Any idea as to quality of the "seasonal adjustments"? My understanding is that year over year comparisons are more meaningful than sequential seasonally adjusted comparisons.
K Harris had a comment to this effect in a recent post...
My belief is that the price declines are the real news, since these endanger the US consumer and the lending industry, which have reallly been the foundation of the US economy in the past few years.
Plus now you have to add rapidly rising interest rates to the mix, and I think you see foreclosures rise even more rapidly and prices fall further, ultimately leading to an even greater amount of lender and consumer retrenchment.
Man, it was a trifecta of bullish news today, this with the Chicago PMI (52.4) and consumer confidence (109. both above expectations.
I guess inventories will tell the story, and the big unknown there is the size of shadow inventories. How many existing homes are owned by investors who were hoping for a quick gain and are now waiting for a market recovery before putting the house on the market?
Add to that, the inventory of canceled and yet un-resold new homes.
The fastest growing is probably the foreclosed homes reverting to banks. I imagine it's still very small, but likely growing more than 100% yoy.
Nice view of your thoughts Joe (I call em 'mulling it over', but thought you might take offence. I mean no harm and, if you need to know, feel you could be a kindred spirit. My condolences in advance.)
Ok, so it appears we share the same view of those precious realtors and brokers whose jobs seem to be insulated from any downturn so far.
What of this:
Total existing-home sales including single-family, townhomes, condominiums and co-ops rose 0.6 percent to a seasonally adjusted annual rate of 6.28 million units in November from a level of 6.24 million in October,
and then the declining red bar graphs in that first figure?
Do you stick with the picture or with the words? [See? this mullin' it over is not all that fun.]
Well the good news is the housing market isn't plunging like it could have given the sheer scale of over-valuation and over-building. The bad news is this is playing out exactly like you would expect a housing bust to play out - a prolonged period of slowly declining transaction volumes and prices. We are only starting the second year of this bust, and historically it takes 5 years to reach a nadir. Still, I expect the champagne will be flowing early again this year down at the NAR...
Seems to me that as long as prices continue to drop and volume doesn't make a real dent in inventory, then the situation only gets worse not better.
Ya but the Fed doesn't care if a few folks get crushed as long as the system thrives... and looking at these new data points & the shifting yield curve tells me NO RATE cuts this spring. They will conclude the system is fine and that the economy is pretty close to 'neutral'.
So besides waiting to see what happens with the Spring RE inventory rush... watch the dollar & the Forex.
If the dollar strengthens - the pressure on the Asian CBs to buy debt diminishes so they don't have to burn through their reserves as quickly... Pushing this whole process out a bunch more.
Settle in people - its gonna be a marathon, not a sprint... regardless of how the race ends up. That's my guess.
For what it's worth, here's my take on the numbers. I think the real story is that inventories for sale have skyrocketed 117% since the boom began in early 2001. They've come down 1% or so since then. And that's with the bias towards lower inventories/listings you get almost every fall/winter. I think the housing market is definitely in for more pain in 2007 simply because of the Everest-like size of the inventory overhang. Just my two cents, of course ...
Sales rose 0.6% on the month vs. forecasts for a 0.8% decline. The sales rate came in at 6.28 million units vs. 6.24 million a month earlier. But its down 10.7% from a year earlier (7.03 million units in 11/05).
Inventory dropped a bit 1% to 3.82 million units from 3.854 million units in October. Thats a 7.3 month supply at the current sales rate, just off the cycle peak of 7.4 months in October.
Prices dropped again. The median price of all existing homes (condos + single family + co-ops) slipped to $218,000 in November from $219,000 in October and $225,000 a year ago. On a percentage basis, single-family only home prices dropped at a rate of about 3.6%. Thats the second-biggest decline ever, behind last months 4.2% drop.
My thoughts on these numbers ...
Like new home sales yesterday, existing home sales bounced in November. I expected this given the dip in mortgage rates weve seen lately. But are these numbers really all that good? Id argue no, when you look at the big picture. Consider ...
The sales rate is basically going nowhere, up a miniscule 1.1% from the September low and well off the high (-13.6%) of 7.27 million units in June 2005. Thats not exactly a rip-roaring rally.
Inventories? Yes, theyre down 1.1% from the July cycle peak of 3.86 million units. But when you consider the supply of homes for sale skyrocketed 117% from the pre-boom 2001 low of 1.77 million units through the July peak, that 1%-ish decline doesnt look so impressive.
Thats not all, either. It is absolutely normal and customary for for-sale inventory to stabilize or decline late in the year. People who dont sell their homes during the peak spring and summer selling season often pull those homes from the market for the holidays. Then they re-list early in the following year.
You see that seasonal pattern time and time again. It happened in the boom years of 2001 ... 2002 ... 2003 ... and 2004. Even in 2005, when the market had already started topping out, inventory levels stabilized late in the year, before surging again in early 2006. I expect supply to start rising again after the first of the year, and set a new cycle high by spring 2007.
There is simply no getting around a few basic facts:
1) While sales arent falling sharply anymore, theyre not improving much, either.
2) Supply is still at astronomically high levels and ...
3) Homes remain relatively unaffordable, despite the recent decline weve seen in mortgage rates and home prices.
I guess inventories will tell the story, and the big unknown there is the size of shadow inventories.
I think it will be foreclosures.
Having looked at some other downturns (e.g. what took place in California in the early 90s), it seems that increasing foreclosures are a sign of a deteriorating market and decreasing foreclosures are a sign that a bottom is near.
Right now (if sites like RealtyTrack and Foreclosure.com are accurate) foreclosures are rapidly increasing.
Superficially it makes sense - a foreclosures adds a home to the market, removes a participant from the market (partly by ruining their credit), and financially harms the lender (which could lead to fewer loans thus fewer sales).
If foreclosures were not increasing I might be less concerned about the future of the housing market given recent data. And those rising interest rates ain't gonna help.
"So besides waiting to see what happens with the Spring RE inventory rush.."
Mike (in FL) and Bob (in MA) have alluded to this as well, and my thought is that we won't have much longer to see where this goes. January isn't typically a robust month for listings, but I expect to see inventory momentum build right after 1/1 as a gusher of sellers try to jump the market's gun.
All, inventories will most likely fall this month (December) and maybe in January too. That is the typical seasonal pattern as homeowners take their homes off the market for the holidays.
It's common to see inventories drop around 10% in December. Here are some examples of recent inventory declines:
Nov-03\t2,530,000
Dec-03\t2,300,000
Jan-04\t2,200,000
Nov to Dec Decline: 9.1%
Nov-04\t2,480,000
Dec-04\t2,214,000
Jan-05\t2,147,000
Nov to Dec Decline: 10.7%
Of course this year inventories barely declined and actually rose in January:
Nov-05\t2,924,000
Dec-05\t2,846,000
Jan-06\t2,883,000
Nov to Dec Decline: 2.7%
Currently inventories are at 3.82 million. It will be interesting to see if inventories follow the normal pattern (and drop to 3.45 million or so), or stay high like in Dec 2005.
Currently inventories are at 3.82 million. It will be interesting to see if inventories follow the normal pattern (and drop to 3.45 million or so), or stay high like in Dec 2005.
These numbers cry out for a seasonal adjustment.
Much commotion has been made about declining inventories recently, especially farther north.
My suspicion is that these are illusory seasonal declines.
Just talked to a realtor who sells houses for his son who is in charge of forclosures for Coldwell Banker in San Diego Area. He said that his son had almost 0 houses to sell a year ago. He now has over 100! He says that banks are in now hurry to deal yet. I have seen a rise in Bank Owned signs in the area and in my patrols check on them frequently. Not one has sold or even come down in price. Not sure what is up with that. The realtor said that Coldwell has been paying the families a lump sum to leave ASAP as soon as they forclose. They do this because it usually takes months to get deadbeats to leave and they tend to trash the place. They figure it's worth the money to get the house quick and try to sell in a dropping market. There were four other forclosures within 100 feet of where I was talking to this guy (he stopped me for directions). What is happening on the street is much different that what the numbers say. All the builders houses that have been empty this summer are STILL Empty. It's as if the builders don't care. This can't last.
and financially harms the lender (which could lead to fewer loans thus fewer sales)
With prices officially down 3.1% (the real drop including give aways is more like 10%-15%) the value of their collateral is shrinking fast. Lets see how many of them will go belly up reducing liquidity to the RE market.
The HB stocks are not happy (check the tape) with the yoy price drop either. From now on it is cut throat price competition between new and existing houses. Lets see who is going to drive whom into the ground.
Ok, so it appears we share the same view of those precious realtors and brokers whose jobs seem to be insulated from any downturn so far.
Not so fast. NSA sales are down in November yoy and from October of this year. These are the real sales (not seasonally adjusted) that RE complex collect their fees on. They are hurting big time. Would they spend $ 40 million if they werent?
As a microcosm of the bigger picture, here are the numbers of listings (all residential types) from the publicly available version of the MLS for Monmouth County NJ:
This is Ocean County NJ with a caveat:
12-27-05\t4549
12-28-06\t5563*
11-27-06\t6012*
*Is because several towns seemed to drop entirely from the MLS between 11-13 and 11-14-06. In one day listings plunged by 1,200. I am reasonably sure that including the dropped towns would add at least 800 listings to the current inventory, but I do not have the hard data to back that up.
Here we are, three months out from the great Nontraditional Mortgage Guidance Coming Out Party, and Fannie Bloody Mae is loosening its eligibility, underwriting, and pricing standards for interest-only mortgages. Temporary buydowns on IO. Read it and heave. I'm so disgusted I can't stand it. So much for everybody getting on the credit discipline bandwagon.
Here we are, three months out from the great Nontraditional Mortgage Guidance Coming Out Party, and Fannie Bloody Mae is loosening its eligibility, underwriting, and pricing standards for interest-only mortgages
the system is rigged as much as it can be tanta. you and others can rage against the machine all you want, this market isn't going to go out without a full blown assault to keep the party going. if the belief is this has been keeping the economy afloat the last 5 years, what makes anyone think those who profited from it will sit idly by while their supper is taken from them?
"Currently inventories are at 3.82 million. It will be interesting to see if inventories follow the normal pattern (and drop to 3.45 million or so), or stay high like in Dec 2005."
I don't think they will follow the pattern. The sellers who see writting on the wall/desperate flippers will try to get a head start on competition, and will begin listing/relisting in early January. The flipper I renovated townhouse for is going to list in the first week of January. Watch out for the stampede to the RE exits.
Btw. The stocks of the mortgage purveyors didn't like the 3.1% price drop either. They know the true value of the collateral backing their toxic garbage.
Yes, anonymous. That's the only thing they didn't loosen up on, undoubtedly because their depository customers are being told by the Feds not to do that any more. The very fact that they dropped the contract variance requirement--meaning, any dimwitted lender with a Fannie contract can deliver this stuff to them, you no longer have to negotiate a contract addendum (which could have volume and other limitations on it)--means they're planning to take as much of this crap as originators can come up with. I realize that Richard thinks I sound like Dorothy in Oz, but the fact remains that Fannie and Freddie showed at least some restraint on this crud during the boom years. Now that the bleedin Alt-A pools are starting to smell bad, all of a sudden the agencies (one assumes Freddie will follow suit) are offering to step in and be It. I get cranky about GSE credit standards just like I do about depositories, and for the same reason. Damn, I need some coffee.
The sellers who see writting on the wall/desperate flippers will try to get a head start on competition, and will begin listing/relisting in early January.
i heard this same argument last year and it didn't happen. we'll see what happens this go-round.
Anonymous - yeah, I saw that last bullet too. I guess that means all those no doc loans will have to swear they can afford the fixed rate fully amortized loan. One has to ask: why are they getting an IO if they can really afford the fixed rate.
I'm beginning to think people are getting the IO in some unknown proportion because they are lying but the bulk because they believe they can invest the MEW and earn more off it than what they owe in accumulating interest. I don't actually believe all of these people are foolishly spending it all at Best Buy (although a subset surely are).
I'm guessing that there is a carry trade (MEW at low interest rate -> stocks at better price growth rates) going on by baby boomers who are just now trying to deal with their impending retirement the same way they've dealt with everything else...late and badly. I think most believe they will be able to service the MEW from the stock market over the long term, or that at least the will be able to exit first when it stops working. As home prices decline, I expect the MEW flow will dry up, and the stock market will stall. At that point, the loan servicing costs will eventually trigger a stock market correction as folks try to unwinding the no-longer-viable carry.
It's always the rush for the exits that
causes the problem.
"i heard this same argument last year and it didn't happen. we'll see what happens this go-round."
Remember, last year there was not bubble. Now everybody knows the drill. They can't wait to get out of the gate.
Rather watching, (exclusively) inventory, we should also focus on the demand side of the equation. The MBA mortgage applications will be our leading indicator of the buying power going forward.
Sales in the Sunshine state are off 30 percent from last year, but that doesn't matter -- because the national numbers suggest a recovery is in the offing?
Wow - According to that Doc you can get 40 year loans with a 10 year IO period at 95 LTV and 100% CLTV with only a minimum of $500 of the buyer's own funds, all insured through FM. Amazing.
I think I'll give up hope and start shopping this weekend...
">>The sellers who see writting on the wall/desperate flippers will try to get a head start on competition, and will begin listing/relisting in early January.
i heard this same argument last year and it didn't happen. we'll see what happens this go-round."
What do you mean, "it didn't happen"? Inventory went up last January, as opposed to the traditional trend of going down. Somebody was trying to get a head-start on the competition.
I was cursed to be born to survivors of the Great D. so I hate debt at some genetic level.
I will be further cursed to be visiting folks with those 50inch LCDs with ear splitting entertainment systems as they brag on the no interest no payments for 40 years refi that they renegotiated to replace their 40 year IO mortgage they were 2 years behind on.
Later, I will munch on the gourmet dinner at the 5 star restaurant bought with the lump sum payment they got when they did the refi.
"Wow - According to that Doc you can get 40 year loans with a 10 year IO period at 95 LTV and 100% CLTV with only a minimum of $500 of the buyer's own funds, all insured through FM."
Tanta, with this variety of loan, is the interest-only period long enough that that qualification will be based on the interest-only payment? Or is the length of the interest-only period irrelevant?
One of the charter goals of F&F is to provide liquidity to the secondary mortgage market during times of distress, when those markets most need that liquidity. Cutting off the credit spigot during a downturn is a surefire way to ensure the market is crippled. This was the original reasoning behind the retained portfolios. When no one wanted to buy mortages on the secondary market, or even wanted to buy F&F securitized debt, F&F could hold the paper in their retained portfolios and issue debt. Debt that is assumed to be backed by the full faith and credit of the United States.
"I was cursed to be born to survivors of the Great D. so I hate debt at some genetic level."
Yeah, me too. My father was just out of high school when the depression started. When he passed away, we found in his basement about 200 rolls of paper towels and toilet paper.
In the boom of stocks "dividend" was passe, old news. They saw Microsoft make people rich and wanted capital apprciation only.
It's the same right now in housing.
In the boom of housing people knew that whatever piddly contributions to the principal was nothing compared to the capital appreciation, which was tax free!. Better to spend all you can afford on the interest only and leverage a more expensive house..i.e. more capital appreciation. ...(besides, no tax deduction on the part of the payment that goes to principal...)
Paying off a house is not even a thought in their retirement plans unless it means selling their big McMansion and moving to Idaho on a lake to build their dream home with the profits.
There is a different mindset on what "owning a house" means now. It's more like leasing a car.
Now dividend stocks are "paying dividends" and are all the rage. The mindset has changed. Microsoft and Qualcomm pay dividends.
The same will eventually happen in housing when after several years of no appreciation, the old-school idea of building equity through payments on equity will return. House prices will wait for wages to catch up, or drop a little or a lot to help, but either way boomers and their kids will realize that their calculations for the 70% of income needed for retirement assumed no house payment.
Whether that happens sooner rather than later is anyone's guesss.
winjr, I just walked down to the local CVS and got some Dr. Pepper, on the undoubtedly misguided idea that it won't interact with the drugs as much as coffee does. I'll probably get spastic plus a bad case of the burps. But since the alternative is going to bed before sundown . . .
The length of the IO period doesn't matter to the qualifying payment: Fannie is insisting that everybody get qualified at the amortizing payment. (And yes, you have to be strict about ratios for that to mean diddlysquat, and the part about letting lenders do non-automated underwriting is not promising news in this respect. Lenders are always good at coming up with "compensating factors" for ridiculous DTIs.) The issue with the length of the IO period is really how it coincides or doesn't with the first rate adjustment. Fannie will take a 3/1 ARM, for instance, that has a 3-year IO period or a 10-year IO period. The problem with the 3-year IO period is that the borrower gets hit with a rate adjustment, amortizing payments, and payments calculated over a 27-year term instead of a 30-year term, all on the same really bad day. Add it up and it's nasty payment shock. On the other hand, the 10-year IO period presents the equity problem. Given the general state of the existing home markets in a lot of areas, a lot of these borrowers will be lucky to see prices come back to where they started from in three years.
Number2son, I honestly don't think they're really worried about taking everyone's trash. They're really worried about taking CFC's and WF's and WAMU's trash. Gotta keep the "partners" happy.
The big question is whether the MI companies are going to go along with this in a big way or not. I mean, you can say you'll buy a 95% loan all day long, but if the MIs don't write the policies, it doesn't happen in fact. I'm sure the MIs told Fannie they'd play nice, but I'm not yet convinced they're going to play as nice as CFC et al. would like them to.
As I read it, the powers that be are going to keep the liquidity flowing as long as they are able to. Nevermind what happens when it all comes crashing down. They can keep the party going for years.
So, what does happen when it eventually comes down?
And how to invest in the meantime? Go along with the party? Run to another country where they practice financial discipline? (And where might that be?) Hide and put your money in a mattress? Anyone?
I'd guess you do all of the above - go along with the party some but have some stashed in the mattress too.
In short play the game but be damned sure you take some of the winnings off the table each round & once off the table it stays off the table - don't 'reinvest' to 'double down'.
If your game pile goes to zero take that as a hint to leave (winnings in pocket) and find a different game with better odds. Until then ante up.
Well, vader, turns out you're right. Dr. Pepper is not a good idea. I feel like a '72 Corolla into which some fool installed an alcohol-and-nitro-fueled Dodge Hemi. Fun for about 10 minutes, then the wheels fall off.
Fortunately, it's time for my fog-inducing antihistamines, so I guess I'm going to be climbing into my jammies and crawling into bed. At least it's dark outside by now.
question:
I understand the difference between NSA and SA in terms of definition. My question is what are the adjustments factored in for housing and who dictates what these adjustments are? I'm guessing these adjustments have to be regional, is this right?
This is the OFHEO letter to Freddie and Fannie regarding non-traditional mortgage practices which seems to run counter to the e-mail that Tanta received.
I'm not exactly sure on that dryfly. My own forays with illness and hospital stays has taught me that sleeping all the time can paradoxically feel like an eternity. Particularly if you're always waking up feeling godawful-miserable. That and there's only so many ways one can sit on a bed before your butt starts going numb.
Best of luck Tanta, I don't envy you the experience. May it be successful and brief.
"Here we are, three months out from the great Nontraditional Mortgage Guidance Coming Out Party, and Fannie Bloody Mae is loosening its eligibility, underwriting, and pricing standards for interest-only mortgages. Temporary buydowns on IO. Read it and heave. I'm so disgusted I can't stand it. So much for everybody getting on the credit discipline bandwagon."
That's because IOs are performing extremely well. Expect Freddie to follow as well. The Agencies are going to back off sub prime which will probably embolden the non-agency buyers to raise yield requirements.
Look. Prior to 2001-2002 there simply were not anywhere near enough IO loans on anyone's book to make statistically significant observations about performance. The few IOs out there were private banking clients and held in bank portfolios. Private banking clients are much higher net-worth individuals than your average conforming loan borrower, FICO for FICO, and they by definition have a pot of money to invest (that's why they need a private banker). As recently as 2005, Moody's was basing its credit enhancement calculations on IO pools on a synthetic methodology because there was no history for this stuff.
There is now some history for the 2002-2006 vintage, at least on the non-agency prime RMBS side. I haven't seen any numbers, confidentially or publically, for agency IO performance. I remain convinced that heretofore GSE purchases of this product were moderate and conservative. My whole rant yesterday involved the point that Fannie seems to be moving toward the "non-agency" loan parameters, rather than the "non-agency" lenders moving to the Fannie parameters. So it seems to me that a comparison to non-agency IO performance is valid.
The most recent public information on prime non-agency IO performance I've seen is from Fitch: "Serious delinquencies for hybrid ARM IO loans . . . originated in 2005 and 2006 are approximately two to three times higher than the age-adjusted delinquency for the same products from the 2003-2004 vintages."
But of course delinquency in and of itself isn't really the issue, especially in a vintage that had its early seasoning in a high appreciation, low rate environment. The other "performance" issue that matters is loss severity, not just loss frequency. (We've been through this before.) In 2005 Moody's was estimating that IO loans had an expected loss severity 10%-20% greater than a comparable amortizing loan (holding collateral quality and borrower credit quality constant) because of the "amortization gap." I haven't seen more recent estimates from Moody's, but I will observe that it is no longer 2005 and I cannot see the "amortization gap" getting better for anyone. I should also point out that Moody's severity numbers are from the perspective of a bond holder most or all of whose losses on high LTV loans are absorbed by a mortgage insurer or second lien holder.
In any case, I'd like to see statistically significant historical data on IOs that tells me they're dandy performers without low-stress interest rate and economic circumstances, higher than historically normal home price appreciation, and basically unlimited refinance options for borrowers about to be in trouble with the reset/recast. Since those conditions, as far as I can see, are getting smaller in the rear-view mirror.
juan, thanks for the recipe, but I don't have a cold or the flu. (Not that I won't eat chicken soup anyway. It's one of the few things I'm allowed.) My problem is a white blood cell count of 2.5 (normal is 4.5-10) and a hypersensitivity to one of my chemo drugs that I just developed. So it's antibiotics, antihistamines, and corticosteroids for Tanta, who has once again been grounded. (I'm allowed out once a day for a walk, as long as I wear a surgical mask. Scares the hell out of the neighborhood dogs and children, though, so it's not all bad.) Just my cruddy luck to be put on Cipro on the day after Christmas, having spent the holiday feasting on chocolate and espresso.
This morning I'm drinking 3:1 decaf to caf and testing the placebo effect. I'm most assuredly not going to spend the next two weeks in bed--the absolute last thing I need is bedsores and reduced lung capacity. As soon as my neighbors wake up and go to work, I'll be cranking up the rock and roll. A little Steve Earle is what I need, I think. El Corazon. "Here I Am." At about 90 decibels.
Tanta,
My financial advisor, Mr. Ponzi, has so far garnered me 1.5% per month on my investments since October 2006 when I deposited my life's savings to his care. Are you saying we need more historical performance to gauge investment risk?
Poor Tanta - concentrate on your own health, because I don't think credit quality is going to improve in the near future. Everyone's trying to figure out how to back down this thing without precipitating a collapse, and there's no way to do that without writing new bad loans.
See, for example, this Mortgage Outpost thread:
598 Mid Score
Purchase-Full Doc
O/O SFR
Past Foreclosure - 07/2006
In DE
Need the highest LTV Possible- Will anyone do fico only program?
...
I know New Century will. I just did a purchase where the borrower's down payment came from money from their prior house after it was foreclosed on.
Yes, that's right. Having a foreclosure in the past year and a FICO below 600 is no barrier to getting a purchase money loan in this brave new world of funny money lending.
Everyone's trying to figure out how to back down this thing without precipitating a collapse, and there's no way to do that without writing new bad loans.
Mise couldn't have said it better himself.
As far as Producer's point that I/Os perform so well... I guess the next logical step is N/Ps... 'No Payment' loans. They would perform perfectly well - no one would ever miss a payment then.
But for marketing considerations maybe we call them 'Maximum Negative Amortization' Loans or 'MAXIs' for short.
I bet we could sell them like crazy, 'specially after Christmas.
I had a friend who thought I should give up on selling industrial components and instead switch over to 'intangibles' like software, business services or finacials... you need a very good imagination for that biz & that I have.
Not me, Tanta. I'm laughing too hard. MAXI PAD's are an idea which may sweep the market. I can envision various Congress Critters getting lyrical about MAXI PAD loans....
I'm here to thank MOM and Cal for reading broker sites so I don't have to. I don't mind recognizing my limits. I head over to Broker Universe every now and again and I always need to stop and shower . . .
Mama, did I ever tell you about the PMS ARM? You know, between drugs and creeping age I forget which of my anecdotes I've already used . . . most of them weren't funny enough for recycling . . .
MLN USA does nothing for me. Time to fire up the Google.
Putting +"Mortgage Lenders Network" +billions gave me a number of 4.4 billion of loans originated in 2005, couldn't get an '06 number. Mortgage forum said they told people their tradelines got pulled.
They had cut compensation to their people by 75% earlier in December. Some loans are still funding, but it sounds like the end is nigh. Mene, Mene, Tekel Upharsin.
They did Alt-A (very alt, by the sounds of some of them) and subprime. I'll be danged if I know the difference any more. I think I've got Post Mortgage Mania Syndrome.
Cal, according to some of the fine folks at Broker Outpost, you can get some amazing loans through DU! That makes the part about not requiring the I/Os to qualify that way even more, well, amazing. see this thread.
I think the subprime lenders closings will snowball, because as one subprime lender goes under, the bad loans get concentrated among fewer lenders, causing the buybacks to concentrate on fewer people. They will have no choice but to strengthen their underwriting, price risk appropriately, and increase loan reserves or they can just not change and go under.
But if they strengthen underwriting.. they will fund fewer loans and make less money, higher rates means less people can afford so fewer people can buy so less money, increased loan reserves (you guessed it) means they make less money.
It doesn't really seem like there is a way out for many of these guys.
It's confirmed. MLN USA (Mortgage Lenders Network) is officially no longer funding loans. Apparently loans in their rescission period might not even fund. Warehouse empty.
Cal, the pace of the closings is certainly picking up. But heck, when some of these 2006 MBS already have over 10% delinquency rates, what do we all expect?
People can write and talk about all the liquidity coming into the market, but many of the borrowers seeking these refis are on their second or third refi in the last five years, and with LTVs over or approaching 100%, there is a point at which lenders have to stop underwriting.
This is why the nationwide drop in housing values is so significant. It has shoved millions of borrowers under the critical CLTV mark, and it is precipitating a wave of defaults.
People who have no equity in their homes are very likely to default once their payments become a strain.
Any idea as to quality of the "seasonal adjustments"? My understanding is that year over year comparisons are more meaningful than sequential seasonally adjusted comparisons.
K Harris had a comment to this effect in a recent post...
Once again, this is being touted as good news. Look at the yield curve unwinding:
Bloomberg.com:
Government Bonds
My belief is that the price declines are the real news, since these endanger the US consumer and the lending industry, which have reallly been the foundation of the US economy in the past few years.
Plus now you have to add rapidly rising interest rates to the mix, and I think you see foreclosures rise even more rapidly and prices fall further, ultimately leading to an even greater amount of lender and consumer retrenchment.
Man, it was a trifecta of bullish news today, this with the Chicago PMI (52.4) and consumer confidence (109.
both above expectations.
I guess inventories will tell the story, and the big unknown there is the size of shadow inventories. How many existing homes are owned by investors who were hoping for a quick gain and are now waiting for a market recovery before putting the house on the market?
Add to that, the inventory of canceled and yet un-resold new homes.
The fastest growing is probably the foreclosed homes reverting to banks. I imagine it's still very small, but likely growing more than 100% yoy.
As ac pointed out, the real news may be the price drops and the "comps" now being made putting recent buyers in the red.
If prices dropped say 10% and sales increased in response, would the news still be higher volume?
When is price the headline vs volume?
Seems to me that as long as prices continue to drop and volume doesn't make a real dent in inventory, then the situation only gets worse not better.
The only thing perhaps saved by volume increases with price drops is the jobs of realtors and brokers.
Nice view of your thoughts Joe (I call em 'mulling it over', but thought you might take offence. I mean no harm and, if you need to know, feel you could be a kindred spirit. My condolences in advance.)
Ok, so it appears we share the same view of those precious realtors and brokers whose jobs seem to be insulated from any downturn so far.
What of this:
Total existing-home sales including single-family, townhomes, condominiums and co-ops rose 0.6 percent to a seasonally adjusted annual rate of 6.28 million units in November from a level of 6.24 million in October,
and then the declining red bar graphs in that first figure?
Do you stick with the picture or with the words? [See? this mullin' it over is not all that fun.]
Well the good news is the housing market isn't plunging like it could have given the sheer scale of over-valuation and over-building. The bad news is this is playing out exactly like you would expect a housing bust to play out - a prolonged period of slowly declining transaction volumes and prices. We are only starting the second year of this bust, and historically it takes 5 years to reach a nadir. Still, I expect the champagne will be flowing early again this year down at the NAR...
Seems to me that as long as prices continue to drop and volume doesn't make a real dent in inventory, then the situation only gets worse not better.
Ya but the Fed doesn't care if a few folks get crushed as long as the system thrives... and looking at these new data points & the shifting yield curve tells me NO RATE cuts this spring. They will conclude the system is fine and that the economy is pretty close to 'neutral'.
So besides waiting to see what happens with the Spring RE inventory rush... watch the dollar & the Forex.
If the dollar strengthens - the pressure on the Asian CBs to buy debt diminishes so they don't have to burn through their reserves as quickly... Pushing this whole process out a bunch more.
Settle in people - its gonna be a marathon, not a sprint... regardless of how the race ends up. That's my guess.
For what it's worth, here's my take on the numbers. I think the real story is that inventories for sale have skyrocketed 117% since the boom began in early 2001. They've come down 1% or so since then. And that's with the bias towards lower inventories/listings you get almost every fall/winter. I think the housing market is definitely in for more pain in 2007 simply because of the Everest-like size of the inventory overhang. Just my two cents, of course ...
My thoughts on these numbers ...
Like new home sales yesterday, existing home sales bounced in November. I expected this given the dip in mortgage rates weve seen lately. But are these numbers really all that good? Id argue no, when you look at the big picture. Consider ...
You see that seasonal pattern time and time again. It happened in the boom years of 2001 ... 2002 ... 2003 ... and 2004. Even in 2005, when the market had already started topping out, inventory levels stabilized late in the year, before surging again in early 2006. I expect supply to start rising again after the first of the year, and set a new cycle high by spring 2007.
There is simply no getting around a few basic facts:
1) While sales arent falling sharply anymore, theyre not improving much, either.
2) Supply is still at astronomically high levels and ...
3) Homes remain relatively unaffordable, despite the recent decline weve seen in mortgage rates and home prices.
I guess inventories will tell the story, and the big unknown there is the size of shadow inventories.
I think it will be foreclosures.
Having looked at some other downturns (e.g. what took place in California in the early 90s), it seems that increasing foreclosures are a sign of a deteriorating market and decreasing foreclosures are a sign that a bottom is near.
Right now (if sites like RealtyTrack and Foreclosure.com are accurate) foreclosures are rapidly increasing.
Superficially it makes sense - a foreclosures adds a home to the market, removes a participant from the market (partly by ruining their credit), and financially harms the lender (which could lead to fewer loans thus fewer sales).
If foreclosures were not increasing I might be less concerned about the future of the housing market given recent data. And those rising interest rates ain't gonna help.
Dryfly wrote:
"So besides waiting to see what happens with the Spring RE inventory rush.."
Mike (in FL) and Bob (in MA) have alluded to this as well, and my thought is that we won't have much longer to see where this goes. January isn't typically a robust month for listings, but I expect to see inventory momentum build right after 1/1 as a gusher of sellers try to jump the market's gun.
All, inventories will most likely fall this month (December) and maybe in January too. That is the typical seasonal pattern as homeowners take their homes off the market for the holidays.
It's common to see inventories drop around 10% in December. Here are some examples of recent inventory declines:
Nov-03\t2,530,000
Dec-03\t2,300,000
Jan-04\t2,200,000
Nov to Dec Decline: 9.1%
Nov-04\t2,480,000
Dec-04\t2,214,000
Jan-05\t2,147,000
Nov to Dec Decline: 10.7%
Of course this year inventories barely declined and actually rose in January:
Nov-05\t2,924,000
Dec-05\t2,846,000
Jan-06\t2,883,000
Nov to Dec Decline: 2.7%
Currently inventories are at 3.82 million. It will be interesting to see if inventories follow the normal pattern (and drop to 3.45 million or so), or stay high like in Dec 2005.
Best Wishes.
Currently inventories are at 3.82 million. It will be interesting to see if inventories follow the normal pattern (and drop to 3.45 million or so), or stay high like in Dec 2005.
These numbers cry out for a seasonal adjustment.
Much commotion has been made about declining inventories recently, especially farther north.
My suspicion is that these are illusory seasonal declines.
Anectodal story from the field.
Just talked to a realtor who sells houses for his son who is in charge of forclosures for Coldwell Banker in San Diego Area. He said that his son had almost 0 houses to sell a year ago. He now has over 100! He says that banks are in now hurry to deal yet. I have seen a rise in Bank Owned signs in the area and in my patrols check on them frequently. Not one has sold or even come down in price. Not sure what is up with that. The realtor said that Coldwell has been paying the families a lump sum to leave ASAP as soon as they forclose. They do this because it usually takes months to get deadbeats to leave and they tend to trash the place. They figure it's worth the money to get the house quick and try to sell in a dropping market. There were four other forclosures within 100 feet of where I was talking to this guy (he stopped me for directions). What is happening on the street is much different that what the numbers say. All the builders houses that have been empty this summer are STILL Empty. It's as if the builders don't care. This can't last.
and financially harms the lender (which could lead to fewer loans thus fewer sales)
With prices officially down 3.1% (the real drop including give aways is more like 10%-15%) the value of their collateral is shrinking fast. Lets see how many of them will go belly up reducing liquidity to the RE market.
The HB stocks are not happy (check the tape) with the yoy price drop either. From now on it is cut throat price competition between new and existing houses. Lets see who is going to drive whom into the ground.
Ok, so it appears we share the same view of those precious realtors and brokers whose jobs seem to be insulated from any downturn so far.
Not so fast. NSA sales are down in November yoy and from October of this year. These are the real sales (not seasonally adjusted) that RE complex collect their fees on. They are hurting big time. Would they spend $ 40 million if they werent?
As a microcosm of the bigger picture, here are the numbers of listings (all residential types) from the publicly available version of the MLS for Monmouth County NJ:
12-27-05 5,168
12-28-06 7,075 (+36.9% Y0Y, -9.7% from November)
11-27-06 7,843
This is Ocean County NJ with a caveat:
12-27-05\t4549
12-28-06\t5563*
11-27-06\t6012*
*Is because several towns seemed to drop entirely from the MLS between 11-13 and 11-14-06. In one day listings plunged by 1,200. I am reasonably sure that including the dropped towns would add at least 800 listings to the current inventory, but I do not have the hard data to back that up.
This just crossed my path:
http://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2006/0626.pdf
Here we are, three months out from the great Nontraditional Mortgage Guidance Coming Out Party, and Fannie Bloody Mae is loosening its eligibility, underwriting, and pricing standards for interest-only mortgages. Temporary buydowns on IO. Read it and heave. I'm so disgusted I can't stand it. So much for everybody getting on the credit discipline bandwagon.
With prices officially down 3.1%
Prices are down about 4.8% since Oct 2005 and 5.2% since Jul 2006. They're down 3.1% from one year ago.
the system is rigged as much as it can be tanta. you and others can rage against the machine all you want, this market isn't going to go out without a full blown assault to keep the party going. if the belief is this has been keeping the economy afloat the last 5 years, what makes anyone think those who profited from it will sit idly by while their supper is taken from them?
"Currently inventories are at 3.82 million. It will be interesting to see if inventories follow the normal pattern (and drop to 3.45 million or so), or stay high like in Dec 2005."
I don't think they will follow the pattern. The sellers who see writting on the wall/desperate flippers will try to get a head start on competition, and will begin listing/relisting in early January. The flipper I renovated townhouse for is going to list in the first week of January. Watch out for the stampede to the RE exits.
Btw. The stocks of the mortgage purveyors didn't like the 3.1% price drop either. They know the true value of the collateral backing their toxic garbage.
as I read it they have to qualify based on the term of the loan rather then the teaser rate or the lower ARM rate?
Yes, anonymous. That's the only thing they didn't loosen up on, undoubtedly because their depository customers are being told by the Feds not to do that any more. The very fact that they dropped the contract variance requirement--meaning, any dimwitted lender with a Fannie contract can deliver this stuff to them, you no longer have to negotiate a contract addendum (which could have volume and other limitations on it)--means they're planning to take as much of this crap as originators can come up with. I realize that Richard thinks I sound like Dorothy in Oz, but the fact remains that Fannie and Freddie showed at least some restraint on this crud during the boom years. Now that the bleedin Alt-A pools are starting to smell bad, all of a sudden the agencies (one assumes Freddie will follow suit) are offering to step in and be It. I get cranky about GSE credit standards just like I do about depositories, and for the same reason. Damn, I need some coffee.
i heard this same argument last year and it didn't happen. we'll see what happens this go-round.
Anonymous - yeah, I saw that last bullet too. I guess that means all those no doc loans will have to swear they can afford the fixed rate fully amortized loan. One has to ask: why are they getting an IO if they can really afford the fixed rate.
I'm beginning to think people are getting the IO in some unknown proportion because they are lying but the bulk because they believe they can invest the MEW and earn more off it than what they owe in accumulating interest. I don't actually believe all of these people are foolishly spending it all at Best Buy (although a subset surely are).
I'm guessing that there is a carry trade (MEW at low interest rate -> stocks at better price growth rates) going on by baby boomers who are just now trying to deal with their impending retirement the same way they've dealt with everything else...late and badly. I think most believe they will be able to service the MEW from the stock market over the long term, or that at least the will be able to exit first when it stops working. As home prices decline, I expect the MEW flow will dry up, and the stock market will stall. At that point, the loan servicing costs will eventually trigger a stock market correction as folks try to unwinding the no-longer-viable carry.
It's always the rush for the exits that
causes the problem.
"i heard this same argument last year and it didn't happen. we'll see what happens this go-round."
Remember, last year there was not bubble. Now everybody knows the drill. They can't wait to get out of the gate.
Rather watching, (exclusively) inventory, we should also focus on the demand side of the equation. The MBA mortgage applications will be our leading indicator of the buying power going forward.
I'm with AC - again this is being touted as good news. Prices dropped at the aggregate level, which probably boosted sales, right?
I think the real story lies in understanding local markets. Look at this story on Florida's resale market, for a good idea of what I'm getting at.
Sales in the Sunshine state are off 30 percent from last year, but that doesn't matter -- because the national numbers suggest a recovery is in the offing?
Can that line of reasoning really be?
Wow - According to that Doc you can get 40 year loans with a 10 year IO period at 95 LTV and 100% CLTV with only a minimum of $500 of the buyer's own funds, all insured through FM. Amazing.
I think I'll give up hope and start shopping this weekend...
Oh, and they talk about qualifying at the fully-amort. payment, but don't give the ratios they qualify at.
Most CA 1st-time buyers are at 40-50% gross now, how much higher can it possibly go?
">>The sellers who see writting on the wall/desperate flippers will try to get a head start on competition, and will begin listing/relisting in early January.
i heard this same argument last year and it didn't happen. we'll see what happens this go-round."
What do you mean, "it didn't happen"? Inventory went up last January, as opposed to the traditional trend of going down. Somebody was trying to get a head-start on the competition.
Yep
I was cursed to be born to survivors of the Great D. so I hate debt at some genetic level.
I will be further cursed to be visiting folks with those 50inch LCDs with ear splitting entertainment systems as they brag on the no interest no payments for 40 years refi that they renegotiated to replace their 40 year IO mortgage they were 2 years behind on.
Later, I will munch on the gourmet dinner at the 5 star restaurant bought with the lump sum payment they got when they did the refi.
"Wow - According to that Doc you can get 40 year loans with a 10 year IO period at 95 LTV and 100% CLTV with only a minimum of $500 of the buyer's own funds, all insured through FM."
Tanta, with this variety of loan, is the interest-only period long enough that that qualification will be based on the interest-only payment? Or is the length of the interest-only period irrelevant?
P.S. Maybe Pepsi? Mountain Dew?
Jolt?
Tanta, does this mean that the Federal govt is going to bail out the lenders using their proxies Freddie and Fannie to take on everyone's trash?
Read it and heave. I'm so disgusted I can't stand it. So much for everybody getting on the credit discipline bandwagon.
Liquidity anyone? Shaken or stirred?
As long as the system is flooded with money - they are going to find ways to pump it out into people's wallets.
Regulations & guidances mean as much to them as stumps and sand bars to the mighty flow of the Mississippi heading to the Gulf of Mexico.
One of the charter goals of F&F is to provide liquidity to the secondary mortgage market during times of distress, when those markets most need that liquidity. Cutting off the credit spigot during a downturn is a surefire way to ensure the market is crippled. This was the original reasoning behind the retained portfolios. When no one wanted to buy mortages on the secondary market, or even wanted to buy F&F securitized debt, F&F could hold the paper in their retained portfolios and issue debt. Debt that is assumed to be backed by the full faith and credit of the United States.
jb
"I was cursed to be born to survivors of the Great D. so I hate debt at some genetic level."
Yeah, me too. My father was just out of high school when the depression started. When he passed away, we found in his basement about 200 rolls of paper towels and toilet paper.
In the boom of stocks "dividend" was passe, old news. They saw Microsoft make people rich and wanted capital apprciation only.
It's the same right now in housing.
In the boom of housing people knew that whatever piddly contributions to the principal was nothing compared to the capital appreciation, which was tax free!. Better to spend all you can afford on the interest only and leverage a more expensive house..i.e. more capital appreciation. ...(besides, no tax deduction on the part of the payment that goes to principal...)
Paying off a house is not even a thought in their retirement plans unless it means selling their big McMansion and moving to Idaho on a lake to build their dream home with the profits.
There is a different mindset on what "owning a house" means now. It's more like leasing a car.
Now dividend stocks are "paying dividends" and are all the rage. The mindset has changed. Microsoft and Qualcomm pay dividends.
The same will eventually happen in housing when after several years of no appreciation, the old-school idea of building equity through payments on equity will return. House prices will wait for wages to catch up, or drop a little or a lot to help, but either way boomers and their kids will realize that their calculations for the 70% of income needed for retirement assumed no house payment.
Whether that happens sooner rather than later is anyone's guesss.
winjr, I just walked down to the local CVS and got some Dr. Pepper, on the undoubtedly misguided idea that it won't interact with the drugs as much as coffee does. I'll probably get spastic plus a bad case of the burps. But since the alternative is going to bed before sundown . . .
The length of the IO period doesn't matter to the qualifying payment: Fannie is insisting that everybody get qualified at the amortizing payment. (And yes, you have to be strict about ratios for that to mean diddlysquat, and the part about letting lenders do non-automated underwriting is not promising news in this respect. Lenders are always good at coming up with "compensating factors" for ridiculous DTIs.) The issue with the length of the IO period is really how it coincides or doesn't with the first rate adjustment. Fannie will take a 3/1 ARM, for instance, that has a 3-year IO period or a 10-year IO period. The problem with the 3-year IO period is that the borrower gets hit with a rate adjustment, amortizing payments, and payments calculated over a 27-year term instead of a 30-year term, all on the same really bad day. Add it up and it's nasty payment shock. On the other hand, the 10-year IO period presents the equity problem. Given the general state of the existing home markets in a lot of areas, a lot of these borrowers will be lucky to see prices come back to where they started from in three years.
Number2son, I honestly don't think they're really worried about taking everyone's trash. They're really worried about taking CFC's and WF's and WAMU's trash. Gotta keep the "partners" happy.
The big question is whether the MI companies are going to go along with this in a big way or not. I mean, you can say you'll buy a 95% loan all day long, but if the MIs don't write the policies, it doesn't happen in fact. I'm sure the MIs told Fannie they'd play nice, but I'm not yet convinced they're going to play as nice as CFC et al. would like them to.
As I read it, the powers that be are going to keep the liquidity flowing as long as they are able to. Nevermind what happens when it all comes crashing down. They can keep the party going for years.
So, what does happen when it eventually comes down?
And how to invest in the meantime? Go along with the party? Run to another country where they practice financial discipline? (And where might that be?) Hide and put your money in a mattress? Anyone?
Anyone?
I'd guess you do all of the above - go along with the party some but have some stashed in the mattress too.
In short play the game but be damned sure you take some of the winnings off the table each round & once off the table it stays off the table - don't 'reinvest' to 'double down'.
If your game pile goes to zero take that as a hint to leave (winnings in pocket) and find a different game with better odds. Until then ante up.
Tanta
All caffine is off for you. If googles are still correct.
That includes colas and chocolate.
maybe Ritalin or amphetamine, hopefully legal-claim attention deficit.
Well, vader, turns out you're right. Dr. Pepper is not a good idea. I feel like a '72 Corolla into which some fool installed an alcohol-and-nitro-fueled Dodge Hemi. Fun for about 10 minutes, then the wheels fall off.
Fortunately, it's time for my fog-inducing antihistamines, so I guess I'm going to be climbing into my jammies and crawling into bed. At least it's dark outside by now.
It's going to be a long two weeks.
It's going to be a long two weeks.
Nah, not if you are sleeping all the time. It'll go really fast.
question:
I understand the difference between NSA and SA in terms of definition. My question is what are the adjustments factored in for housing and who dictates what these adjustments are? I'm guessing these adjustments have to be regional, is this right?
http://www.ofheo.gov/media/pdf/PRGuidance121306.pdf
This is the OFHEO letter to Freddie and Fannie regarding non-traditional mortgage practices which seems to run counter to the e-mail that Tanta received.
I'm not exactly sure on that dryfly. My own forays with illness and hospital stays has taught me that sleeping all the time can paradoxically feel like an eternity. Particularly if you're always waking up feeling godawful-miserable. That and there's only so many ways one can sit on a bed before your butt starts going numb.
Best of luck Tanta, I don't envy you the experience. May it be successful and brief.
Good dreams of everything pleasant, Tanta.
"Here we are, three months out from the great Nontraditional Mortgage Guidance Coming Out Party, and Fannie Bloody Mae is loosening its eligibility, underwriting, and pricing standards for interest-only mortgages. Temporary buydowns on IO. Read it and heave. I'm so disgusted I can't stand it. So much for everybody getting on the credit discipline bandwagon."
That's because IOs are performing extremely well. Expect Freddie to follow as well. The Agencies are going to back off sub prime which will probably embolden the non-agency buyers to raise yield requirements.
It will be an Alt A year in 2007.
tanta,
sounds as though you need real homemade chicken soup but with addition of fresh lime juice and 3-4 tablespoons of salsa picante.
no guarantee but works well for either cold or flu.
"Debt that is assumed to be backed by the full faith and credit of the United States."
Actually Fannie and Freddie bonds are not backed by the full faith and credit of the US government...only Ginnie Maes are...
producer, you crack me up.
That's because IOs are performing extremely well.
Look. Prior to 2001-2002 there simply were not anywhere near enough IO loans on anyone's book to make statistically significant observations about performance. The few IOs out there were private banking clients and held in bank portfolios. Private banking clients are much higher net-worth individuals than your average conforming loan borrower, FICO for FICO, and they by definition have a pot of money to invest (that's why they need a private banker). As recently as 2005, Moody's was basing its credit enhancement calculations on IO pools on a synthetic methodology because there was no history for this stuff.
There is now some history for the 2002-2006 vintage, at least on the non-agency prime RMBS side. I haven't seen any numbers, confidentially or publically, for agency IO performance. I remain convinced that heretofore GSE purchases of this product were moderate and conservative. My whole rant yesterday involved the point that Fannie seems to be moving toward the "non-agency" loan parameters, rather than the "non-agency" lenders moving to the Fannie parameters. So it seems to me that a comparison to non-agency IO performance is valid.
The most recent public information on prime non-agency IO performance I've seen is from Fitch: "Serious delinquencies for hybrid ARM IO loans . . . originated in 2005 and 2006 are approximately two to three times higher than the age-adjusted delinquency for the same products from the 2003-2004 vintages."
But of course delinquency in and of itself isn't really the issue, especially in a vintage that had its early seasoning in a high appreciation, low rate environment. The other "performance" issue that matters is loss severity, not just loss frequency. (We've been through this before.) In 2005 Moody's was estimating that IO loans had an expected loss severity 10%-20% greater than a comparable amortizing loan (holding collateral quality and borrower credit quality constant) because of the "amortization gap." I haven't seen more recent estimates from Moody's, but I will observe that it is no longer 2005 and I cannot see the "amortization gap" getting better for anyone. I should also point out that Moody's severity numbers are from the perspective of a bond holder most or all of whose losses on high LTV loans are absorbed by a mortgage insurer or second lien holder.
In any case, I'd like to see statistically significant historical data on IOs that tells me they're dandy performers without low-stress interest rate and economic circumstances, higher than historically normal home price appreciation, and basically unlimited refinance options for borrowers about to be in trouble with the reset/recast. Since those conditions, as far as I can see, are getting smaller in the rear-view mirror.
Here's the Moody's link, but you do have to register to read it.
AG/BB is in favor of wanting the party to continue.
reel up the : 'the job of the fed chair is to take away the punch bowl when the party really gets started.'
AG says: "hurry, hurry, get your ARM! Get your ARMs before the rates ... on your FRMs...continue to decline..."
the troubling part is alan greenspan has left and taken the 'real' punchbowl along with him on his travels.
juan, thanks for the recipe, but I don't have a cold or the flu. (Not that I won't eat chicken soup anyway. It's one of the few things I'm allowed.) My problem is a white blood cell count of 2.5 (normal is 4.5-10) and a hypersensitivity to one of my chemo drugs that I just developed. So it's antibiotics, antihistamines, and corticosteroids for Tanta, who has once again been grounded. (I'm allowed out once a day for a walk, as long as I wear a surgical mask. Scares the hell out of the neighborhood dogs and children, though, so it's not all bad.) Just my cruddy luck to be put on Cipro on the day after Christmas, having spent the holiday feasting on chocolate and espresso.
This morning I'm drinking 3:1 decaf to caf and testing the placebo effect. I'm most assuredly not going to spend the next two weeks in bed--the absolute last thing I need is bedsores and reduced lung capacity. As soon as my neighbors wake up and go to work, I'll be cranking up the rock and roll. A little Steve Earle is what I need, I think. El Corazon. "Here I Am." At about 90 decibels.
My question is: where do 'they' put the punch bowl when the take it away? and what is in it in the first place?
Jim rodgers said oklahoma and iowa-type states would weather a USA/US$ downturn because ... apparently oil/nat gas in okla and corn in iowa.
they are paying stock options and the big bonus in okc and tulsa if u got any 'mining' experience.
Uh oh producer, you woke up Tanta.
=(
Meanwhile, over in Japan, where they had great fun making >100% LTV loans in the late 80s (because real estate could never go down) ...
a summary from circa 2003?
and mortgage rates today
Tanta,
My financial advisor, Mr. Ponzi, has so far garnered me 1.5% per month on my investments since October 2006 when I deposited my life's savings to his care. Are you saying we need more historical performance to gauge investment risk?
Poor Tanta - concentrate on your own health, because I don't think credit quality is going to improve in the near future. Everyone's trying to figure out how to back down this thing without precipitating a collapse, and there's no way to do that without writing new bad loans.
See, for example, this Mortgage Outpost thread:
598 Mid Score
Purchase-Full Doc
O/O SFR
Past Foreclosure - 07/2006
In DE
Need the highest LTV Possible- Will anyone do fico only program?
...
I know New Century will. I just did a purchase where the borrower's down payment came from money from their prior house after it was foreclosed on.
Yes, that's right. Having a foreclosure in the past year and a FICO below 600 is no barrier to getting a purchase money loan in this brave new world of funny money lending.
Wishing you well, Tanta.
P.S. - I like your taste in music.
I know New Century will.
NEW making 52-wk. lows as I type this. No reason for concern, I'm sure. ;>)
BTW, Mama, your "mortgage outpost" link appears to be disfunctional.
MOM
My current swag idea is that there is a 2 tier money system.
90% who desperatly need $s to survive and 10% $s are akin to trash that has to be moved regardless.
Thanks, let me try that again. Broker Outpost thread
It's good to see Tanta up early, firing with both barrels.
Everyone's trying to figure out how to back down this thing without precipitating a collapse, and there's no way to do that without writing new bad loans.
Mise couldn't have said it better himself.
As far as Producer's point that I/Os perform so well... I guess the next logical step is N/Ps... 'No Payment' loans. They would perform perfectly well - no one would ever miss a payment then.
But for marketing considerations maybe we call them 'Maximum Negative Amortization' Loans or 'MAXIs' for short.
I bet we could sell them like crazy, 'specially after Christmas.
I had a friend who thought I should give up on selling industrial components and instead switch over to 'intangibles' like software, business services or finacials... you need a very good imagination for that biz & that I have.
Have a Happy New Year all.
Planned Amortization Debt. Just an idea to go with the MAXIs.
Now we're all sorry I got up, aren't we?
Not me, Tanta. I'm laughing too hard. MAXI PAD's are an idea which may sweep the market. I can envision various Congress Critters getting lyrical about MAXI PAD loans....
I hope the docs still allow you to laugh!
"Fannie Tightening Underwriting Standards
Fannie Mae has announced that, effective Jan. 30, borrowers must be qualified at "a fully-indexed rate that assumes a fully-amortizing repayment schedule" in order to qualify a loan for purchase by the government-sponsored enterprise."
National Mortgage News - mortgage industry news | mortgage information | commercial real estate
It is funny how National Mortgage News is reporting this as a tightening of standard and Tanta showing how it isn't..
Mortgage broker forum has just said MLN USA has stopped funding loans..
I'm here to thank MOM and Cal for reading broker sites so I don't have to. I don't mind recognizing my limits. I head over to Broker Universe every now and again and I always need to stop and shower . . .
Mama, did I ever tell you about the PMS ARM? You know, between drugs and creeping age I forget which of my anecdotes I've already used . . . most of them weren't funny enough for recycling . . .
MLN USA does nothing for me. Time to fire up the Google.
Putting +"Mortgage Lenders Network" +billions gave me a number of 4.4 billion of loans originated in 2005, couldn't get an '06 number. Mortgage forum said they told people their tradelines got pulled.
http://www.mlnusa.com
They had cut compensation to their people by 75% earlier in December. Some loans are still funding, but it sounds like the end is nigh. Mene, Mene, Tekel Upharsin.
They did Alt-A (very alt, by the sounds of some of them) and subprime. I'll be danged if I know the difference any more. I think I've got Post Mortgage Mania Syndrome.
Cal, according to some of the fine folks at Broker Outpost, you can get some amazing loans through DU! That makes the part about not requiring the I/Os to qualify that way even more, well, amazing. see this thread.
I think the subprime lenders closings will snowball, because as one subprime lender goes under, the bad loans get concentrated among fewer lenders, causing the buybacks to concentrate on fewer people. They will have no choice but to strengthen their underwriting, price risk appropriately, and increase loan reserves or they can just not change and go under.
But if they strengthen underwriting.. they will fund fewer loans and make less money, higher rates means less people can afford so fewer people can buy so less money, increased loan reserves (you guessed it) means they make less money.
It doesn't really seem like there is a way out for many of these guys.
It's confirmed. MLN USA (Mortgage Lenders Network) is officially no longer funding loans. Apparently loans in their rescission period might not even fund. Warehouse empty.
Cal, the pace of the closings is certainly picking up. But heck, when some of these 2006 MBS already have over 10% delinquency rates, what do we all expect?
People can write and talk about all the liquidity coming into the market, but many of the borrowers seeking these refis are on their second or third refi in the last five years, and with LTVs over or approaching 100%, there is a point at which lenders have to stop underwriting.
This is why the nationwide drop in housing values is so significant. It has shoved millions of borrowers under the critical CLTV mark, and it is precipitating a wave of defaults.
People who have no equity in their homes are very likely to default once their payments become a strain.