DAP was limited to this group -those with good to excellent credit - there would be appx 120,166 loans of the 823,000 that used DAP .... and of these there would be appx 9,857 additional lifetime foreclosures
Using the guesstimate of 215,000 average loan amount and a 25% loss exposure on sale the total losses on these 9,857 addtl foreclosures would amount to appx $530 million.
To get the total loss on this book of 120,166 loans using DAP you have to take the base claims rate for loans w/o DAP of 8,772 foreclosures - for a total of 18,629 ... which using the same 215,000 avg loan and 25% loss ($53,775 on the 215,000 avg loan) on each sale would represent a total combined cumulative loss for this book of 120,166 loans using DAP of $1.002 billion
The total value of the 120,166 loans using DAP at same 215,000 avg loan would be appx $25.85 billion
If the FHA charged the current 1.5% up front premium and the 0.55% annual premium, the total insurance collected over 5 years on this book of 120,166 loans using DAP would be $1.098 billion
Again, if DAP was offered only to those with 620 or higher credit scores there would be a net revenue positive of $96.8 million in loss coverage vs insurance collected.
Bottom line is the FHA could by all appearances - using their numbers - keep the DAP program but restrict to 620 and higher credit scores - and it would be revenue positive
By all appearances they could provide something like 120,000 DAP loans to those with 620+ credit scores without raising premiums at all
dryfly, I recommend the book "Jennifer Government" for a view of a fictional relative of Agent Conjures. An interesting (and hopefully entertaining) read!
"All it would take is a couple of these in the US and there might be a few changes. Guess we'll have to wait until after the revelation.
Anonymous | 08.02.08 - 5:18 pm"
Simon Bolivar was able to completely stamp out corruption in the big swath of South and Central America where he operated by making a bribe of anything over 10 pesos a capital crime. And he didn't even have to put very many people in front of firing squads.
I'd love to see this applied to congress critters and lobbyists.
OT - why is it DAP when the program is called Down Payment Assistance?
Good Gad this thread is still going.
Ah-hah, ASG now agrees it's one in six.
Harmony all around.
But ASG, have you no sense of humor at all? We like to have fun here along with the nerdiness.
Bacon ... your post actually made the effort to include useful straightforward input - which led me to looking for the correct data ...
...so, I'm going to type a bunch of numbers in paragraph form. I will use a current, static (that means "point in time") number and call it a rate. Also, I will ignore the fact that almost every DAP is sponsored by the corporate seller and built into the sales price.
ASG, has this exercise helped you refine your sales pitch?
I'm with LawyerLiz - MY god, this thread is still going?
OK, ASG finally concedes that FHA has double digit lifetime claim rates. But he's still way off on his loss given default figure. It's more like 35%, not 25% (go to hud.gov and Search for "Actuarial Review" and look at the loss section, or go to OMB's website and look at the Credit Supplement to the Budget for credit subsidy rate assumptions). ASG also doesn't take into account the difference in loss given default for DAP vs. non-DAP loans - it's low 30's for non-DAP and high 30's for DAP. Finally, I don't see how he comes up with his revenue figure for DAP loans. What assumption is he making about prepayments in order to calculate expected revenue?
One in six is, in fact 3.02% if I had only started with 18.12%. What was I thinking?
OK, here's my full disclosure why I was hard on ASG. His sales pitch reminds me (in fact, he uses the same vocabulary) of those I used to hear from various charletons who got ahold of a naive client when I worked at a smallish CPA firm.
OK, I'm leaving to read Tanta's new thread. I'll be more polite.
PS: Liz, I have a serious question for you that I'll type on the open thread.
"The Secretary shall provide for a refund of a portion or all of the higher premiums"
This isn't as bad as you make it sound. What I read that as is: We decided based on a credit profile that you were probably a deadbeat, but after all these years, turns out you made all your payments on time, so we were wrong about you and we should have been charging you the SuburbanWASP rate, not the UrbanReefer rate, so sorry, here's your refund for the difference.
I wouldn't assume the rating of risk of homebuyers is all that accurate, and this keeps then honest. People whose numbers don't look all that hot, but dutifully pay their bills, should not be penalized for that.