Nemo?
"With more than $300,000 in combined annual income, tens of thousands of dollars in the bank and credit scores that top 800,"?
WTF, these people make 300k/year and only have tens of thousands saved?
i read in one of Cali regs that the banks could use the IOUs to pay their state banking taxes. probably explains why they took the IOUs and for such a limited time.
While the amount they make is easily enough to qualify for the new loan, tax deductions for self-employed workers dropped their official income below the threshold that banks wanted to see.
Talk about "missing the point."
Someone ought to inform the staff writer that, when he says "income," he should be saying "revenue."
It's not "income" until you reach the number after deductions.
California is giving its debt to people who don't necessarily want it. Amazing, now you don't even have to agree to buy debt, you'll just get it anyway. Is the SEC and Treasury really going to go along with this? This looks like money printing to me.
It doesn't take much insight to figure out why they were denied.
$300K/yr, less than $100K of savings - either they just started earning at that level and have no history, or they aren't really earning $300K/yr after expenses.
Seriously, if your mortgage is around $60K/yr, on that income you should be able to save up more than "tens of thousands" of dollars pretty quick.
From May, the index was down 0.3%. Export prices were down 12.8% on year in June, while import prices were 32.2% lower.
"The slide in wholesale prices is highly likely to widen in July, August and September, exceeding 7% down the road," Tetsuro Sawano, senior fixed income strategist at Mitsubishi UFJ Securities, was quoted as saying in a Reuters report following the data. "Today's data would help the Bank of Japan reinforce its cautious stance on the economy."
Amazing, now you don't even have to agree to buy debt, you'll just get it anyway. Is the ... Treasury really going to go along with this?
Please re-check the definition of the modern "Dollar," or more precisely, Federal Reserve Note. It's nothing but a note that you can trade for another note just like it. Before TPTB are done, you will be encased in an 11-dimensional crystal formed entirely of debt, and your issue will have to pay it off on your behalf.
I put this on the last thread post-pig, but it is pretty funny the idea of IOUs having a credit profile in the first place. Usually credit analysis of short-term debt is driven by a borrower's liquidity
Bond Girl,
Don't you love that bondbuyer site? I also like to peruse the inventory at syllc.com
example:
Maturity 6/1/2027 MT DIABLO CALIF UNI SCH DIST Baa1 A+ NATL-RE coupon 5.000 yield 5.150 call 6/1/2014 @101.00 CUSIP 621196WE0
I don't recall which regular poster (dryfly, ac or Nemo) said "The all American reason for stated income mortgages are for tax cheats." Tanta backed those up with her posts of the exact forms needed to report non-traditional income.
WS: hate to break it to you, but "your money in a bank account" is just more debt. debt that the bank owes to you and that you assume that the bank (or FDIC) will repay on your demand.
Let's be more precise with the language. States don't bankrupt. If California is overtly backstopped then we might as well change our name to Federal States of America.
I actually wonder if most of the reason CA state debt isn't getting dumped is because investors know that however California resolves this situation it will be punishing to local credits. And local credits have a lot less flexibility.
Nikki has a crap morning, starts up and pulls the early money in, even generates a slightly premature headline about stocks rising on buybacks, promptly slumps on PM's assertions on market prospects...
"Before you dismiss my words as a rant, hear me out. Why, for example, is the power to commit substantial resources on taxpayers' behalf, to influence many of the most important commitments and relationships of businesses, individuals, and governments, and to initiate economic and regulatory policies with far-reaching consequences, in the hands of unelected officials with unexceptional abilities and no real accountability?"
I call BS on this. I own my own business. There are these things called TAXES. We file them every year. All it takes is your last two years tax returns to prove income.
Jennifer France is either lying about her household income or filing tax returns with lots of "creative accounting."
There are plans to eventually get him buried at Neverland (much like Elvis is interred at Graceland.) Currently, they need a special agreement from the city and permit to do so, which is going to take a bit to get worked out. It may be months before Mr. Jackson has a final resting place.
"States don't have the legal power to print currency."
~~~~
They do if they start their own banks ... which Cali should do pronto ...
California Dreamin’: How The State Can Beat Its Budget Woes by Dr. Ellen Brown
If private banks can create credit on their books, so can the world’s eighth largest economy. Indeed, there is longstanding precedent for this approach. The State of North Dakota has owned its own bank for nearly a century. North Dakota is one of only two States (along with Montana) that are not currently facing budget shortfalls. North Dakota has beaten the Wall Street credit freeze by generating its own credit. By law, ever since 1919 the State’s revenues have been deposited in its own bank, the Bank of North Dakota (BND). Using the “fractional reserve” lending scheme open to all banks, these deposits are then available to be used as the “reserves” for creating many times their face value in loans. Other banks in the State do not see the BND as a threat, because it partners with them and backstops them, serving as a sort of central bank for North Dakota. BND’s loans are not insured by the Federal Deposit Insurance Corporation (FDIC) but are guaranteed by the State."
maybe that $1 million home now comps at $700k thanks to the foreclosure down the street. these "poor me" stories turn my stomach. i'm with art eclectic -- bs
Kitchen, MarketWatch
LOS ANGELES (MarketWatch) -- Japan's domestic corporate goods price index, the nation's benchmark measure of wholesale prices, fell a record 6.6% in June from the year-ago period, the Bank of Japan said Friday.
mp writes:
Did they finally get around to burying Jacko?
Inquiring minds want to know.
================\
You know, with all the weird stuff that happens in the financial world, nothing there compares to the MJ worship crap. I mean, at about the same time as his death, Robert Mcnamera passed. The Times did a front page article but other than that there was such a silence. Here's a person who had a monumental effect on our country, on lives and deaths, on our standing in the world. He dies, and nary a mention.
But let an entertainer like MJ pass, and the attention is monumental. I don't get it. What I do get is that we are so doomed, and deserve whatever we get if our sense of priority is this messed up.
Wall Street is insane and have cut off their heads to spite us all.(sorry, imagery I enjoy) The obviousness of the world losing faith in investing in our financial markets compounded with individual/institutional investors also starting to take a pass at the casino leads to the conclusion these fine folks know it can't be saved. Take the money and run while handing out huge bonuses to make everyone complicit seems to be the plan.
Too Big To Jail
Why prosecutors won't hit Wall Street hard in the subprime scandal.
Jul 9, 2009
"Tony Accetta, a former prosecutor in the U.S. Attorney's office in New York, contends the big Wall Street players know far more than they are admitting.
.....
"Unfortunately, prosecution of fraud is "the only way you're going to get reform" on Wall Street, argues Accetta. Going after small fry like Sky won't do anything to deter future scamming by the Street. "This is a systemic problem that goes back to the dotcom bubble, to the Enrons, HealthSouths, and Worldcoms," he says. "Our corporate capital-formation structure for the last 10 to 15 years has gone beyond the odd-duck crook here and there. It's become institutionalized."
that alabama county that bond girl mentioned has 660,000 people and 3.2 billion in troubled sewer debt. that seems sorta outrageous. almost 5k a head if i did the math correctly.
No hit record, but he was a whiz kid. One of the titans in the car industry. A legend. Bill Gates better die now if he wants any kind of funeral, cuz he has no hit record either.
WASHINGTON — The drive to remake the nation's health care system suffered yet another setback in Congress on Thursday when a pivotal group of House Democrats demanded changes in legislation the leadership was drafting on a fast track.
The emerging bill "lacks a number of elements essential to preserving what works and fixing what is broken," 40 members of the Blue Dog Coalition of moderate to conservative Democrats wrote party leaders. To win their support, they said, any legislation would need to be much more aggressive in reining in the growth of health care as well as in addressing a disparity in Medicare payments they said adversely affects rural providers.
Why is there so much surprise that liar loans are coming back? Or that there is public outrage that tax cheats who don't save cannot buy a house they can only afford using vast amounts of other people's money, and almost none of their own?
Return to that world is what Geithner, Bernanke, Summers, Pelosi, Frank, Dodd, and Schumer are aiming for. Why are we surprised?
You know, I just learned of McNamara's death this evening.
You should watch his movie if you haven't already.
The Fog of War: Eleven Lessons from the Life of Robert S. McNamara
It's more than a little self-serving. But if somebody like Alan Greenspan or Ben Bernanke ever looks back on their failures with as much honesty as McNamara, I'll be shocked.
Everyone who applies for a loan self qualifies himself or herself (self underwrites) because they have information about themselves that the lender does not have at the time of making the loan. For example, the borrower who on paper qualifies knows if they will quit after the loan closes and invest in their brother's business; if the company they work for is in trouble and will lay them off, or if they are planning to quit and start over in a new career, etc. Yes, there are a set of borrowers who will overextend themselves and be too optimistic about repaying, but these people will do it through total credit borrowing so if the mortgage is limited in amount, they will overextend their credit in other ways, such as credit cards, department store cards, etc. There is nothing particularly wrong or worse about no doc loans. In fact, they are better than regular mortgages because they lower the transaction cost of loan approval assuming that the higher interest rate is less than the transaction cost savings.
"So CR is saying that it's possible for a successful self-employed person to get a lender underwritten loan.
But I've never heard him say exactly how.
How about saying so now, CR?"
I think someone else already said it, but I suggest that 30% cash down, and 5 years of tax returns showing enough net income should get you a loan.
"interest" (1): one more step on the slippery slope to debt-serfdom!
"interest" (2): the debt that keeps on giving!
"interest" (3): money for nothing (and your chicks for free? try YouTube).
Creating a bank of California that (de facto) lets the state run a deficit isn't really a way to make the state get its fiscal house in order. Just one more horse you can feed to the wolf before it gets to the carriage.
Rich,it is called an "exception".A senior underwriter reviews the app to see if an exception to the written underwriting policies makes sense for the lender.They will look at deductions and such things as the quality of the income .Tanta said it better than I can,and CR provided the links in the post.Lenders used to do this all the time,of course it does presuppose that you have qualified underwriters and there are few left,they were not necessary once risk was removed from the business.
Rich,it is called an "exception".A senior underwriter reviews the app to see if an exception to the written underwriting policies makes sense for the lender.They will look at deductions and such things as the quality of the income .Tanta said it better than I can,and CR provided the links in the post.Lenders used to do this all the time,of course it does presuppose that you have qualified underwriters and there are few left,they were not necessary once risk was removed from the business.
[ Japan's domestic corporate goods price index, the nation's benchmark measure of wholesale prices, fell a record 6.6% in June from the year-ago period]
Priced in. Nikkei flat as a pancake. Of course it's priced in until GS says it isn't.
[ Japan's domestic corporate goods price index, the nation's benchmark measure of wholesale prices, fell a record 6.6% in June from the year-ago period]
Priced in. Nikkei flat as a pancake. Of course it's priced in until GS says it isn't.
A couple years of tax returns & 20% down might get it done.
So 20% down is the difference between borrower underwritten and lender underwritten? If so, the whole argument is bunk.
As for the tax returns, we've argued it a hundred times. A self-employed person files a schedule C.
With Turbo Tax, I can make you up a Schedule C in 10 minutes that will say anything you want. There's no independent, reliable way to verify that the Schedule C is real.
It's amazing CR can keep bringing this up without advancing the argument. Just give it your best shot, CR.
How can a successful self-employed person get a lender-underwritten loan?
"Everyone who applies for a loan self qualifies himself or herself (self underwrites) because they have information about themselves that the lender does not have at the time of making the loan. "
Someone must think this board is populated by morons. Because a self-employed person controls several key elements of their own future income does not mean that the lender cannot get a tremendous amount of information from actual tax returns. I am employed. I can quit tomorrow. Does that mean my past income is meaningless? Balderdash.
A successful self employed person receives an underwritten loan by giving the bank underwriter two years of business and personal tax returns and a current P&L and balance sheet. Not all underwriters know how to analyze tax returns. Old-school underwriters from the 1980s are still around and the junior underwriters give the tax returns to her and she hands to loan originator a piece of paper and says, "you can use this amount for gross income for qualifying purposes."
People who are screwed are the folks who were talked in to taking HUGE business deductions for their personal expenses. This makes it look like their business is paying them low wages (in order to avoid paying high taxes) yet they are really living a much higher personal lifestyle. Their obligation to the IRS looks low and now they cannot qualify for that refi. Cry me a river.
Bank of North Dakota, located in Bismarck, ND, is the only state-owned bank in the nation. Its mission, established by legislative action in 1919, is to encourage and promote agriculture, commerce and industry in North Dakota. In this role, the Bank acts as a funding resource in partnership with other financial institutions, economic development groups and guaranty agencies.
"interest" (1): one more step on the slippery slope to debt-serfdom!
"interest" (2): the debt that keeps on giving!
"interest" (3): money for nothing (and your chicks for free? try YouTube).
~~~
Fractional reserve banking using debt is clearly what is causing the senorage of our money ...
think about it ... they can insert $9 for every earned dollar thereby increasing the supply of money with no
wealth behind it ... a future promise of money they don't have but by fractional reserve banking ...
"With Turbo Tax, I can make you up a Schedule C in 10 minutes that will say anything you want. There's no independent, reliable way to verify that the Schedule C is real."
I find it hard to believe that a lender cannot get your tax return direct from the IRS (with your permission), thereby escaping most fraud. Besides, it's easy to make up a W2. Does that mean that "verifying" income for wage earners is also meaningless?
Regarding the return of stated income loans....well in many states, mortgage brokers now have fiduciary duties. Their duty and responsibility to the homeowner and legal risk is much greater than it was 2 years ago.
Perhaps they'll return someday, but at much higher interest rates and at a much lower loan to value ratio.
Mp the McNamera documentary was very good. Anyone who is willing to go back to the scene if their crime and face it full on as McNamera did gets props in my books. Real introspection is sadly missing nowadays.
@rich: Denninger explained how he did it in real life, within the last day or two. I don't always agree with him but The Market Ticker covers it.
@mmckinl: Yes, and it's even worse with people able to write CDS without any regulation. If a tiny hedge fund wants cash, and a large bank wants to hide some crap on its books, the bank just buys a CDS from the hedgie. Hedgie gets to lever up the market some more, and the bank can pretend that its horrifyingly bad investment is fully offset by the CDS!
Regarding creating your own Schedule C, well lenders today make the borrower sign a document that will give the lender access to the borrower's tax returns....when filed with the IRS. Today lenders are doing this BEFORE funding the loan.
mmckinl (profile) wrote on Thu, 7/9/2009 - 10:08 pm
Until we can get rid of the Fed and fractional reserve banking why not start a bank ...
If you can't beat 'em , join 'em ... for your own benefit
Why get rid of Fed when it is the private banks that are the problem? Start making direct transfer payments and granting credit straight from the Fed to the citizens. Disintermediate the vampire banks and dislodge them from the preferred slot on the food chain.
"Why get rid of Fed when it is the private banks that are the problem? Start making direct transfer payments and granting credit straight from the Fed to the citizens. Disintermediate the vampire banks and dislodge them from the preferred slot on the food chain."
Mmm, the Fed IS a private bank with other banks as the primary shareholders. It is the king vampire and run for a bloodsucking profit.
"Yes, Shnaps is correct, HOWEVER, the hard money folks say that the stated income applicants don't have the equity needed for a hard money-stated loan."
That's odd. ALL stated income applicants have too little money saved up for a loan? Meaning they ALL have less than 50% of the cost of their house saved up? If that's the case, then even the applicants who saved the most don't have enough skin in the game, and the average and less qualified applicants must have WAY too little skin in the game. Meaning that a. the house prices are still way too high and b. they saved way too little to be homeowners. Obviously we need a lot more price decreases and a lot more saving, not liar loans.
The real problem is stated income in a high-LTV regime. Stated Income might be all right if the buyer's got real skin in the game and the lender's got sufficient collateral to come out all right if the borrower isn't honest.
Let's not forget that the lenders making the stated income loans were often fraud-pushers as well.
Part of me thinks that credit (meaning debt) should be regulated like medicine. Those who can't handle it shouldn't be allowed to get it. The bankers will argue that it's perfectly fair for them to make a buck skimming interest off the 90% of the population who fail to pay their credit cards on time, but somehow I don't think that's in the national interest!
Imagine a credit card system in which, whenever you don't pay the full balance on time each month, your credit limit is locked down to the outstanding balance until it's paid off in full. No pay, no play!
And yes, Japanese traders take a long mid-day lunch break. And the trading afterwards is more "liquid"!!
Yeah, back in the 80's & 90's you could get a "no qualify" loan with sufficient down. No need for any kind of paperwork if you're really committed, cash-wise.
He still thinks the war on the cascading failure of, Underwater Homeowner --> Default --> Foreclosure --> Below Market Sale --> Falling House Prices --> Even More Underwater Homeowners, is winnable with the puny tools he has available.
"Imagine a credit card system in which, whenever you don't pay the full balance on time each month, your credit limit is locked down to the outstanding balance until it's paid off in full. No pay, no play!"
It's happening right now. CC's with a high balance-to-limit are having that done as we speak. Tightening the screws every few months so there's no headroom.
LL, If I had a conservative appraiser value a home, I'd be prepared to put up 50% of the purchase price, as long as I could know for sure that the other 50% was from the buyer's own pocket.
mmckinl (profile) wrote on Thu, 7/9/2009 - 10:30 pm
Wisdom Speaker
Doing away with fractional reserve banking gives the opportunity for money creation to
the UST to spend right into the economy without debt ...
Centralized direct-to-citizen lending through electronic facilities would effectively reclaim all the transactional costs necessary in the private banking system and make it impossible for a banking cartel to create artificial scarcity in the money supply by withholding credit.
There is an auction of 300 houses coming up. The bank minimum bids are really
quite low, but it's not an absolute auction so the low minimum bids are prolly phony.
One of the townhouses is on Brickell Avenue, formerly in the $600ks now the minimum
bid is in I think the 120ks. It has a nice sized back yard, as shown on the news, with a long skinny pool--would be called huge in Cali. If I thought that minimum was real, I'd be interested.
2 story, the inside looked quite spacious. Not in great shape, but not trashed either.
Suzuki Motor Corp. and Mitsubishi Motors Corp., suffering from plunging U.S. sales and excess North American plant capacity, may have to quit the market after a quarter century.
Suzuki, Japan’s fourth-largest carmaker, reported a 78 percent drop in unit sales in June, pushing its first-half decline to 60 percent, the market’s worst. Mitsubishi is down 51 percent this year, and is stuck in a slump that began in 2003.
Both carmakers “should withdraw from the U.S.,” said Yuuki Sakurai, chief executive of Tokyo-based Fukoku Capital Management Inc., which oversees about $10 billion in Tokyo. “It’s time for them to decide whether they pay a high price to continue business there or stop the bleeding.”
There is an auction of 300 houses coming up. The bank minimum bids are really
quite low, but it's not an absolute auction so the low minimum bids are prolly phony.
One of the townhouses is on Brickell Avenue, formerly in the $600ks now the minimum
bid is in I think the 120ks. It has a nice sized back yard, as shown on the news, with a long skinny pool--would be called huge in Cali. If I thought that minimum was real, I'd be interested.
2 story, the inside looked quite spacious. Not in great shape, but not trashed either.
BTW, that bondbuyer article makes a very clear case for why the Feds might need to bail out California (while using the leverage thus obtained to also straighten out the state government) -- if they don't, the ensuing credit market turmoil will punish all the rest of the states as well, creating chaos in the muni bond markets and state spending ability:
Larkin said the loss of California’s investment-grade rating wouldn’t just harm the state, but also would hurt municipal bond issuers across the country.
“If their bond rating goes to junk or goes below investment grade, it would have phenomenal consequences across the entire municipal bond market,” he said. “It would represent a major change in people’s belief in the safety of the municipal bond market.”
P.S. I wonder if TreasuryDirect could be all the bank that any individual should ever need. Corporations could have their corporate banks but at least your average Joe wouldn't get caught in the crossfire...
"Stated income loans were borrower underwritten loans, not lender unwritten loans"
No matter how many times I read this it does not make sense. Just because it is a Stated Income loan does not mean that there are no underwriting criteria. e.g.: LTV, credit scores, documentable cash on hand, liquid assets, and hard assets.
A successful self employed person receives an underwritten loan by giving the bank underwriter two years of business and personal tax returns and a current P&L and balance sheet.
It's amazing the ignorance that's always been shown around here in discussing self-employment and this topic.
For sole proprietors, the personal and business tax returns are one and the same -- 1040. Anybody with self-employment income files a Sched C, whether employed or not.
Most full-time self-employed people don't get W-2s. You get 1099s from some sources, but certainly not all. If you operate a storefront or work with the public, 1099s might be a very small part of your income. The bottom line of the Sched C, net income (which is the equivalent of salary for an employed person) depends as much on expenses and deduction (like office in home) as income. A person who takes the most aggressive office in home depreciation deduction, for example, will show less net income than one who takes none. And many choose to take none, for valid reasons.
I'm not disputing that underwriters make exceptions for successful self-employed people. Of course they do, because some successful self-employed people still can get loans.
But neither CR nor Tanta could ever really defend their mantra about lender underwritten vs. borrower underwritten. It's like some sacred druid chant around here, and it's and never supported with logic.
Why does it matter anymore?
I have a couple of friends who were very successful employed in the corporate world for years. Now, they have been unemployed for months, and their only income is what they can make from self-employment. Some people like this are house rich and have lots of equity and very little debt. But it's not easy to keep their families going with a refi, if they can't get one.
If they were in the same position, but employed in even the crummiest job that's going to get the ax or furloughed tomorrow, they would get one easily.
"the Feds might need to bail out California.... if they don't, the ensuing credit market turmoil will punish all the rest of the states as well, creating chaos in the muni bond markets and state spending ability"
Isn't that what should happen?
But the prospect of reducing state spending will indeed trigger a bailout.
"Larkin said the loss of California’s investment-grade rating wouldn’t just harm the state, but also would hurt municipal bond issuers across the country."
I do not understand the correlation. It would seem to me that if Cali bond ratings fall enough, pension funds and others would choose to invest with the more fiscally responsible states and munis? i.e. Cali's pain is everyone else's windfall.
"A person who takes the most aggressive office in home depreciation deduction, for example, will show less net income than one who takes none. And many choose to take none, for valid reasons."
Being self-employed allows you to "choose" to pay no taxes? I have no problem if anyone who "chooses" to pay no taxes also cannot get a home loan. Fair is fair. And anyway, it should not be difficult to get a loan for 50% of a very conservative value for a home, based on collateral alone, as long as there are no senior claims. I know we're all used to 97% and 90% loans, but a 50% loan is huge.
BH,
If California falls below investment grade a bunch of things happen. None of them good for the rest of the market. What happened to the CP markets when a few big names got in trouble?
Wisdom Speaker (homepage, profile) wrote on Thu, 7/9/2009 - 10:36 pm
P.S. I wonder if TreasuryDirect could be all the bank that any individual should ever need. Corporations could have their corporate banks but at least your average Joe wouldn't get caught in the crossfire...
Absolutely. The nearest thing we have to a banking system of the future, assuming again that we still have a future in which to have that banking system.
Being self-employed allows you to "choose" to pay no taxes? I have no problem if anyone who "chooses" to pay no taxes also cannot get a home loan. Fair is fair.
I think the point is that the lenders were choosing to back out those large deductions and then count the larger number as income.
Regardless, a great deal of this is solved by LTV. If you put down 75%, not a lot of questions need to be asked about the Sched C or K.
re:self employed-
I had an asp software that I charged $49.00 a month, so the account would pay less than $600, anything over that amount and you met Irs-business 1099 threshold....
still $49 mos x 300 or 500 is decent change with no overhead...
For more than 25 years, 100% of my income has come from self-employment.
I built and ran a business, hired people, bought equipment, supported a family, fed the economy etc. etc. as a self-employed person. I never want to retire, and it's all I ever want to be.
If I were 30 and just starting out again, I could not choose self-employment, because the health care costs are too high.
If we are heading toward a country in which the barriers to self-employed people getting mortgages are so high as to be prohibitive, even for the best and the brightest, then there will be hardly any successful self-employed people left in our country. Nobody will choose it.
In a time when jobs are drying up, that would be a national tragedy.
In case you didn't know yet, for all those years I've been self-employed as a professional writer.
"In total, AIG last year agreed to pay in excess of $1 billion in retention payments and performance bonuses to employees across the organization, including to the financial products employees."
"Regardless, a great deal of this is solved by LTV. If you put down 75%, not a lot of questions need to be asked about the Sched C or K."
In normal times, I would agree. But I would not lend 75% of a home's price at bubble prices. In Southern California, many areas had prices at peak that were 5 times the price 10 years earlier. A 25% haircut would not have been conservative in that environment. In many areas, even the currently deflated prices are double, after adjusting for inflation, what they were at the bottom of the last cycle. Based on collateral, I'd consider 50% in those areas, but not more unless the prices had deflated a lot more from peak.
self-employment is a horrible fate. all you do is pay taxes, process your taxes, and pay for your healthcare. unless by 'self-employed' one means 'cooking up insurance scams', which is the only kind of self-employment our society rewards.
"What happened to the CP markets when a few big names got in trouble?"
They froze because lenders could not know what banks were solvent, or not due to the off balance sheet shenanigans they were playing and the systemic risk. In contrast, state and muni finance are somewhat more public, and bond traders tend to do their homework, it is fairly easy to identify the states on the precipice. Unless of course some states and munis have some CDS/MBS/CDO on their books as well. I presume it is the pensions that could provide the biggest surprises.
rich, as someone who worked in a family business and dealt with the yoyo banker class on more than one occasion, the SISA loans (Stated income, Stated Asset) had almost no verification.
Go back in the archive to 2007 and early 2008- most of us were here discussing it in detail, and Tanta was simply amazed at the fraud that wall street packaged up and sold to make their fees.
So your understanding rings false to those of us who have watched this unfold.
By the way, one of the largest consumers of the SISA loans was the realtors who fed on the frenzy and the flippers.
They just wanted the money for a year to flip that sucka onward and capture that sweet money.
Go read the saga of Casey Serin and how he ended buying how many houses.
Spare me the old saw about making life harder.
I remember real bankers, and what we had over the last decade was nonexistent bankers.
OK, I finally got through the article. I am intrigued by the Bank of North Dakota approach.
It is still dreaded fractional reserve lending, meaning the bank is at all times technically insolvent, but I like the fact that it pokes a finger in the eye of the Federal Reserve system. On that basis alone, I am all for a Sovereign Bank of California.
If the government exited all lending (FDIC, FHA, the works), then we wouldn't be arguing about what loans self-employed people should be able to get. I'd much prefer a world where each person's ability to borrow depended solely on convincing someone to lend the money to them, without interference from govt subsidies or penalties. Then the lenders could figure out how to underwrite differently for self-employed people. If they decide to lend 100% of bubble prices with no income verification, then let them. And let the investors supplying the money take the full loss on non-repayment.
But for as long as people can borrow from lenders in arrangements that are subsidized by taxpayers, it is offensive that some people can get special loans that are designed to make it easy for tax cheats.
Rich,if someone is self employed,has good credit and solid documented income they can get a home loan at a competitive rate.I will make hard money loans to 50% CLTV for no longer than 18 months in good parts of Northern California.I use a good Appraiser and the Rates accurately reflect the Risk.One "C" for hard Money,3 "C"'s for "normal loans.And umm,do YOU think rates accurately reflect risk in Cali?
Well, I'm missing the tragedy here. Somehow it does not surprise me that a bunch of mortgage brokers wanting to bring back liar's loans provides such sparse detail on this epic injustice, but it appears that the dedicated efforts of our diligent reporter elicited the information that the borrowers did indeed manage a refi and saved 1.5K a month. This seems like a pretty good deal, and since they could always use that money to make principal payments on the mortgage, the borrowers seem to be in a much stronger position. As a wild bleeping guess, they would have had to pay down the principal to get a really good interest rate on the amortizing mortgage. And they didn't have the money to pay it down.
I had to laugh over the rationale in the article that liar's loans were perfectly safe as long as the creditors weren't allowed to sell them off. How many banks that had hefty crops of liar's loans in their portfolios are still standing? The entire problem with liar's loans is that you JUST DON'T KNOW whether the borrower can pay or not. If you don't underwrite it, it's an asset dependent loan - your security is based on the theory that you can foreclose and recover your money - in other words, you are really in the hard money business.
Hard money loans are expensive for the borrower, because you charge for all the extra work of having to foreclose up front.
And I have very, very bad news for the brokers cited in the article. Unless the industry thinks it is going to line up suckers willing to make hard money loans for prime rates, the new sections of Reg Z are going to come into effect on October 1st of this year. For loans on a principal residence bearing a rate 1.5% or more higher than prime, verifying repayment ability will be a requirement. Reg Z 226.35. Of course, mortgage brokers are famous for not knowing the law so it doesn't surprise me that these bozos don't. You tell me how you verify income with a stated/no doc loan?
They might also want to see the new section 226.36, which has rules for mortgage brokers and appraisals for higher cost loans. Tada!!!
Why don't reporters ever do any friggin' research?
There is enough money there to pay for it ... we already pay more in GDP than the other G7 countries
I agree although it seems more spreading of the pain. Young people should be paying less taxes than older people because they use less healthcare. It should be a graduating tax that starts low and increases over your lifetime up until age 65
"put down 75%". Ah, if only my reading comprehension scores were a little higher. I am so used to people assuming that all normal borrowing involves borrowing more than they are paying themselves that I didn't even check what the 75% applied to. Now that I know what you said, I agree with you.
HollywoodHack (homepage, profile) wrote on Thu, 7/9/2009 - 8:56 pm
reply ignore user
self-employment is a horrible fate. all you do is pay taxes, process your taxes, and pay for your healthcare. unless by 'self-employed' one means 'cooking up insurance scams', which is the only kind of self-employment our society rewards.
I've done software development as both 1099 as well as w2. There's a ton more write offs and investment vehicles to shelter your icome as 1099. Personally I prefer the stability of w2. No worry about healthcare etc...
Yet.
I would seriously wonder about how much more time before the full cost of healthcare to the employer shows up as income on the W2, or is taxed outright at different rates.
Edit: clarification about what will show up on the W2.
Rich, believe me, banks are willing to lend reasonable amounts with reasonable downpayments to the self-employed.
The lie is that stated or no-docs are the only way that self-employed people can get loans. Self-employed people were getting mortgages long before stated, and they will be getting loans right along. The individuals cited in this article did get a refi and lowered their mortgage payment substantially.
The bottom line is a simple yet powerful one. The global crisis is morphing again. Having already contaminated (in a sequential and cumulative manner) housing, finance and the consumer, it is now threatening the potency and credibility of the economic policymaking apparatus. As far as I can see, there are no first best policy responses that are readily available and easy to implement. Instead, the economy will continue to struggle, navigating both the adverse implications of last year’s financial crisis and the unintended consequences of the experimental policy responses. Given the inevitable socio-political dimensions, this story will play out well beyond the realm of the economy, policymaking and markets. PIMCO - Viewpoints July 2009 Crisis Morphing
I would seriously wonder about how much more time before the full cost of healthcare to the employer shows up as income on the W2, or is taxed outright at different rates.
Edit: clarification about what will show up on the W2
~~~~
Baucus tried to tax wage earners to pay for this and he was rebuffed ....
They are actually thinking about taxing high income individuals ... 'bout friggin' time ...
Thank you MoM.Anyone claiming that a self employed person can not get a home loan is full of it.They may not be able to get the amount or rate they feel they "deserve",but they can still get more of a loan than they are likely to repay.A lot of hard money comes from people who want a greater yield from part of their retirement savings.Done right they are a good investment,almost no one does them well because thereare too few brokers willing to say "I don't see any good deals right now,I will call you when I do" and their are too few investors who appreciate a broker who says that.Investors want to hear 12% return.right now maybe 2% of the people seeking hard money loans in sonoma county are reasonable risks at 12% and an 18 month term.Maybe 2%...
Now that I think about it, I can see a compromise on underwriting for the self-employed in a world where almost all loans are controlled by govt rules. Limit the amount of tax-deductible loan to the amount justified under normal (conservative) lending rules based on actual taxable income. Any excess that a lender (backstopped by the govt) wants to give bears interest that is not tax deductible.
"The SF Chronicle is a huge shill for the bay area real estate industry."
Real estate ads are one of the few sources of income left to them. At least until Craig's List and the online Listing services take that away too. One boon from the downturn could be the Realtor Assns and Auto Dealerships losing some the political clout they get from having the local media in their pocket.
It occurs to me that many are interested in buying houses on the cheap for re-sale or rentals, in other words, for profit. If this profit is obtained at the expense of returning servicemen and women, or young families trying to buy their first home, who for whatever reason were unable to buy ahead of you, and thus pay a higher price than they otherwise would have, well, it just strikes me as parasitical, that's all.
Chris George of CMG Mortgage is a clown. Here's what he wrote about East Bay housing in '05:
'The East Bay is unique, it can be its own economic micro-climate," said Christopher George, president of CMG Financial Services, a San Ramon-based firm that provides mortgages and other services. "You have what are essentially new towns that have sprouted in the East Bay, like Brentwood," George said. "You've got Mountain House. The East Bay will not see nearly as severe a downturn in housing'
Hopefully his prognostication about stated-income loans will be equally off the mark!
actually if you live in Silicon Valley, it is pretty easy to having nothing in the bank account even if you are making $300k per year. Just rough numbers off the top of my head: 1) 40% tax rate 2) mortgage for average house in a good neighborhood (assuming bought during peak years) $4-8k/month, childcare $4k month (both parents work full time jobs), private school $2k per month per kid, IRA/401k/529 programs $3k month and bingo, no savings in the bank. So even the top 2%, in SV, don't necessarily feel wealthy.
While he was Secretary of Defense we "saturation bombed" areas of Cambodia blowing away entire villages. We will never know how many people lived in these villages and were blown to bits or burned to death by napalm. Whether it was a record or not is immaterial.
I would not let Kissinger off the hook for the "incursion" into Cambodia....and he has never regretted a thing. As for the coup in Chile and the assasination of Allende...more of Henry's handiwork.
What complete BS. Anyone legitimately making $300k/year from a business will have plenty of documentation (e.g., tax returns, social security filings, etc.) to satisfy bank loan officers. These people just don't understand the difference between revenue and income, and are likely living way beyond their means because of it.
Kinda reminds me of Joe The Plumber and the $250k/yr business he owned. Except when it came down to it, his name wasn't Joe, he wasn't a plumber, he didn't own the business, and he made $40k/yr.
What Rich said about the movie The Fog of War. Confession is good for the soul. If course I also enjoyed the book Voltaire's Bastards by Jonh Ralston Saul so....
On SISA.. Well they wouldn't exist (or would be less than .01% of loans) if the banks thought they were lending their own money. They can best be regarded as fine print covering the banker's buts against bondholder suits: "We TOLD you that we simply wrote down whatever crazy-shit the borrower told us. It's your fauld if you thought that the DTI figure actually MEANT something."
Nemo?
"With more than $300,000 in combined annual income, tens of thousands of dollars in the bank and credit scores that top 800,"?
WTF, these people make 300k/year and only have tens of thousands saved?
What's really funny, though, is that it's Citigroup who is saying someone else is worthless.
funny
income comes and goes....
its currently going to the Dawgs of War.
Question: when a bank cashes a California IOU, what does it put on its books?
Did it make an unsecured loan?
Did it purchase a security?
Anyone??
"what does it put on its books"
What book?
is it just me or has the snark factor increased during the last couple of weeks? could this be a sign of impending systemic collapse? (snark)
i read in one of Cali regs that the banks could use the IOUs to pay their state banking taxes. probably explains why they took the IOUs and for such a limited time.
The couple in question could easily have their accountant draw up an income verification
with an income statement and verified bank transactions ...
What are they doing ... wholesaling illegal drugs ?
From the S.F. Chronicle article:
While the amount they make is easily enough to qualify for the new loan, tax deductions for self-employed workers dropped their official income below the threshold that banks wanted to see.
Talk about "missing the point."
Someone ought to inform the staff writer that, when he says "income," he should be saying "revenue."
It's not "income" until you reach the number after deductions.
More on CA
California on Junk Watch - Bond Buyer Article
banking guidance on how to treat IOUs
http://www.occ.treas.gov/ftp/release/2009-81a.pdf
It's not "income" until you reach the number after deductions. sportsfan
those journalists, not the sharpest knives in the drawer
Ahhh one more thing .....Stated income loans are also DEVIL'S REJECTS
YouTube - DEVIL'S REJECTS ROB ZOMBIE - MIDNIGHT RIDER ALLMAN BROTHERS
Paging all Regulators! Yes, you, at the switch! Page! Ahem, PAGING!
Hmmm? Zzzzzzzzz.....
C
CR,
Do you really think that they were naive? They knew what they were doing, they were hoping that it would not blow up on their watch.
Hopium..
those journalists, not the sharpest knives in the drawer
Apparently, though, someone at the bank understood the concept.
But they could fog a mirror, darnit! They deserve credit as much as anyone else!
Besides, The Plan To Save The Economy fails if people can't continue to bury themselves deeper in ... credit, right?
California is giving its debt to people who don't necessarily want it. Amazing, now you don't even have to agree to buy debt, you'll just get it anyway. Is the SEC and Treasury really going to go along with this? This looks like money printing to me.
the regulators are asking for donations, please
sweet, the IOUs share the same risk weighting as GO bonds and 1-4 family primary mortgages.
It doesn't take much insight to figure out why they were denied.
$300K/yr, less than $100K of savings - either they just started earning at that level and have no history, or they aren't really earning $300K/yr after expenses.
Seriously, if your mortgage is around $60K/yr, on that income you should be able to save up more than "tens of thousands" of dollars pretty quick.
anyone see this..
Japan's wholesale prices mark record drop in June - MarketWatch
From May, the index was down 0.3%. Export prices were down 12.8% on year in June, while import prices were 32.2% lower.
"The slide in wholesale prices is highly likely to widen in July, August and September, exceeding 7% down the road," Tetsuro Sawano, senior fixed income strategist at Mitsubishi UFJ Securities, was quoted as saying in a Reuters report following the data. "Today's data would help the Bank of Japan reinforce its cautious stance on the economy."
deflation beast strikes again..
watch tokyo fight the beast here
YouTube - Godzilla , King of the Monsters
cali has been through this routine before, so probably time to stop the mouth breathing
still, need to resolve the political kerfluffle, but might have to bend your mind a bit and address the political actors
assuming yer a californian
Looks like they're heading for a Devil's Haircut....
YouTube -
C
Amazing, now you don't even have to agree to buy debt, you'll just get it anyway. Is the ... Treasury really going to go along with this?
Please re-check the definition of the modern "Dollar," or more precisely, Federal Reserve Note. It's nothing but a note that you can trade for another note just like it. Before TPTB are done, you will be encased in an 11-dimensional crystal formed entirely of debt, and your issue will have to pay it off on your behalf.
cali has been through this routine before...
When exactly before has the state been entirely bankrupt?
I put this on the last thread post-pig, but it is pretty funny the idea of IOUs having a credit profile in the first place. Usually credit analysis of short-term debt is driven by a borrower's liquidity
I've finally had it with the Orwellian language of the financial marketing industry.
Credit is not credit, unless it's money in YOUR bank account. It's debt. And debt is just "slavery lite".
A credit card is not a card that puts credit in your bank account. It's a debt card.
Glossary updated!!
Bond Girl,
Don't you love that bondbuyer site? I also like to peruse the inventory at syllc.com
example:
Maturity 6/1/2027 MT DIABLO CALIF UNI SCH DIST Baa1 A+ NATL-RE coupon 5.000 yield 5.150 call 6/1/2014 @101.00 CUSIP 621196WE0
Nice double tax free if they can deliver.
Plantagenet,
The Fed then has competition. States don't have the legal power to print currency. There are no rules anymore.
what percentage of the run up in house prices was due to this type of loan?
without this octane booster in the economy's tank housing prices should stay depressed for quite a while.
I think we may be getting close to "the talk" about paper money vs backed money. Uh Oh!!!
I don't recall which regular poster (dryfly, ac or Nemo) said "The all American reason for stated income mortgages are for tax cheats." Tanta backed those up with her posts of the exact forms needed to report non-traditional income.
Primarily, tax cheats need stated income loans.
Did they finally get around to burying Jacko?
Inquiring minds want to know.
WS: hate to break it to you, but "your money in a bank account" is just more debt. debt that the bank owes to you and that you assume that the bank (or FDIC) will repay on your demand.
States don't have the legal power to print currency.
But they do have the moral obligation to be environmentally sensitive. I hope that the registered warrants are being printed on recycled Continentals.
Let's be more precise with the language. States don't bankrupt. If California is overtly backstopped then we might as well change our name to Federal States of America.
I actually wonder if most of the reason CA state debt isn't getting dumped is because investors know that however California resolves this situation it will be punishing to local credits. And local credits have a lot less flexibility.
state issued ious in the 90's
I miss Tanta for many reasons, but the most is I miss HER.
Nikki has a crap morning, starts up and pulls the early money in, even generates a slightly premature headline about stocks rising on buybacks, promptly slumps on PM's assertions on market prospects...
http://www.nni.nikkei.co.jp/e/fr/tnks/marketlive.aspx
Hang in there Mrs Watanabe, only a couple of hours left before the weekend.
C
They already do that to some extent through the fiscal stimulus.
night all
How Long Before the Fed's Days Are Numbered?
"Before you dismiss my words as a rant, hear me out. Why, for example, is the power to commit substantial resources on taxpayers' behalf, to influence many of the most important commitments and relationships of businesses, individuals, and governments, and to initiate economic and regulatory policies with far-reaching consequences, in the hands of unelected officials with unexceptional abilities and no real accountability?"
Michael J. Panzner: How Long Before the Fed's Days Are Numbered?
Senator Ben Nelson doesn't care ... He blocked the Paul- Sanders Fed audit bill ...
It's not a backstop per se, but it is providing aid that has the same end.
Counterpointer,
It is called a devil's headcut, not haircut.
cali is equivalent economy to japan
I call BS on this. I own my own business. There are these things called TAXES. We file them every year. All it takes is your last two years tax returns to prove income.
Jennifer France is either lying about her household income or filing tax returns with lots of "creative accounting."
I've finally had it with the Orwellian language of the financial marketing industry.
-bravo! How would you describe the term "interest"?
mp (profile) wrote on Thu, 7/9/2009 - 9:33 pm
Did they finally get around to burying Jacko?
Inquiring minds want to know.
If he rises in three days, we are all SO screwed...
[With more than $300,000 in combined annual income, tens of thousands of dollars in the bank and credit scores that top 800]
Where are the tax returns ? I hope The IRS reads CR or the Chroncle. There's some $$$$ left on the table Timmay!
" Did they finally get around to burying Jacko?
Inquiring minds want to know"
There are plans to eventually get him buried at Neverland (much like Elvis is interred at Graceland.) Currently, they need a special agreement from the city and permit to do so, which is going to take a bit to get worked out. It may be months before Mr. Jackson has a final resting place.
"States don't have the legal power to print currency."
~~~~
They do if they start their own banks ... which Cali should do pronto ...
California Dreamin’: How The State Can Beat Its Budget Woes by Dr. Ellen Brown
If private banks can create credit on their books, so can the world’s eighth largest economy. Indeed, there is longstanding precedent for this approach. The State of North Dakota has owned its own bank for nearly a century. North Dakota is one of only two States (along with Montana) that are not currently facing budget shortfalls. North Dakota has beaten the Wall Street credit freeze by generating its own credit. By law, ever since 1919 the State’s revenues have been deposited in its own bank, the Bank of North Dakota (BND). Using the “fractional reserve” lending scheme open to all banks, these deposits are then available to be used as the “reserves” for creating many times their face value in loans. Other banks in the State do not see the BND as a threat, because it partners with them and backstops them, serving as a sort of central bank for North Dakota. BND’s loans are not insured by the Federal Deposit Insurance Corporation (FDIC) but are guaranteed by the State."
California Dreamin’: How The State Can Beat Its Budget Woes by Dr. Ellen Brown « Dandelion Salad
A must read article ... actually you should read it several times there is so much info there !
RIF,
Californians would love such a resurrection.. I mean if you believe that JC rose from the dead, surely MJ can too..
There's some $$$$ left on the table Timmay!
Besides his?
bearly (profile) wrote on Thu, 7/9/2009 - 9:41 pm
[With more than $300,000 in combined annual income, tens of thousands of dollars in the bank and credit scores that top 800]
Where are the tax returns ? I hope The IRS reads CR or the Chroncle. There's some $$$$ left on the table Timmay!
Perhaps they, too, filed with special versions of TurboTax, like TurboTax DC, or TurboTax IMF.
California Dreamin’: How The State Can Beat Its Budget Woes by Dr. Ellen Brown
I am afraid the marines would seize any state created bank and shut it down.
Who do you think runs this country?
Does the DEA respect CA state law regarding marijuana dispensaries?
Would the Federal Reserve respect a state created bank and currency?
tens of thousands of dollars in the bank
how about "several hundred thousands"
maybe that $1 million home now comps at $700k thanks to the foreclosure down the street. these "poor me" stories turn my stomach. i'm with art eclectic -- bs
Coinz
North Dakota already has one ...
Lucifer (profile) wrote on Thu, 7/9/2009 - 9:43 pm
RIF,
Californians would love such a resurrection.. I mean if you believe that JC rose from the dead, surely MJ can too..
That would really divert some public attention from the impending Wall Street payday / booty distribution.
Making fun of Timmay never gets old.
For anyone else keeping score on the muni market, Jefferson County, Alabama missed its first debt payment. Good night everyone.
LOL! I thought Jefferson were toast months ago.
C
"There are plans to eventually get him buried at Neverland..."
I wonder what they'll call this cash cow.
Wackoland?
Kitchen, MarketWatch
LOS ANGELES (MarketWatch) -- Japan's domestic corporate goods price index, the nation's benchmark measure of wholesale prices, fell a record 6.6% in June from the year-ago period, the Bank of Japan said Friday.
they never were to hot on the shi**er in bama were they
mp writes:
Did they finally get around to burying Jacko?
Inquiring minds want to know.
================\
You know, with all the weird stuff that happens in the financial world, nothing there compares to the MJ worship crap. I mean, at about the same time as his death, Robert Mcnamera passed. The Times did a front page article but other than that there was such a silence. Here's a person who had a monumental effect on our country, on lives and deaths, on our standing in the world. He dies, and nary a mention.
But let an entertainer like MJ pass, and the attention is monumental. I don't get it. What I do get is that we are so doomed, and deserve whatever we get if our sense of priority is this messed up.
McNamara never had a hit record
Wall Street is insane and have cut off their heads to spite us all.(sorry, imagery I enjoy) The obviousness of the world losing faith in investing in our financial markets compounded with individual/institutional investors also starting to take a pass at the casino leads to the conclusion these fine folks know it can't be saved. Take the money and run while handing out huge bonuses to make everyone complicit seems to be the plan.
Too Big To Jail
Why prosecutors won't hit Wall Street hard in the subprime scandal.
Jul 9, 2009
"Tony Accetta, a former prosecutor in the U.S. Attorney's office in New York, contends the big Wall Street players know far more than they are admitting.
.....
"Unfortunately, prosecution of fraud is "the only way you're going to get reform" on Wall Street, argues Accetta. Going after small fry like Sky won't do anything to deter future scamming by the Street. "This is a systemic problem that goes back to the dotcom bubble, to the Enrons, HealthSouths, and Worldcoms," he says. "Our corporate capital-formation structure for the last 10 to 15 years has gone beyond the odd-duck crook here and there. It's become institutionalized."
Investigators Won't Touch Wall St. In Subrime Mess | Newsweek Voices - Michael Hirsh | Newsweek.com
Japan's domestic corporate goods price index, the nation's benchmark measure of wholesale prices, fell a record 6.6% in June. tanaw
just as i suspected, hyper inflation is around the corner
@joe in flyover
You know, I just learned of McNamara's death this evening.
The Jacko worship doesn't surprise me. Fully 25% of this country is certifiable.
that alabama county that bond girl mentioned has 660,000 people and 3.2 billion in troubled sewer debt. that seems sorta outrageous. almost 5k a head if i did the math correctly.
No hit record, but he was a whiz kid. One of the titans in the car industry. A legend. Bill Gates better die now if he wants any kind of funeral, cuz he has no hit record either.
almost 5k a head
pay to play
So CR is saying that it's possible for a successful self-employed person to get a lender underwritten loan.
But I've never heard him say exactly how.
How about saying so now, CR?
Blue Dog Dems Rebel On Health Care Bill
WASHINGTON — The drive to remake the nation's health care system suffered yet another setback in Congress on Thursday when a pivotal group of House Democrats demanded changes in legislation the leadership was drafting on a fast track.
The emerging bill "lacks a number of elements essential to preserving what works and fixing what is broken," 40 members of the Blue Dog Coalition of moderate to conservative Democrats wrote party leaders. To win their support, they said, any legislation would need to be much more aggressive in reining in the growth of health care as well as in addressing a disparity in Medicare payments they said adversely affects rural providers.
~~~~~
Here we go ...
mmckinl wrote:
North Dakota already has one ...
Already has a state chartered bank that issues its own currency? Really?
You are not talking about a bank chartered by an indian tribe are you? Not the same as the state of North Dakota.
Details please.
[But I've never heard him say exactly how]
A couple years of tax returns & 20% down might get it done.
Why is there so much surprise that liar loans are coming back? Or that there is public outrage that tax cheats who don't save cannot buy a house they can only afford using vast amounts of other people's money, and almost none of their own?
Return to that world is what Geithner, Bernanke, Summers, Pelosi, Frank, Dodd, and Schumer are aiming for. Why are we surprised?
@FUBAR and WASS: Yep, I was going to go there next, except I had to deal with a bit of real life first.
Money: debt that someone else owes you.
Banker Jumps:
City party king, Anjool Malde, leaps to death from rooftop restaurant 'terrified he had lost his job' | Mail Online
A friend said "He'd always been a high-flyer and nothing had ever got in his way."
C
You should watch his movie if you haven't already.
The Fog of War: Eleven Lessons from the Life of Robert S. McNamara
It's more than a little self-serving. But if somebody like Alan Greenspan or Ben Bernanke ever looks back on their failures with as much honesty as McNamara, I'll be shocked.
Comrade Coinz
Why print your own currency when you can print dollars legally ... like the banks do ...
I suggest you read the article ...
California Dreamin’: How The State Can Beat Its Budget Woes by Dr. Ellen Brown
California Dreamin’: How The State Can Beat Its Budget Woes by Dr. Ellen Brown « Dandelion Salad
Everyone who applies for a loan self qualifies himself or herself (self underwrites) because they have information about themselves that the lender does not have at the time of making the loan. For example, the borrower who on paper qualifies knows if they will quit after the loan closes and invest in their brother's business; if the company they work for is in trouble and will lay them off, or if they are planning to quit and start over in a new career, etc. Yes, there are a set of borrowers who will overextend themselves and be too optimistic about repaying, but these people will do it through total credit borrowing so if the mortgage is limited in amount, they will overextend their credit in other ways, such as credit cards, department store cards, etc. There is nothing particularly wrong or worse about no doc loans. In fact, they are better than regular mortgages because they lower the transaction cost of loan approval assuming that the higher interest rate is less than the transaction cost savings.
"So CR is saying that it's possible for a successful self-employed person to get a lender underwritten loan.
But I've never heard him say exactly how.
How about saying so now, CR?"
I think someone else already said it, but I suggest that 30% cash down, and 5 years of tax returns showing enough net income should get you a loan.
OK, I will read the article. BTW, I read her book.
@barfly:
"interest" (1): one more step on the slippery slope to debt-serfdom!
"interest" (2): the debt that keeps on giving!
"interest" (3): money for nothing (and your chicks for free? try YouTube).
Robert McNamara - The Fog of War
Creating a bank of California that (de facto) lets the state run a deficit isn't really a way to make the state get its fiscal house in order. Just one more horse you can feed to the wolf before it gets to the carriage.
Rich,it is called an "exception".A senior underwriter reviews the app to see if an exception to the written underwriting policies makes sense for the lender.They will look at deductions and such things as the quality of the income .Tanta said it better than I can,and CR provided the links in the post.Lenders used to do this all the time,of course it does presuppose that you have qualified underwriters and there are few left,they were not necessary once risk was removed from the business.
Rich,it is called an "exception".A senior underwriter reviews the app to see if an exception to the written underwriting policies makes sense for the lender.They will look at deductions and such things as the quality of the income .Tanta said it better than I can,and CR provided the links in the post.Lenders used to do this all the time,of course it does presuppose that you have qualified underwriters and there are few left,they were not necessary once risk was removed from the business.
[ Japan's domestic corporate goods price index, the nation's benchmark measure of wholesale prices, fell a record 6.6% in June from the year-ago period]
Priced in. Nikkei flat as a pancake. Of course it's priced in until GS says it isn't.
[ Japan's domestic corporate goods price index, the nation's benchmark measure of wholesale prices, fell a record 6.6% in June from the year-ago period]
Priced in. Nikkei flat as a pancake. Of course it's priced in until GS says it isn't.
So 20% down is the difference between borrower underwritten and lender underwritten? If so, the whole argument is bunk.
As for the tax returns, we've argued it a hundred times. A self-employed person files a schedule C.
With Turbo Tax, I can make you up a Schedule C in 10 minutes that will say anything you want. There's no independent, reliable way to verify that the Schedule C is real.
It's amazing CR can keep bringing this up without advancing the argument. Just give it your best shot, CR.
How can a successful self-employed person get a lender-underwritten loan?
Milton you've got to be either a mortgage broker or a comedian but I can't figure out which.
Comrade Coinz
Great book "Web of Debt "
by Dr Ellen Brown
Web of Debt - How Banks And The Federal Reserve Are Bankrupting The Planet...
~~~~~
Until we can get rid of the Fed and fractional reserve banking why not start a bank ...
If you can't beat 'em , join 'em ... for your own benefit
"Everyone who applies for a loan self qualifies himself or herself (self underwrites) because they have information about themselves that the lender does not have at the time of making the loan. "
Someone must think this board is populated by morons. Because a self-employed person controls several key elements of their own future income does not mean that the lender cannot get a tremendous amount of information from actual tax returns. I am employed. I can quit tomorrow. Does that mean my past income is meaningless? Balderdash.
A successful self employed person receives an underwritten loan by giving the bank underwriter two years of business and personal tax returns and a current P&L and balance sheet. Not all underwriters know how to analyze tax returns. Old-school underwriters from the 1980s are still around and the junior underwriters give the tax returns to her and she hands to loan originator a piece of paper and says, "you can use this amount for gross income for qualifying purposes."
People who are screwed are the folks who were talked in to taking HUGE business deductions for their personal expenses. This makes it look like their business is paying them low wages (in order to avoid paying high taxes) yet they are really living a much higher personal lifestyle. Their obligation to the IRS looks low and now they cannot qualify for that refi. Cry me a river.
@rich, barfly
Thanks. I'll check it out.
I never had much use for McNamara. Maybe his documentary will explain some things that have been bothering me for years.
Coinz: Checkout Bank of North Dakota
for the North Dakota Bank.
Bank of North Dakota, located in Bismarck, ND, is the only state-owned bank in the nation. Its mission, established by legislative action in 1919, is to encourage and promote agriculture, commerce and industry in North Dakota. In this role, the Bank acts as a funding resource in partnership with other financial institutions, economic development groups and guaranty agencies.
Wisdom Speaker
"interest" (1): one more step on the slippery slope to debt-serfdom!
"interest" (2): the debt that keeps on giving!
"interest" (3): money for nothing (and your chicks for free? try YouTube).
~~~
Fractional reserve banking using debt is clearly what is causing the senorage of our money ...
think about it ... they can insert $9 for every earned dollar thereby increasing the supply of money with no
wealth behind it ... a future promise of money they don't have but by fractional reserve banking ...
there's already stated income out there now. It's called a 'hard-money' loan.
"With Turbo Tax, I can make you up a Schedule C in 10 minutes that will say anything you want. There's no independent, reliable way to verify that the Schedule C is real."
I find it hard to believe that a lender cannot get your tax return direct from the IRS (with your permission), thereby escaping most fraud. Besides, it's easy to make up a W2. Does that mean that "verifying" income for wage earners is also meaningless?
Regarding the return of stated income loans....well in many states, mortgage brokers now have fiduciary duties. Their duty and responsibility to the homeowner and legal risk is much greater than it was 2 years ago.
Perhaps they'll return someday, but at much higher interest rates and at a much lower loan to value ratio.
Mp the McNamera documentary was very good. Anyone who is willing to go back to the scene if their crime and face it full on as McNamera did gets props in my books. Real introspection is sadly missing nowadays.
Yes, Shnaps is correct, HOWEVER, the hard money folks say that the stated income applicants don't have the equity needed for a hard money-stated loan.
@rich: Denninger explained how he did it in real life, within the last day or two. I don't always agree with him but The Market Ticker covers it.
@mmckinl: Yes, and it's even worse with people able to write CDS without any regulation. If a tiny hedge fund wants cash, and a large bank wants to hide some crap on its books, the bank just buys a CDS from the hedgie. Hedgie gets to lever up the market some more, and the bank can pretend that its horrifyingly bad investment is fully offset by the CDS!
Regarding creating your own Schedule C, well lenders today make the borrower sign a document that will give the lender access to the borrower's tax returns....when filed with the IRS. Today lenders are doing this BEFORE funding the loan.
bearly - LMAO! Nikki is flat as a pancake because it's lunchtime.
C
mmckinl (profile) wrote on Thu, 7/9/2009 - 10:08 pm
Until we can get rid of the Fed and fractional reserve banking why not start a bank ...
If you can't beat 'em , join 'em ... for your own benefit
Why get rid of Fed when it is the private banks that are the problem? Start making direct transfer payments and granting credit straight from the Fed to the citizens. Disintermediate the vampire banks and dislodge them from the preferred slot on the food chain.
"Why get rid of Fed when it is the private banks that are the problem? Start making direct transfer payments and granting credit straight from the Fed to the citizens. Disintermediate the vampire banks and dislodge them from the preferred slot on the food chain."
Mmm, the Fed IS a private bank with other banks as the primary shareholders. It is the king vampire and run for a bloodsucking profit.
"Yes, Shnaps is correct, HOWEVER, the hard money folks say that the stated income applicants don't have the equity needed for a hard money-stated loan."
That's odd. ALL stated income applicants have too little money saved up for a loan? Meaning they ALL have less than 50% of the cost of their house saved up? If that's the case, then even the applicants who saved the most don't have enough skin in the game, and the average and less qualified applicants must have WAY too little skin in the game. Meaning that a. the house prices are still way too high and b. they saved way too little to be homeowners. Obviously we need a lot more price decreases and a lot more saving, not liar loans.
Harumph!
Greenspan didn't make any mistakes.
But the night is still young for Bernanke.
The real problem is stated income in a high-LTV regime. Stated Income might be all right if the buyer's got real skin in the game and the lender's got sufficient collateral to come out all right if the borrower isn't honest.
Let's not forget that the lenders making the stated income loans were often fraud-pushers as well.
Part of me thinks that credit (meaning debt) should be regulated like medicine. Those who can't handle it shouldn't be allowed to get it. The bankers will argue that it's perfectly fair for them to make a buck skimming interest off the 90% of the population who fail to pay their credit cards on time, but somehow I don't think that's in the national interest!
Imagine a credit card system in which, whenever you don't pay the full balance on time each month, your credit limit is locked down to the outstanding balance until it's paid off in full. No pay, no play!
And yes, Japanese traders take a long mid-day lunch break. And the trading afterwards is more "liquid"!!
Gotta run...
Rich:
Tanta spanked you repeatedly for your thoughtless defense of liar's loans.
go read the archives if it isn't too painful.
CR should direct you to do the same.
One more whack at the Orwellian language:
fixed-rate mortgage: indentured servitude. You pay it off with the fruits of your labor.
ARM or floating-rate mortgage: indentured servitude on a ship that goes up and down with the tides.
balloon mortgage: indentured servitude on the Titanic.
interest-only mortgage: indentured servitude that never ends.
Wisdom,
Yeah, back in the 80's & 90's you could get a "no qualify" loan with sufficient down. No need for any kind of paperwork if you're really committed, cash-wise.
Timmy is the McNamara for today...
He still thinks the war on the cascading failure of, Underwater Homeowner --> Default --> Foreclosure --> Below Market Sale --> Falling House Prices --> Even More Underwater Homeowners, is winnable with the puny tools he has available.
Blackhalo (homepage, profile) wrote on Thu, 7/9/2009 - 10:19 pm
Mmm, the Fed IS a private bank with other banks as the primary shareholders. It is the king vampire and run for a bloodsucking profit.
Yes. So change that and the structure of the system can be reused.
You mean they are giving loans other than FHAs in non-Florida land?
You can't even get a hard equity loan here anymore.
Client is selling her house and actually getting some proceeds. A former
RE and mtg broker who is now a secy tho she still has her licenses.
Proceeds are in the mid 50ks. She expects to buy a reasonable sized
condo with it all cash. She's probably right.
IF no one is willing to finance the REOs, then prices will continue to fall.
Will lenders realize this? Hell no.
Why is there so much surprise that liar loans are coming back?
patientrenter,
The article doesn't say they're coming back, just some idiot mortgage broker wishing out loud.
Wisdom Speaker
Doing away with fractional reserve banking gives the opportunity for money creation to
the UST to spend right into the economy without debt ...
Roughly speaking this is worth over a trillion a year in normal times ...
but being in a deflation it could be worth at least 2 trillion a year for years ... without inflation!
Wisdom Speaker -
"Imagine a credit card system in which, whenever you don't pay the full balance on time each month, your credit limit is locked down to the outstanding balance until it's paid off in full. No pay, no play!"
It's happening right now. CC's with a high balance-to-limit are having that done as we speak. Tightening the screws every few months so there's no headroom.
IF no one is willing to finance the REOs, then prices will continue to fall.
Too bad we can't do away with this mortgage thing altogether. Just imagine moving back to all-cash transactions.
Rich,form T-4506 is signd by the borrower,it allows the lender to get a copy of the tax returns $12,48 hour turn around.
LL, If I had a conservative appraiser value a home, I'd be prepared to put up 50% of the purchase price, as long as I could know for sure that the other 50% was from the buyer's own pocket.
as long as I could know for sure that the other 50% was from the buyer's own pocket.
The rub.
mmckinl (profile) wrote on Thu, 7/9/2009 - 10:30 pm
Wisdom Speaker
Doing away with fractional reserve banking gives the opportunity for money creation to
the UST to spend right into the economy without debt ...
Centralized direct-to-citizen lending through electronic facilities would effectively reclaim all the transactional costs necessary in the private banking system and make it impossible for a banking cartel to create artificial scarcity in the money supply by withholding credit.
There is an auction of 300 houses coming up. The bank minimum bids are really
quite low, but it's not an absolute auction so the low minimum bids are prolly phony.
One of the townhouses is on Brickell Avenue, formerly in the $600ks now the minimum
bid is in I think the 120ks. It has a nice sized back yard, as shown on the news, with a long skinny pool--would be called huge in Cali. If I thought that minimum was real, I'd be interested.
2 story, the inside looked quite spacious. Not in great shape, but not trashed either.
Ok, Ok, This is Off Topic, but I was fascinated:
Suzuki Motor Corp. and Mitsubishi Motors Corp., suffering from plunging U.S. sales and excess North American plant capacity, may have to quit the market after a quarter century.
Suzuki, Japan’s fourth-largest carmaker, reported a 78 percent drop in unit sales in June, pushing its first-half decline to 60 percent, the market’s worst. Mitsubishi is down 51 percent this year, and is stuck in a slump that began in 2003.
Both carmakers “should withdraw from the U.S.,” said Yuuki Sakurai, chief executive of Tokyo-based Fukoku Capital Management Inc., which oversees about $10 billion in Tokyo. “It’s time for them to decide whether they pay a high price to continue business there or stop the bleeding.”
There is an auction of 300 houses coming up. The bank minimum bids are really
quite low, but it's not an absolute auction so the low minimum bids are prolly phony.
One of the townhouses is on Brickell Avenue, formerly in the $600ks now the minimum
bid is in I think the 120ks. It has a nice sized back yard, as shown on the news, with a long skinny pool--would be called huge in Cali. If I thought that minimum was real, I'd be interested.
2 story, the inside looked quite spacious. Not in great shape, but not trashed either.
BTW, that bondbuyer article makes a very clear case for why the Feds might need to bail out California (while using the leverage thus obtained to also straighten out the state government) -- if they don't, the ensuing credit market turmoil will punish all the rest of the states as well, creating chaos in the muni bond markets and state spending ability:
Larkin said the loss of California’s investment-grade rating wouldn’t just harm the state, but also would hurt municipal bond issuers across the country.
“If their bond rating goes to junk or goes below investment grade, it would have phenomenal consequences across the entire municipal bond market,” he said. “It would represent a major change in people’s belief in the safety of the municipal bond market.”
P.S. I wonder if TreasuryDirect could be all the bank that any individual should ever need. Corporations could have their corporate banks but at least your average Joe wouldn't get caught in the crossfire...
Now I really am departing. I mean it!
"Stated income loans were borrower underwritten loans, not lender unwritten loans"
No matter how many times I read this it does not make sense. Just because it is a Stated Income loan does not mean that there are no underwriting criteria. e.g.: LTV, credit scores, documentable cash on hand, liquid assets, and hard assets.
Wisdom is addicted, like me.
No fear on the streets in Cali yet?
I do need to go to bed.
Nitey-nite everybody!
It's amazing the ignorance that's always been shown around here in discussing self-employment and this topic.
For sole proprietors, the personal and business tax returns are one and the same -- 1040. Anybody with self-employment income files a Sched C, whether employed or not.
Most full-time self-employed people don't get W-2s. You get 1099s from some sources, but certainly not all. If you operate a storefront or work with the public, 1099s might be a very small part of your income. The bottom line of the Sched C, net income (which is the equivalent of salary for an employed person) depends as much on expenses and deduction (like office in home) as income. A person who takes the most aggressive office in home depreciation deduction, for example, will show less net income than one who takes none. And many choose to take none, for valid reasons.
I'm not disputing that underwriters make exceptions for successful self-employed people. Of course they do, because some successful self-employed people still can get loans.
But neither CR nor Tanta could ever really defend their mantra about lender underwritten vs. borrower underwritten. It's like some sacred druid chant around here, and it's and never supported with logic.
Why does it matter anymore?
I have a couple of friends who were very successful employed in the corporate world for years. Now, they have been unemployed for months, and their only income is what they can make from self-employment. Some people like this are house rich and have lots of equity and very little debt. But it's not easy to keep their families going with a refi, if they can't get one.
If they were in the same position, but employed in even the crummiest job that's going to get the ax or furloughed tomorrow, they would get one easily.
"the Feds might need to bail out California.... if they don't, the ensuing credit market turmoil will punish all the rest of the states as well, creating chaos in the muni bond markets and state spending ability"
Isn't that what should happen?
But the prospect of reducing state spending will indeed trigger a bailout.
"Larkin said the loss of California’s investment-grade rating wouldn’t just harm the state, but also would hurt municipal bond issuers across the country."
I do not understand the correlation. It would seem to me that if Cali bond ratings fall enough, pension funds and others would choose to invest with the more fiscally responsible states and munis? i.e. Cali's pain is everyone else's windfall.
Must. Leave. Leftcoasters. To. It.
C
nytol
I still make hard money firsts and seconds.They are short term,collateral based loans,period.
Mitsu pulling out would be a shame, but no surprise.
I've had three new Mitsu's, two of them brand new designs at the time, and they were virtually bulletproof.
"A person who takes the most aggressive office in home depreciation deduction, for example, will show less net income than one who takes none. And many choose to take none, for valid reasons."
Being self-employed allows you to "choose" to pay no taxes? I have no problem if anyone who "chooses" to pay no taxes also cannot get a home loan. Fair is fair. And anyway, it should not be difficult to get a loan for 50% of a very conservative value for a home, based on collateral alone, as long as there are no senior claims. I know we're all used to 97% and 90% loans, but a 50% loan is huge.
BH,
If California falls below investment grade a bunch of things happen. None of them good for the rest of the market. What happened to the CP markets when a few big names got in trouble?
Wisdom Speaker (homepage, profile) wrote on Thu, 7/9/2009 - 10:36 pm
P.S. I wonder if TreasuryDirect could be all the bank that any individual should ever need. Corporations could have their corporate banks but at least your average Joe wouldn't get caught in the crossfire...
Absolutely. The nearest thing we have to a banking system of the future, assuming again that we still have a future in which to have that banking system.
"Timmy is the McNamara for today..."
don't think i've ever given a +1... but here's one for you on that one, bh
Being self-employed allows you to "choose" to pay no taxes? I have no problem if anyone who "chooses" to pay no taxes also cannot get a home loan. Fair is fair.
I think the point is that the lenders were choosing to back out those large deductions and then count the larger number as income.
Regardless, a great deal of this is solved by LTV. If you put down 75%, not a lot of questions need to be asked about the Sched C or K.
re:self employed-
I had an asp software that I charged $49.00 a month, so the account would pay less than $600, anything over that amount and you met Irs-business 1099 threshold....
still $49 mos x 300 or 500 is decent change with no overhead...
For more than 25 years, 100% of my income has come from self-employment.
I built and ran a business, hired people, bought equipment, supported a family, fed the economy etc. etc. as a self-employed person. I never want to retire, and it's all I ever want to be.
If I were 30 and just starting out again, I could not choose self-employment, because the health care costs are too high.
If we are heading toward a country in which the barriers to self-employed people getting mortgages are so high as to be prohibitive, even for the best and the brightest, then there will be hardly any successful self-employed people left in our country. Nobody will choose it.
In a time when jobs are drying up, that would be a national tragedy.
In case you didn't know yet, for all those years I've been self-employed as a professional writer.
So, go ahead and sling it. I can take it.
AIG to pay more executive bonuses July 15
"In total, AIG last year agreed to pay in excess of $1 billion in retention payments and performance bonuses to employees across the organization, including to the financial products employees."
UPDATE 2-AIG to pay more executive bonuses July 15 - source
| Reuters
"Regardless, a great deal of this is solved by LTV. If you put down 75%, not a lot of questions need to be asked about the Sched C or K."
In normal times, I would agree. But I would not lend 75% of a home's price at bubble prices. In Southern California, many areas had prices at peak that were 5 times the price 10 years earlier. A 25% haircut would not have been conservative in that environment. In many areas, even the currently deflated prices are double, after adjusting for inflation, what they were at the bottom of the last cycle. Based on collateral, I'd consider 50% in those areas, but not more unless the prices had deflated a lot more from peak.
self-employment is a horrible fate. all you do is pay taxes, process your taxes, and pay for your healthcare. unless by 'self-employed' one means 'cooking up insurance scams', which is the only kind of self-employment our society rewards.
Anyone notice how AIG did a reverse stock split and then dropped like a rock?
"If I were 30 and just starting out again, I could not choose self-employment, because the health care costs are too high."
~~~~~
Exactly why we need Single Payer ...
If for no other reason than to free up the entrepreneurial class ...
But there are many more reasons ... cutting health care costs, making business competitive against
foreign competition at home and abroad, to ensure adequate health care coverage for everybody and
give a boost to consumer sentiment ...
mmckinl
But what will be the tax added to FED and State income tax? Another 10%?
"What happened to the CP markets when a few big names got in trouble?"
They froze because lenders could not know what banks were solvent, or not due to the off balance sheet shenanigans they were playing and the systemic risk. In contrast, state and muni finance are somewhat more public, and bond traders tend to do their homework, it is fairly easy to identify the states on the precipice. Unless of course some states and munis have some CDS/MBS/CDO on their books as well. I presume it is the pensions that could provide the biggest surprises.
rich, as someone who worked in a family business and dealt with the yoyo banker class on more than one occasion, the SISA loans (Stated income, Stated Asset) had almost no verification.
Go back in the archive to 2007 and early 2008- most of us were here discussing it in detail, and Tanta was simply amazed at the fraud that wall street packaged up and sold to make their fees.
So your understanding rings false to those of us who have watched this unfold.
By the way, one of the largest consumers of the SISA loans was the realtors who fed on the frenzy and the flippers.
They just wanted the money for a year to flip that sucka onward and capture that sweet money.
Go read the saga of Casey Serin and how he ended buying how many houses.
Spare me the old saw about making life harder.
I remember real bankers, and what we had over the last decade was nonexistent bankers.
Someday this war's gonna end...
@mmckinl,
OK, I finally got through the article. I am intrigued by the Bank of North Dakota approach.
It is still dreaded fractional reserve lending, meaning the bank is at all times technically insolvent, but I like the fact that it pokes a finger in the eye of the Federal Reserve system. On that basis alone, I am all for a Sovereign Bank of California.
"Anyone notice how AIG did a reverse stock split and then dropped like a rock? "
Well it sure provided some room for options traders to make some easy money on puts and shorts.
Tim waiting for 2012
But what will be the tax added to FED and State income tax? Another 10%?
~~~~~
For the middle class it should be next to nothing .... Pre Reagan tax rates on individuals ...
Taxes on financial transactions, carbon , food additives that make us sick ...
There is enough money there to pay for it ... we already pay more in GDP than the other G7 countries
by about 70% so it just a matter of rearranging the financing ...
But I would not lend 75% of a home's price at bubble prices.
Yes, that's why I wrote "put down 75%".
If the government exited all lending (FDIC, FHA, the works), then we wouldn't be arguing about what loans self-employed people should be able to get. I'd much prefer a world where each person's ability to borrow depended solely on convincing someone to lend the money to them, without interference from govt subsidies or penalties. Then the lenders could figure out how to underwrite differently for self-employed people. If they decide to lend 100% of bubble prices with no income verification, then let them. And let the investors supplying the money take the full loss on non-repayment.
But for as long as people can borrow from lenders in arrangements that are subsidized by taxpayers, it is offensive that some people can get special loans that are designed to make it easy for tax cheats.
Rich,if someone is self employed,has good credit and solid documented income they can get a home loan at a competitive rate.I will make hard money loans to 50% CLTV for no longer than 18 months in good parts of Northern California.I use a good Appraiser and the Rates accurately reflect the Risk.One "C" for hard Money,3 "C"'s for "normal loans.And umm,do YOU think rates accurately reflect risk in Cali?
Well, I'm missing the tragedy here. Somehow it does not surprise me that a bunch of mortgage brokers wanting to bring back liar's loans provides such sparse detail on this epic injustice, but it appears that the dedicated efforts of our diligent reporter elicited the information that the borrowers did indeed manage a refi and saved 1.5K a month. This seems like a pretty good deal, and since they could always use that money to make principal payments on the mortgage, the borrowers seem to be in a much stronger position. As a wild bleeping guess, they would have had to pay down the principal to get a really good interest rate on the amortizing mortgage. And they didn't have the money to pay it down.
I had to laugh over the rationale in the article that liar's loans were perfectly safe as long as the creditors weren't allowed to sell them off. How many banks that had hefty crops of liar's loans in their portfolios are still standing? The entire problem with liar's loans is that you JUST DON'T KNOW whether the borrower can pay or not. If you don't underwrite it, it's an asset dependent loan - your security is based on the theory that you can foreclose and recover your money - in other words, you are really in the hard money business.
Hard money loans are expensive for the borrower, because you charge for all the extra work of having to foreclose up front.
And I have very, very bad news for the brokers cited in the article. Unless the industry thinks it is going to line up suckers willing to make hard money loans for prime rates, the new sections of Reg Z are going to come into effect on October 1st of this year. For loans on a principal residence bearing a rate 1.5% or more higher than prime, verifying repayment ability will be a requirement. Reg Z 226.35. Of course, mortgage brokers are famous for not knowing the law so it doesn't surprise me that these bozos don't. You tell me how you verify income with a stated/no doc loan?
They might also want to see the new section 226.36, which has rules for mortgage brokers and appraisals for higher cost loans. Tada!!!
Why don't reporters ever do any friggin' research?
There is enough money there to pay for it ... we already pay more in GDP than the other G7 countries
I agree although it seems more spreading of the pain. Young people should be paying less taxes than older people because they use less healthcare. It should be a graduating tax that starts low and increases over your lifetime up until age 65
"put down 75%". Ah, if only my reading comprehension scores were a little higher. I am so used to people assuming that all normal borrowing involves borrowing more than they are paying themselves that I didn't even check what the 75% applied to. Now that I know what you said, I agree with you.
Comrade Coinz
The Bank of North Dakota approach.
It is still dreaded fractional reserve lending,
~~~~
Agreed ... what it really is is an exercise in banking theory ... although it would work ...
We need to get people involved in thinking about the creation of money ...
For years the PTB have deliberately confused the people on this score ...
If people found out what was really happening they might get ideas like printing our own money instead of borrowing it !
The goal is to get rid of fractional reserve banking and the Fed as we know it ...
HollywoodHack (homepage, profile) wrote on Thu, 7/9/2009 - 8:56 pm
reply ignore user
self-employment is a horrible fate. all you do is pay taxes, process your taxes, and pay for your healthcare. unless by 'self-employed' one means 'cooking up insurance scams', which is the only kind of self-employment our society rewards.
I've done software development as both 1099 as well as w2. There's a ton more write offs and investment vehicles to shelter your icome as 1099. Personally I prefer the stability of w2. No worry about healthcare etc...
Now that I know what you said, I agree with you.
But of course, 75% will never happen because somehow our society believes that there is a god-given right to 20% down, at most.
Tim waiting for 2012
"Young people should be paying less taxes than older people because they use less healthcare. "
~~~~~
Young people making little wouldn't notice the difference ...and they would be free to start families, a business
or new work without fear of medical bills ....
No worry about healthcare etc...
Yet.
I would seriously wonder about how much more time before the full cost of healthcare to the employer shows up as income on the W2, or is taxed outright at different rates.
Edit: clarification about what will show up on the W2.
Rich, believe me, banks are willing to lend reasonable amounts with reasonable downpayments to the self-employed.
The lie is that stated or no-docs are the only way that self-employed people can get loans. Self-employed people were getting mortgages long before stated, and they will be getting loans right along. The individuals cited in this article did get a refi and lowered their mortgage payment substantially.
The bottom line is a simple yet powerful one. The global crisis is morphing again. Having already contaminated (in a sequential and cumulative manner) housing, finance and the consumer, it is now threatening the potency and credibility of the economic policymaking apparatus. As far as I can see, there are no first best policy responses that are readily available and easy to implement. Instead, the economy will continue to struggle, navigating both the adverse implications of last year’s financial crisis and the unintended consequences of the experimental policy responses. Given the inevitable socio-political dimensions, this story will play out well beyond the realm of the economy, policymaking and markets.
PIMCO - Viewpoints July 2009 Crisis Morphing
I would seriously wonder about how much more time before the full cost of healthcare to the employer shows up as income on the W2, or is taxed outright at different rates.
Edit: clarification about what will show up on the W2
~~~~
Baucus tried to tax wage earners to pay for this and he was rebuffed ....
They are actually thinking about taxing high income individuals ... 'bout friggin' time ...
Thank you MoM.Anyone claiming that a self employed person can not get a home loan is full of it.They may not be able to get the amount or rate they feel they "deserve",but they can still get more of a loan than they are likely to repay.A lot of hard money comes from people who want a greater yield from part of their retirement savings.Done right they are a good investment,almost no one does them well because thereare too few brokers willing to say "I don't see any good deals right now,I will call you when I do" and their are too few investors who appreciate a broker who says that.Investors want to hear 12% return.right now maybe 2% of the people seeking hard money loans in sonoma county are reasonable risks at 12% and an 18 month term.Maybe 2%...
Take a name asswipe
The answer of course to print our own money ... not borrow it
get rid of the Fed and fractional reserve banking ... and Voila ...
Trillions at tax payer disposal ... the banks would actually have to earn their money !
Now that I think about it, I can see a compromise on underwriting for the self-employed in a world where almost all loans are controlled by govt rules. Limit the amount of tax-deductible loan to the amount justified under normal (conservative) lending rules based on actual taxable income. Any excess that a lender (backstopped by the govt) wants to give bears interest that is not tax deductible.
Hmm,I'll use spillchick necst time.
The SF Chronicle is a huge shill for the bay area real estate industry.
Their "reporters" should be prosecuted.
"The SF Chronicle is a huge shill for the bay area real estate industry."
The journalists choose not to bite the hand that feeds them. It's inevitable.
BURN
The SF Chronicle is a huge shill for the bay area real estate industry.
Their "reporters" should be prosecuted.
~~~~
Have you heard the term Main Stream Media or corporate media ?
that's them ...
"Why don't reporters ever do any friggin' research? "
Damn Girl..........that sure woke ME up.............wanna adopt an old man?
"The SF Chronicle is a huge shill for the bay area real estate industry."
Real estate ads are one of the few sources of income left to them. At least until Craig's List and the online Listing services take that away too. One boon from the downturn could be the Realtor Assns and Auto Dealerships losing some the political clout they get from having the local media in their pocket.
The SF Chronicle has much better Real Estate Reporters than the Santa Rosa "Press Democrat".
self-employment is a horrible fate.
Most self employed people would tell you it's not for the faint of heart.
And most self-employed people wouldn't give it up regardless.
Blackhalo
It's not just the Realtor Assns and Auto Dealerships ....
It's the whole Chamber of Commerce .... Pharma , defense and health care ....
You don't hear half the BS that's really going on in those industries ...
Thank God for the internet ... I know most of what I know through the internet ...
It saves days ... weeks ... months of heavy duty research and study ...
It occurs to me that many are interested in buying houses on the cheap for re-sale or rentals, in other words, for profit. If this profit is obtained at the expense of returning servicemen and women, or young families trying to buy their first home, who for whatever reason were unable to buy ahead of you, and thus pay a higher price than they otherwise would have, well, it just strikes me as parasitical, that's all.
Chris George of CMG Mortgage is a clown. Here's what he wrote about East Bay housing in '05:
'The East Bay is unique, it can be its own economic micro-climate," said Christopher George, president of CMG Financial Services, a San Ramon-based firm that provides mortgages and other services. "You have what are essentially new towns that have sprouted in the East Bay, like Brentwood," George said. "You've got Mountain House. The East Bay will not see nearly as severe a downturn in housing'
Hopefully his prognostication about stated-income loans will be equally off the mark!
actually if you live in Silicon Valley, it is pretty easy to having nothing in the bank account even if you are making $300k per year. Just rough numbers off the top of my head: 1) 40% tax rate 2) mortgage for average house in a good neighborhood (assuming bought during peak years) $4-8k/month, childcare $4k month (both parents work full time jobs), private school $2k per month per kid, IRA/401k/529 programs $3k month and bingo, no savings in the bank. So even the top 2%, in SV, don't necessarily feel wealthy.
"McNamara never had a hit record"
While he was Secretary of Defense we "saturation bombed" areas of Cambodia blowing away entire villages. We will never know how many people lived in these villages and were blown to bits or burned to death by napalm. Whether it was a record or not is immaterial.
I would not let Kissinger off the hook for the "incursion" into Cambodia....and he has never regretted a thing. As for the coup in Chile and the assasination of Allende...more of Henry's handiwork.
What complete BS. Anyone legitimately making $300k/year from a business will have plenty of documentation (e.g., tax returns, social security filings, etc.) to satisfy bank loan officers. These people just don't understand the difference between revenue and income, and are likely living way beyond their means because of it.
Kinda reminds me of Joe The Plumber and the $250k/yr business he owned. Except when it came down to it, his name wasn't Joe, he wasn't a plumber, he didn't own the business, and he made $40k/yr.
The liar loans catered to those sorts of people.
What Rich said about the movie The Fog of War. Confession is good for the soul. If course I also enjoyed the book Voltaire's Bastards by Jonh Ralston Saul so....
On SISA.. Well they wouldn't exist (or would be less than .01% of loans) if the banks thought they were lending their own money. They can best be regarded as fine print covering the banker's buts against bondholder suits: "We TOLD you that we simply wrote down whatever crazy-shit the borrower told us. It's your fauld if you thought that the DTI figure actually MEANT something."
I called this back in 2007 as well. (actually called in well before then, this was my first documented call..)
Here's an article I posted online while I was in the thick of the housing bubble:
http://ezinearticles.com/?Why-The-Presidents-Proposed-FHA-Housing-Bailout-Wont-Work&id=746045
Oh well..
That link isn't functioning right now..
http://www.ideamarketers.com/?Why_the_Presidents_proposed_FHA_housing_bailout_wont_work&articleid=229472
Shows the article in it's entirety