Housing is screwed for a decade (and all the paper that goes with it)unless we bulldozed foreclosed homes to diminish the vast oversupply of the non-perishable good.
Anecdote: Foreclosed home near me in Central NJ originally listed at $250k, has been sitting at $189k for the last few weeks. Median price in the area is about $300k, median income about $50k . . . still a ways to go . . .
To add to my anecdote: a colleague had his house listed for over a year with almost no interest and one lowball offer. A similar house across from his was bought 2 years ago at $720k, just sold a few weeks ago at $540k. Prices around here in Central NJ have been fairly sticky but I think are beginning to come unglued -- NJ unemployment went from 6.1 to 7.1 in December.
Housing is screwed for a decade (and all the paper that goes with it)unless we bulldozed foreclosed homes to diminish the vast oversupply of the non-perishable good.
Elvis | 01.28.09 - 11:09 am | #
Elvis, you assume people have jobs to buy homes. That's the kicker.
in my part of DC, half of the houses recently sold are FHA up to 625K. Helps the first time homeowners, but they'll probably regret it in a year or so.
My brother is looking at a REO in AZ. Huuge lot, great location only problem is it's on a septic system and needs a little interior work done. The bank has had 2 deals fall through due to financing. He's paying cash, the property in a world with credit is maybe worth a mil, in a cash world I gotta say no more than $800k.
Housing is screwed for a decade (and all the paper that goes with it)unless we bulldozed foreclosed homes to diminish the vast oversupply of the non-perishable good. Elvis | 01.28.09 - 11:09 am | #
I, as a potential homebuyer, I disagree. Current homeowners, lenders and paper pedlers are screwed. For the rest of us things are looking up.
Wall Street bonuses are paid on February. When they don't come, or are diminished...watch the default rate a couple months from now in New Jersey, NY, and Connecticut
Comrade Alexei,NO.Look at price/rent ratios,then the local economy...how stable is it? and recall that cash is not yet king,but will be crowned soon...
Housing is screwed for a decade (and all the paper that goes with it)unless we bulldozed foreclosed homes to diminish the vast oversupply of the non-perishable good. Elvis | 01.28.09 - 11:09 am | #
Elvis, you assume people have jobs to buy homes. That's the kicker. Outsider | 01.28.09 - 11:12 am | #
Remember, bulldozing homes is "shovel ready", and I agree with E. Especially when it comes to unsustainable housing, and housing that shouldn't be sustained like some homes in Detroit, whose primary function at this point is housing crack dealer and pro's.
Prices around here in Central NJ have been fairly sticky but I think are beginning to come unglued -- NJ unemployment went from 6.1 to 7.1 in December.
Anyone currently holding a jumbo loan is simply in a race against fate. I gather that most of those who are making their payments are hanging on by the mere fact they are employed. As unemployment continues to uptick, I expect foreclosures to erupt as they take down otherwise prime borrowers. Anyone in a jumbo who's seen 30-40% depreciation will either a) never move, or b) default. Either way, real estate is going to stay depressed for years and years and years.
The higher end homes (as in jumbo loans) are going to get hammered in so many areas: CA, FL, NV, AZ, WA, DC, MD, VA, MA, CT, Chicagoland. We're talking at least the next half decade before they bottom.
It will be worse than sub-prime and the Alt-A debacle.
PS Girl, never, ever, ever, use a broker. They are floating loans and gambling with your money. Use a direct lender...ie, someone who has received TARP funds!!!
Anonymous writes:
PS Girl, never, ever, ever, use a broker. They are floating loans and gambling with your money. Use a direct lender...ie, someone who has received TARP funds!!!
This is Bank of America. They definitely got TARPED.
Elvis writes:
Housing is screwed for a decade (and all the paper that goes with it)unless we bulldozed foreclosed homes to diminish the vast oversupply of the non-perishable good.
I live part time in Florida and Minnesota. In Florida foreclosed homes get moldy because they do not run air conditioning. In Minnesota the smart banks turn off the heat and the pipes freeze and water damage turns to mold.
"diminish the vast oversupply of the non-perishable good"
Fortunately many of the recently built homes are very perishable. It won't take a bulldozer to remove them from the supply of marketable housing, but it probably will take a bulldozer to return the lots to productive farmland.
"Elvis, you assume people have jobs to buy homes. That's the kicker.
Outsider"
I make no assumptions about people have job/money to buy homes. I only know that there were about 4M too many homes built during the bubble and new demand for homes will be under 500k for at least a couple of years (and probably longer). That puts the oversupply today around 10 years worth. The only way to get rid of that mess in any sort of timely fashion is to knock down the foreclosed homes (that the gov't would buy) and salvage the usable parts.
I, as a potential homebuyer, I disagree. Current homeowners, lenders and paper pedlers are screwed. For the rest of us things are looking up.
Blackhalo | 01.28.09 - 11:14 am | #
They'll fix that soon enough. The next stimulus package is coming directly out of your hide, when they tank the dollar. You see, we can't have homeowners and asset holders getting screwed alone; that would be a forbidden redistribution of wealth. We've got to screw the prudent dollar holders and savers as well, that way everything stays even.
Of course the agents of this change will skim a little percentage off the top of both moves, but the top needs to stay on the top.
In a January 26 analysis entitled "Some Inconvenient Truths," Merrill Lynch's Chief North American Economist, David Rosenberg, calls depression:
"There were no fewer than four in the nineteenth century, one in the twentieth century, and we are very likely enduring another one today."
The complete paper, in pdf format, is available at "The Big Picture" blog. It can also be found at Financial Times' "The Long Room" blog.
Conjure is in complete agreement with Rosenberg's most excellent analysis.
Conjure will have more to say about this in the coming days, and will probably publish another Conjure Discussion Paper devoted to the on-going depression.
Meanwhile, beware of the market's reaction to the Bad Bank Put.
PS girl,call wells,see what they will do and call your banker back.These banks are refi'ing good loans so that they can say "we changed our spots and are ONLY making GOOD loans now!" It is worth your while to make a couple of calls." Gee Mr Banker,Greg at Wells said he could...and he has such nice eyes"
"unless we bulldozed foreclosed homes to diminish the vast oversupply of the non-perishable good."
There is precedent:
"In 1933, for example, Congress passed the Agricultural Adjustment Act (AAA) to provide economic relief to farmers. The AAA had at its core a plan to raise crop prices by paying farmers a subsidy to compensate for voluntary cutbacks in production. Funds for the payments would be generated by a tax levied on industries that processed crops. By the time the act had become law, however, the growing season was well underway, and the AAA encouraged farmers to plow under their abundant crops."
Even though the country is in the midst of a financial crisis, it's still possible to buy a house with no money down. A relatively small but growing number of Americans are turning to an obscure home loan program backed by the U.S. Department of Agriculture.
.
CR, Im a mortgage broker but wish to sell you nothing. Maybe educate a bit
Bloomberg gets it half right. I suppose I should give Reuters equal time but I dont have the stomach for it. This article by Bloomberg is so typical, and why its almost useless to read the news services. Taleb is right. Us Lowly Mortgage Brokers on the firing line know whats what, and that is Im sure why its said that one should never read news articles on subjects about which they know something.
Whats happened, in addition to rates rising, is that Fannie and Freddie have layered in significant additional fees for FICO scores under 740 (very high), LTVs over 60% and for Cash-Out ReFis. These just took effect. Where before lenders would pay rebate on rates above wholesale par (about 0.5% in Fee for every 0.125% increase in Rate), they have now pared Rebate back such that every 0.125% increase in Rate will get you, say, 0.125% in Rebate, or points back. You can no longer pay for your ReFi by increasing the Rate and there is thus no longer available the no-points or the no-cost ReFi. Your monthly payment savings must therefore be quite significant to overcome from $5K to $10K in Closing Costs, at least half of which is points. Even if the Rate goes back down to 4.50%, Ill have to tell my clients Yes, but your costs have also gone up. Itll now cost you $7K (or whatever) to ReFi and 5 years (or whatever) to break even. I think we now may have just seen the last ReFi mini-boom in my lifetime.
The foregoing is in the context of an industry that has layered in significant additional cost over the past 10 years. The lenders have all initiated an underwriting fee (that used to be considered a cost of doing business), now having risen to $600+, and mortgage brokers have all introduced a processing fee (ours is $550). These fees are additive to consistently rising title and escrow fees, and to some extent appraisal fees. Thus, before a Loan Fee is added, the cost of doing a ReFi is, say, $2,800. Now Fannie and Freddie have layered in additional cost and Rebate will no longer pay these costs. The point is of course that the industry is killing off ReFis and hampering purchases, and my biz may go the way of the buggy whip biz. I would certainly not recommend that anyone get into this business at this point. Maybe Ill write a song: Momma dont let your chirrun grow up to be mortgage brokers.
Let's make sure we're clear here. The FDIC is going to run a "bank" that purchases "all" of the bad assets "...clogging banks' balance sheets...". A few points:
We have no idea what the assets are "worth" because banks and other financials have been allowed to valuate their own assets independent of any 3rd party oversight.
Since many bad assets are "off" balance sheet assets, how much MORE is out there in the ether, waiting to pounce?
As far as I calculate, and offering a MOST conservative estimate, we're probably talking in the neighborhood of 8-10 TRILLION dollars in bad assets...minimum!
Are we going to print 10 trillion dollars? Are we going to borrow 10 trillion dollars from China and Japan and Saudi Arabia to pay down these assets?
Let's say, just for grins, that the "bad" bank buys up 99% of the toxic assets, and the banks are "joyously" thrust back to the days of 10:1 reserves (Which of course is a sham, because bankers will find ways to circumvent such reserve requirments in an effort to maximize their profits. That's the name of the game.), and they're feeling giddy in their apparent solvency. And so what that we have a 10 trillion dollar deficit: we can begin paying it down now because the economy is saved!! Not so fast. The ultimate success of these actions is predicated upon two things happening: (1) That people become willing to once again use debt to engage in commerce, and (2) that the country's GDP turns around and again reaches 3-5% per annum growth. But let's not forget that America's GDP "growth" is not REAL growth because we don't produce anything. 72% of our growth is consumer spending, ALL of which over the past decade was in fact DEBT spending, if you will. And so once the "bad" bank has purchased all of the bad assets and all of the banks are happy, does our GDP grow because consumers, who are unemployed and broke and disillusioned and angry and still in debt up to their eyeballs, begin spending money that they don't have...again?
Tom Stone, you are a flipping idiot. While shopping is good as an idea, she got a well below market quote. I'm in the industry...that is a take it and run sort of deal at 4.625 with a point.
x-MER will have a nice day, too. With news like this it will allow for more money to be poured into financials so that bonuses and divies can continue to flow
@Lucifer - on WFC, did you happen to catch if they extended their definition of delinquent account again? They had been doing that the past 2 or 3 quarters. Just curious if they finally stopped. They were relatively up-front about it, but it seemed nobody really cared much.
Spent $25 Billion in TARP money and raised another $10 billion and are staring in to the abyss that is Wachovia and still paying a dividend...They will be back for more money..soo
30 year's experience in the mortgage industry here.
4.625% at a point is an excellent quote in today's market. My advice would be to lock it today it if it makes sense in your overall financial picture. While rates can certainly go lower, it's unlikely that they will go significantly lower anytime soon.
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Is it in the ballpark high or low? It's tough to find rentals in the specific neighborhood, but the one available(after running through RvB program says that he'd save $500k over 15 years buying. For him, that's a rounding error. He's not in love with it and is bidding accordingly.
Outsider, yes. BofA has been good on small mortgages, under $100K, and apparently also on Closing Costs. Get a Good Faith Estimate before you commit, your mileage may vary.
I pointed out to a listing agent at an open house this weekend, that her one and only comp was from a time last year when the conforming limits were higher. Since the property would require a jumbo loan without an absurd down payment, I pointed out her "low mortgage rates" selling point was meaningless, and so was the comp.
She told me to find someone to "structure" the loans.
Is anyone out there actually still "structuring" anymore? I've been thinking I'd be thankful just to get a straight-up, 20% DP, high-FICO 30-year vanilla fixed. I'd assumed anything more exotic wasn't happening anymore. I mean, what sane institution would take second position in a property today?
Of course jumbos are failing. Sellers can't find anybody to take their place, even at steep discounts as qualifying for a jumbo requires your virgin mother's co-signiture.
Just wanted to say your report matches what I am seeing. We could re-fi our 30 year fixed into a 15 year fixed at a lower interest rate and keep our payment roughly the same but now everyone wants 7K in closing costs!!
Basel Too writes:
in my part of DC, half of the houses recently sold are FHA up to 625K. Helps the first time homeowners, but they'll probably regret it in a year or so.
How should it be stated?
1---All homes bought in the last 12 months, except for a small % with exceptional sale circumstances, could have been purchased for less today.
2---All equity downpayments up to 30% in bubble areas, on homes purchased from 2007 to mid-2008, have been lost.
3---Equity downpayments up to 20% on homes purchased from mid-2008 to now will be gone by mid-2009.
4---Almost all perception of the likely risk of downpayment equity up to 20%, on new purchases, being lost within a year has been successfully obscured by the ongoing, futile bailout charade.
Having trouble imagining the circumstances under which buyers are not going to regret buying RE.
PS Girl: Rate and point sounds good. But does the $1,200 include title, credit, junk fees, appraisal, etc, etc, etc? Sounds to me like just another point to the broker. What is sale price?
You know the latest ponzi scheme arrestee, Agape Worldwide (Long Island)?
Last summer I worked with a guy who was raving about the great rates on his investment. There were 8 of us all working around a conference table. I told him there was no doubt he was in a ponzi scheme, take his money and get the hell out, get into FDIC insured CDs only - this is no time to be chasing yield, and certainly not of this variety.
When this story broke yesterday, I emailed him. Sure enough, this was it. Fortunately for him, he lost only a pittance, about $7K.
Why the f@ck don't people listen? BTW, this was at the very same table where I tried to talk another friend out of investing in Fannie preferreds, 1 week before the implosion.
Comrade Alexei Mikhailovich writes:
My brother is looking at a REO in AZ. Huuge lot, great location only problem is it's on a septic system and needs a little interior work done. The bank has had 2 deals fall through due to financing. He's paying cash, the property in a world with credit is maybe worth a mil, in a cash world I gotta say no more than $800k.
Am I in the ballpark?
I don't think you are any where near the ballpark. I've been watching one that started at 1.2, currently down to 695, so far - no takers.
With $7K closing costs, if that's truly across the board, there isn't going to be a lot of refi'ing going on.
A while back I posted that this is like a game of musical chairs, and hope you like the house you're in now because you're going to be staying there awhile. The higher closing cost rates reaffirm that feeling.
"4.625% at a point is an excellent quote in today's market. My advice would be to lock it today it if it makes sense in your overall financial picture. While rates can certainly go lower, it's unlikely that they will go significantly lower anytime soon."
PSgirl said: "Thanks for all of the advice. I have a call in to him to accept the 4.625. We will see what happens."
Sorry for arriving so late to the party.
A couple of weeks ago I called to get a quote from my bank on a cash-out refi and was offered 4.875% with 2 points on a 30-year fixed.
I've already got a HELOC at 4% (for which I paid no fees of any kind), so it made no sense for me to do the refi for the time being.
Myself, if I could have gotten it for a point (or less) I would have taken it to lock-in the low rate for an indefinite period (as opposed to floating with my HELOC).
Housing is screwed for a decade (and all the paper that goes with it)unless we bulldozed foreclosed homes to diminish the vast oversupply of the non-perishable good. \t Elvis | \t \t \t \t01.28.09 - 11:09 am | #Not housing. Housing owners. Destroying a useful good to make the rich richer is the height of stupidity.
One note on BOA - I was dealing with them last week, posted my story in comments somewhere here. Wife and I got pre-approved for one place, then a week letter got the letter in the mail saying that BOA will not lend above 80% LTV in "declining markets", so if we asked for more, and the appraisal came in low, they'd just reduce the loan principal. Gee, thanks.
That said, they do have good no-fee loan programs, where they waive or pay a significant portion of the closing costs.
"......row because consumers, who are unemployed and broke and disillusioned and angry and still in debt up to their eyeballs, begin spending money that they don't have...again?"
DanW, you are absolutely correct. It does NOT add up. It will not work. The only reasoning that works is to default on the debt - we just aren't being told the specifics.
what would you need a cash out refi if your so smart, and your economics lesson's so valuable? should'nt your business model provide you with tons of cash?
Would you lend your cash at 4% on a cash out to someone? In florida, california, or even arkansas?
I've been looking at one in Rockville where the asking price has dropped $90,000 (almost 20%) since September 2008. Beautiful house in a great neighorhood. Another $60,000 and we might put in an offer.
I just refi'd my 15 year from 5.99% (taken out last fall) to 4.75% (in CA). No closing costs (yes, I realize my rate may be a bit higher because of that), no points.
No cash out, appx. 35% LTV, 800-ish FICO scores. Small local bank.
The only way to get rid of that mess in any sort of timely fashion is to knock down the foreclosed homes (that the gov't would buy) and salvage the usable parts.
Wrong. A very one-sided and counterproductive solution. There are much better methods, such as LOWER THE PRICE. Oh, and also LOWER THE PRICE. And did I mention LOWER THE F**KING PRICE?
At a low enough price, people will move in. In fact Low-income families in expensive states would hugely benefit, as they could move out of crappy, crammed apartments, and move into (by their standards) luxurious, sustainably priced houusing they can own.
Of course, the government's preferred method is equally myopic: vastly increase demand by allowing in a flood of illegal immigrants. that way, we eliminate the supply "imbalance" and lower working American's wages and standard of living in one fell swoop. Mission accomplished!
PSgirl
i am a mortgage banker. rates are primarily credit score, ltv/cltv and loan size driven. location can have an affect. was the 1 point discount or origination? some brokers tend to "hide" the orig until last and not count it as closing costs.
assuming it was an IN property, at least 80% ltv/cltv and a 720 or better middle score, the quote you're getting is close.
ZeroPointZero said: "...what would you need a cash out refi if your so smart, and your economics lesson's so valuable?..."
College tuition, for one thing. It would be cheaper and easier to borrow against my home (in whatever way I do it) than with student loans.
Long term investment, for another. As bad or as long as this recession gets, it won't last forever. When the recovery begins, I'd have a large chunk of money borrowed at historically-low interest rates available to invest.
I can tell from your post that you aren't interested in an intelligent answer, but others might be.
Sure they're in trouble...what they bought with those loans was never worth what they paid. It's like buying a 3 year old Escalade...52k new, and all yours for 21k. This is called DEFLATION. DEFLATION is a GOOD thing. Say it 100 times.
Yea - I know - dead thread
but if anyone it reading... i hit 4.75% 30 year fixes conforming with a portfolio lender. The key is finding a portfolio lender, not a spinner-offer to the 2ndary
Nemo?
Remember folks, it's not just CA, FL, AZ & NV that are hosed in jumbo land, it's NY, NJ, CT, Chicagoland, DC
Nemo!
Housing is screwed for a decade (and all the paper that goes with it)unless we bulldozed foreclosed homes to diminish the vast oversupply of the non-perishable good.
Mortgage applications continue to fall.
Anecdote: Foreclosed home near me in Central NJ originally listed at $250k, has been sitting at $189k for the last few weeks. Median price in the area is about $300k, median income about $50k . . . still a ways to go . . .
-Mike J
Jumbo Czar
Firsty!
With cram downs now ok, will lenders be willing to provide jumbo loans?
First?
To add to my anecdote: a colleague had his house listed for over a year with almost no interest and one lowball offer. A similar house across from his was bought 2 years ago at $720k, just sold a few weeks ago at $540k. Prices around here in Central NJ have been fairly sticky but I think are beginning to come unglued -- NJ unemployment went from 6.1 to 7.1 in December.
-Mike J
Housing is screwed for a decade (and all the paper that goes with it)unless we bulldozed foreclosed homes to diminish the vast oversupply of the non-perishable good.
Elvis | 01.28.09 - 11:09 am | #
Elvis, you assume people have jobs to buy homes. That's the kicker.
in my part of DC, half of the houses recently sold are FHA up to 625K. Helps the first time homeowners, but they'll probably regret it in a year or so.
My brother is looking at a REO in AZ. Huuge lot, great location only problem is it's on a septic system and needs a little interior work done. The bank has had 2 deals fall through due to financing. He's paying cash, the property in a world with credit is maybe worth a mil, in a cash world I gotta say no more than $800k.
Am I in the ballpark?
wait until April......going to get much worse.
Ciao
MS
Are there any mortgage people here.
My banker just called me and offered 4.625 with one point and $1200.00 in closing costs on a re-fi.
Does this sound reasonable?
Housing is screwed for a decade (and all the paper that goes with it)unless we bulldozed foreclosed homes to diminish the vast oversupply of the non-perishable good.
Elvis | 01.28.09 - 11:09 am | #
I, as a potential homebuyer, I disagree. Current homeowners, lenders and paper pedlers are screwed. For the rest of us things are looking up.
Oh, that is a 30 year fixed.
Wall Street bonuses are paid on February. When they don't come, or are diminished...watch the default rate a couple months from now in New Jersey, NY, and Connecticut
My local CU stopped all jumbos on 1/1/09
Add super prime CC defaults
PS Girl, if that is a CONVENTIONAL 30 year fixed, it's there. If it's Jumbo, I laugh at you!!!!
Are there any mortgage people here.
My banker just called me and offered 4.625 with one point and $1200.00 in closing costs on a re-fi.
Does this sound reasonable?
Great Idea for a new network TV show!...30 minute Re-fi's
one lowball offer.
Comrade Mike J | 01.28.09 - 11:11 am | #
In retrospect, how lowball was the offer, really?
Comrade Alexei,NO.Look at price/rent ratios,then the local economy...how stable is it? and recall that cash is not yet king,but will be crowned soon...
PSgirl-
An offer is one thing...wait until you turn it in....it won't be at that rate when it comes back to you...
I can "offer" all I want with great rates...doesn't mean they are reality based though.
Ciao
MS
Housing is screwed for a decade (and all the paper that goes with it)unless we bulldozed foreclosed homes to diminish the vast oversupply of the non-perishable good.
Elvis | 01.28.09 - 11:09 am | #
Elvis, you assume people have jobs to buy homes. That's the kicker.
Outsider | 01.28.09 - 11:12 am | #
Remember, bulldozing homes is "shovel ready", and I agree with E. Especially when it comes to unsustainable housing, and housing that shouldn't be sustained like some homes in Detroit, whose primary function at this point is housing crack dealer and pro's.
Prices around here in Central NJ have been fairly sticky but I think are beginning to come unglued -- NJ unemployment went from 6.1 to 7.1 in December.
Anyone currently holding a jumbo loan is simply in a race against fate. I gather that most of those who are making their payments are hanging on by the mere fact they are employed. As unemployment continues to uptick, I expect foreclosures to erupt as they take down otherwise prime borrowers. Anyone in a jumbo who's seen 30-40% depreciation will either a) never move, or b) default. Either way, real estate is going to stay depressed for years and years and years.
No, not jumbo. About 210K
"My banker just called me and offered 4.625 with one point and $1200.00 in closing costs on a re-fi"
Jumbo in Arizona? No deals like this here...
The higher end homes (as in jumbo loans) are going to get hammered in so many areas: CA, FL, NV, AZ, WA, DC, MD, VA, MA, CT, Chicagoland. We're talking at least the next half decade before they bottom.
It will be worse than sub-prime and the Alt-A debacle.
PS Girl, never, ever, ever, use a broker. They are floating loans and gambling with your money. Use a direct lender...ie, someone who has received TARP funds!!!
MS writes:
PSgirl-
An offer is one thing...wait until you turn it in....it won't be at that rate when it comes back to you...
Interesting. Thanks for letting me know. I will report back on this.
PS girl,call around...I think your banker might waive the point...offer him $2k and no points.
Anonymous writes:
PS Girl, never, ever, ever, use a broker. They are floating loans and gambling with your money. Use a direct lender...ie, someone who has received TARP funds!!!
This is Bank of America. They definitely got TARPED.
"...but it's no wonder sales of expensive homes have slowed significantly."
I was wondering why the median sale price of Chicago-area homes was finally coming down after "mysteriously" going up earlier in the housing bust.
Tom Stone writes:
PS girl,call around...I think your banker might waive the point...offer him $2k and no points.
Would BAC do something like this?
that rate is not available without points. whoever said that is on crack. 4.625 with a point is a great deal today
Elvis writes:
Housing is screwed for a decade (and all the paper that goes with it)unless we bulldozed foreclosed homes to diminish the vast oversupply of the non-perishable good.
I live part time in Florida and Minnesota. In Florida foreclosed homes get moldy because they do not run air conditioning. In Minnesota the smart banks turn off the heat and the pipes freeze and water damage turns to mold.
Bulldoze them all!
"diminish the vast oversupply of the non-perishable good"
Fortunately many of the recently built homes are very perishable. It won't take a bulldozer to remove them from the supply of marketable housing, but it probably will take a bulldozer to return the lots to productive farmland.
PSgirl(Unrated) writes:
\tTom Stone writes:
PS girl,call around...I think your banker might waive the point...offer him $2k and no points.
Would BAC do something like this?
\t PSgirl | \t \t \t \t01.28.09 - 11:20 am | #
PSgirl | 01.28.09 - 11:20 am | #
Probably YMMV.
"Elvis, you assume people have jobs to buy homes. That's the kicker.
Outsider"
I make no assumptions about people have job/money to buy homes. I only know that there were about 4M too many homes built during the bubble and new demand for homes will be under 500k for at least a couple of years (and probably longer). That puts the oversupply today around 10 years worth. The only way to get rid of that mess in any sort of timely fashion is to knock down the foreclosed homes (that the gov't would buy) and salvage the usable parts.
I, as a potential homebuyer, I disagree. Current homeowners, lenders and paper pedlers are screwed. For the rest of us things are looking up.
Blackhalo | 01.28.09 - 11:14 am | #
They'll fix that soon enough. The next stimulus package is coming directly out of your hide, when they tank the dollar. You see, we can't have homeowners and asset holders getting screwed alone; that would be a forbidden redistribution of wealth. We've got to screw the prudent dollar holders and savers as well, that way everything stays even.
Of course the agents of this change will skim a little percentage off the top of both moves, but the top needs to stay on the top.
This is Bank of America. They definitely got TARPED.
PSgirl | 01.28.09 - 11:19 am | #
PSgirl - I just went to BOA website and for my state, a refi for me would be 4.875 w/one point. (APR 5.025)
Just for comparison sake.
CONJURE COMMUNIQUE
In a January 26 analysis entitled "Some Inconvenient Truths," Merrill Lynch's Chief North American Economist, David Rosenberg, calls depression:
"There were no fewer than four in the nineteenth century, one in the twentieth century, and we are very likely enduring another one today."
The complete paper, in pdf format, is available at "The Big Picture" blog. It can also be found at Financial Times' "The Long Room" blog.
Conjure is in complete agreement with Rosenberg's most excellent analysis.
Conjure will have more to say about this in the coming days, and will probably publish another Conjure Discussion Paper devoted to the on-going depression.
Meanwhile, beware of the market's reaction to the Bad Bank Put.
Have a nice day.
PSgirl - shop it around. Call a few banks and ask them to beat the offer.
If you belong to a credit union, even better.
PS girl,call wells,see what they will do and call your banker back.These banks are refi'ing good loans so that they can say "we changed our spots and are ONLY making GOOD loans now!" It is worth your while to make a couple of calls." Gee Mr Banker,Greg at Wells said he could...and he has such nice eyes"
"unless we bulldozed foreclosed homes to diminish the vast oversupply of the non-perishable good."
There is precedent:
"In 1933, for example, Congress passed the Agricultural Adjustment Act (AAA) to provide economic relief to farmers. The AAA had at its core a plan to raise crop prices by paying farmers a subsidy to compensate for voluntary cutbacks in production. Funds for the payments would be generated by a tax levied on industries that processed crops. By the time the act had become law, however, the growing season was well underway, and the AAA encouraged farmers to plow under their abundant crops."
The Depression in the U.S.--An Overview
Comrade Alexei - $800k in AZ sounds like a falling knife.
.
Great news. Here's an awesome new lending program. Sihn up now and be ahead of the curve.
We live in a beautiful world, don't we?
Home Loan Program Benefits Rural Families : NPR
Even though the country is in the midst of a financial crisis, it's still possible to buy a house with no money down. A relatively small but growing number of Americans are turning to an obscure home loan program backed by the U.S. Department of Agriculture.
.
CR, Im a mortgage broker but wish to sell you nothing. Maybe educate a bit
Bloomberg gets it half right. I suppose I should give Reuters equal time but I dont have the stomach for it. This article by Bloomberg is so typical, and why its almost useless to read the news services. Taleb is right. Us Lowly Mortgage Brokers on the firing line know whats what, and that is Im sure why its said that one should never read news articles on subjects about which they know something.
Jan. 28 (Bloomberg) -- Mortgage applications in the U.S. slumped last week by the most in 16 years as refinancing plunged. U.S. MBAs Mortgage Applications Index Fell 39% Last Week
Whats happened, in addition to rates rising, is that Fannie and Freddie have layered in significant additional fees for FICO scores under 740 (very high), LTVs over 60% and for Cash-Out ReFis. These just took effect. Where before lenders would pay rebate on rates above wholesale par (about 0.5% in Fee for every 0.125% increase in Rate), they have now pared Rebate back such that every 0.125% increase in Rate will get you, say, 0.125% in Rebate, or points back. You can no longer pay for your ReFi by increasing the Rate and there is thus no longer available the no-points or the no-cost ReFi. Your monthly payment savings must therefore be quite significant to overcome from $5K to $10K in Closing Costs, at least half of which is points. Even if the Rate goes back down to 4.50%, Ill have to tell my clients Yes, but your costs have also gone up. Itll now cost you $7K (or whatever) to ReFi and 5 years (or whatever) to break even. I think we now may have just seen the last ReFi mini-boom in my lifetime.
The foregoing is in the context of an industry that has layered in significant additional cost over the past 10 years. The lenders have all initiated an underwriting fee (that used to be considered a cost of doing business), now having risen to $600+, and mortgage brokers have all introduced a processing fee (ours is $550). These fees are additive to consistently rising title and escrow fees, and to some extent appraisal fees. Thus, before a Loan Fee is added, the cost of doing a ReFi is, say, $2,800. Now Fannie and Freddie have layered in additional cost and Rebate will no longer pay these costs. The point is of course that the industry is killing off ReFis and hampering purchases, and my biz may go the way of the buggy whip biz. I would certainly not recommend that anyone get into this business at this point. Maybe Ill write a song: Momma dont let your chirrun grow up to be mortgage brokers.
boeing cuts 10,000 jobs and WFC admits to a loss..
Some Inconvenient Truths
RE: one more thing on bad banks:
Let's make sure we're clear here. The FDIC is going to run a "bank" that purchases "all" of the bad assets "...clogging banks' balance sheets...". A few points:
Tom Stone, you are a flipping idiot. While shopping is good as an idea, she got a well below market quote. I'm in the industry...that is a take it and run sort of deal at 4.625 with a point.
Have a nice day.
mp
x-MER will have a nice day, too. With news like this it will allow for more money to be poured into financials so that bonuses and divies can continue to flow
and will probably publish another Conjure Discussion Paper
mp | 01.28.09 - 11:29 am | #
Was it really published? I remembered to check back thru the posts but couldnt find it....
..........................
All unemployed to be placed into a "Bad Worker" pool.
then....."poof"
Anon 1134,how long does it take you to make 3 phone calls?
Leader O turns to technology to save us.
@Lucifer - on WFC, did you happen to catch if they extended their definition of delinquent account again? They had been doing that the past 2 or 3 quarters. Just curious if they finally stopped. They were relatively up-front about it, but it seemed nobody really cared much.
long enought to lose the rate...she's .25 below market, and the coupons are moving the wrong way.
Phaedrus | 01.28.09 - 11:32 am | #
$5K-10K in closing costs????
BOA just quoted PSgirl $1200.
lucifer writes:
WFC admits to a loss..
Spent $25 Billion in TARP money and raised another $10 billion and are staring in to the abyss that is Wachovia and still paying a dividend...They will be back for more money..soo
30 year's experience in the mortgage industry here.
4.625% at a point is an excellent quote in today's market. My advice would be to lock it today it if it makes sense in your overall financial picture. While rates can certainly go lower, it's unlikely that they will go significantly lower anytime soon.
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Tom,
Is it in the ballpark high or low? It's tough to find rentals in the specific neighborhood, but the one available(after running through RvB program says that he'd save $500k over 15 years buying. For him, that's a rounding error. He's not in love with it and is bidding accordingly.
Outsider, yes. BofA has been good on small mortgages, under $100K, and apparently also on Closing Costs. Get a Good Faith Estimate before you commit, your mileage may vary.
Thanks for all of the advice. I have a call in to him to accept the 4.625. We will see what happens.
I pointed out to a listing agent at an open house this weekend, that her one and only comp was from a time last year when the conforming limits were higher. Since the property would require a jumbo loan without an absurd down payment, I pointed out her "low mortgage rates" selling point was meaningless, and so was the comp.
She told me to find someone to "structure" the loans.
Is anyone out there actually still "structuring" anymore? I've been thinking I'd be thankful just to get a straight-up, 20% DP, high-FICO 30-year vanilla fixed. I'd assumed anything more exotic wasn't happening anymore. I mean, what sane institution would take second position in a property today?
Meet the new boss. Same as the old boss.
Phaedrus
Phaedrus | 01.28.09 - 11:32 am | #
Thanks for the write up.
Of course jumbos are failing. Sellers can't find anybody to take their place, even at steep discounts as qualifying for a jumbo requires your virgin mother's co-signiture.
Rate quotes don't mean dick....when you get your app. in and processed that's where the rubber meets the road.
Until then the system can quote all it wants....seems to me we have a little problem with that nowadays called level 3.
Ciao
MS
All unemployed to be placed into a "Bad Worker" pool.
then....."poof"
Anonymous | 01.28.09 - 11:34 am | #
Soylent Green?
Phadrus,
Just wanted to say your report matches what I am seeing. We could re-fi our 30 year fixed into a 15 year fixed at a lower interest rate and keep our payment roughly the same but now everyone wants 7K in closing costs!!
Life is too uncertain for that right now.
o this is the quote of the day
"Morgan Stanley CFO: ROE remain 12-15% over the year"
What year are we talking about?
'cause it's not last or this.
Ciao
MS
Obama - Gov't is powerless.
He better do it at that rate without screwing me--after all, he might not have a job without me basically paying his salary.
$800k falling knives are called Guillotine's
Basel Too writes:
in my part of DC, half of the houses recently sold are FHA up to 625K. Helps the first time homeowners, but they'll probably regret it in a year or so.
How should it be stated?
1---All homes bought in the last 12 months, except for a small % with exceptional sale circumstances, could have been purchased for less today.
2---All equity downpayments up to 30% in bubble areas, on homes purchased from 2007 to mid-2008, have been lost.
3---Equity downpayments up to 20% on homes purchased from mid-2008 to now will be gone by mid-2009.
4---Almost all perception of the likely risk of downpayment equity up to 20%, on new purchases, being lost within a year has been successfully obscured by the ongoing, futile bailout charade.
Having trouble imagining the circumstances under which buyers are not going to regret buying RE.
PS Girl: Rate and point sounds good. But does the $1,200 include title, credit, junk fees, appraisal, etc, etc, etc? Sounds to me like just another point to the broker. What is sale price?
You know the latest ponzi scheme arrestee, Agape Worldwide (Long Island)?
Last summer I worked with a guy who was raving about the great rates on his investment. There were 8 of us all working around a conference table. I told him there was no doubt he was in a ponzi scheme, take his money and get the hell out, get into FDIC insured CDs only - this is no time to be chasing yield, and certainly not of this variety.
When this story broke yesterday, I emailed him. Sure enough, this was it. Fortunately for him, he lost only a pittance, about $7K.
Why the f@ck don't people listen? BTW, this was at the very same table where I tried to talk another friend out of investing in Fannie preferreds, 1 week before the implosion.
Sigh.
PS Girl: Anonymous is wrong. Honest brokers (who are not greedy) usually come in less expensive than direct lenders.
Comrade Alexei Mikhailovich writes:
My brother is looking at a REO in AZ. Huuge lot, great location only problem is it's on a septic system and needs a little interior work done. The bank has had 2 deals fall through due to financing. He's paying cash, the property in a world with credit is maybe worth a mil, in a cash world I gotta say no more than $800k.
Am I in the ballpark?
I don't think you are any where near the ballpark. I've been watching one that started at 1.2, currently down to 695, so far - no takers.
MS wrote: ""Morgan Stanley CFO: ROE remain 12-15% over the year" What year are we talking about?"
Did you remember to add in the TARP funds? That's the return on their investment in lobbying expenses and campaign campaign contributions.
Seriously, what are the accounting rules for TARP funds - if any?
With $7K closing costs, if that's truly across the board, there isn't going to be a lot of refi'ing going on.
A while back I posted that this is like a game of musical chairs, and hope you like the house you're in now because you're going to be staying there awhile. The higher closing cost rates reaffirm that feeling.
Staying put is the new meme.
"4.625% at a point is an excellent quote in today's market. My advice would be to lock it today it if it makes sense in your overall financial picture. While rates can certainly go lower, it's unlikely that they will go significantly lower anytime soon."
IOW, rates only go up !!
DC area
sold 2005:
$6,500,000
current asking price:
$2,499,900
FX6834977 on FranklyMLS.com 7405 GEORGETOWN PIKE, MCLEAN VA for $2,499,900 in HILL VIEW ESTATES Home For Sale
PSgirl said: "Thanks for all of the advice. I have a call in to him to accept the 4.625. We will see what happens."
Sorry for arriving so late to the party.
A couple of weeks ago I called to get a quote from my bank on a cash-out refi and was offered 4.875% with 2 points on a 30-year fixed.
I've already got a HELOC at 4% (for which I paid no fees of any kind), so it made no sense for me to do the refi for the time being.
Myself, if I could have gotten it for a point (or less) I would have taken it to lock-in the low rate for an indefinite period (as opposed to floating with my HELOC).
FWIW.
Sebastia
Housing is screwed for a decade (and all the paper that goes with it)unless we bulldozed foreclosed homes to diminish the vast oversupply of the non-perishable good.
\t Elvis | \t \t \t \t01.28.09 - 11:09 am | # Not housing. Housing owners. Destroying a useful good to make the rich richer is the height of stupidity.
One note on BOA - I was dealing with them last week, posted my story in comments somewhere here. Wife and I got pre-approved for one place, then a week letter got the letter in the mail saying that BOA will not lend above 80% LTV in "declining markets", so if we asked for more, and the appraisal came in low, they'd just reduce the loan principal. Gee, thanks.
That said, they do have good no-fee loan programs, where they waive or pay a significant portion of the closing costs.
Beware The Emperor of Ice Cream!
Comrade Mike J writes:
Mortgage applications continue to fall
Lyon Jewett ain't gonna like that talk
"......row because consumers, who are unemployed and broke and disillusioned and angry and still in debt up to their eyeballs, begin spending money that they don't have...again?"
DanW, you are absolutely correct. It does NOT add up. It will not work. The only reasoning that works is to default on the debt - we just aren't being told the specifics.
FWIW
it's worth zilch.
your a home gamer, as cramer call's it.
what would you need a cash out refi if your so smart, and your economics lesson's so valuable? should'nt your business model provide you with tons of cash?
Would you lend your cash at 4% on a cash out to someone? In florida, california, or even arkansas?
Starbucks - Wow, that's unreal.
I've been looking at one in Rockville where the asking price has dropped $90,000 (almost 20%) since September 2008. Beautiful house in a great neighorhood. Another $60,000 and we might put in an offer.
js, esq. - there is nothing wrong w/ going around and low-balling. The RE agent wont like it but heh it gives them something to do.
In the late 80s I offered 55% on a 800k house and it was accepted...pigs do fly some times...and like everything else timing is everything
I just refi'd my 15 year from 5.99% (taken out last fall) to 4.75% (in CA). No closing costs (yes, I realize my rate may be a bit higher because of that), no points.
No cash out, appx. 35% LTV, 800-ish FICO scores. Small local bank.
The only way to get rid of that mess in any sort of timely fashion is to knock down the foreclosed homes (that the gov't would buy) and salvage the usable parts.
Wrong. A very one-sided and counterproductive solution. There are much better methods, such as LOWER THE PRICE. Oh, and also LOWER THE PRICE. And did I mention LOWER THE F**KING PRICE?
At a low enough price, people will move in. In fact Low-income families in expensive states would hugely benefit, as they could move out of crappy, crammed apartments, and move into (by their standards) luxurious, sustainably priced houusing they can own.
Of course, the government's preferred method is equally myopic: vastly increase demand by allowing in a flood of illegal immigrants. that way, we eliminate the supply "imbalance" and lower working American's wages and standard of living in one fell swoop. Mission accomplished!
PSgirl
i am a mortgage banker. rates are primarily credit score, ltv/cltv and loan size driven. location can have an affect. was the 1 point discount or origination? some brokers tend to "hide" the orig until last and not count it as closing costs.
assuming it was an IN property, at least 80% ltv/cltv and a 720 or better middle score, the quote you're getting is close.
Phaedrus, you just made my whole day. Mortgage brokers going broke. Now really is change we can believe in.
ZeroPointZero said: "...what would you need a cash out refi if your so smart, and your economics lesson's so valuable?..."
College tuition, for one thing. It would be cheaper and easier to borrow against my home (in whatever way I do it) than with student loans.
Long term investment, for another. As bad or as long as this recession gets, it won't last forever. When the recovery begins, I'd have a large chunk of money borrowed at historically-low interest rates available to invest.
I can tell from your post that you aren't interested in an intelligent answer, but others might be.
Sebastia
intelligent AND sebastian don't go together.
Nice try though.....
Ciao
MS
Sure they're in trouble...what they bought with those loans was never worth what they paid. It's like buying a 3 year old Escalade...52k new, and all yours for 21k. This is called DEFLATION. DEFLATION is a GOOD thing. Say it 100 times.
MS said: "intelligent AND sebastian don't go together.
Nice try though....."
You can drop dead, too.
S.
Yea - I know - dead thread
but if anyone it reading... i hit 4.75% 30 year fixes conforming with a portfolio lender. The key is finding a portfolio lender, not a spinner-offer to the 2ndary
teats are still sore
give me a break!!!
americansRdeadbeats, how irritating. Some of us are both ethical AND save people money. I'm one.
ok..nobody said it..
We need a Mold Czar..