RIP Philo

Houses in the States.

http://articles.moneycentral.msn.com/banking/homefinancing/homefinancing.aspx


From the article:
>
Getting a home loan just got harder

As some lenders collapse under the weight of bad mortgages, others are getting pickier. Now you have to have a real down payment -- and actually be able to afford the house.
<

Oh no, you have to be able to afford the house? This is pickier? This may explain the fact that the lenders are collapsing.
Permalink Send private email O Canader 
March 23rd, 2007 1:20pm
You certainly are clever.  It is easy to laugh and point after the crash is well documented in the paper.  Where are your dotcom millions?
Permalink z-z-zed 
March 23rd, 2007 1:22pm
There was obviously a real-estate bubble in the states, and it was obviously ripe for bursting.  Just too many people getting interest-only mortgages w/ no down payment and bizarre ARM terms...

There's a bubble here, too, (Vancouver), but it's less clear if it's going to burst.
Permalink Send private email Ward 
March 23rd, 2007 1:24pm
I'm beginning to worry about whether my FHA insured mortgage can get called in.
Permalink Send private email muppet 
March 23rd, 2007 1:25pm
Which I'm sure is detailed somewhere in the 47 pages of disclosures.
Permalink Send private email muppet 
March 23rd, 2007 1:27pm
"There was obviously...it was obviously ripe"

"There's a bubble here, too, (Vancouver), but it's less clear if it's going to burst."

Note the tense.  Was it obviously a bubble that was obivously ripe? Or does it just seem like that now?  What's ripe? Should I sell my beach house?  Buy it back next year? in five years?

It has been said that bubbles burst, perhaps definitionally.

Is there a bubble in oil right now or are current prices driven by fundamentals of supply & demand?  Where prices obviously too low three years ago and ripe for an increase?
Permalink z-z-zed 
March 23rd, 2007 1:31pm
>>> Note the tense.  Was it obviously a bubble that was obivously ripe?

Ok, well, I fell into the trap that I always pointed out when anyone else started talking about "the bubble:" there is no single bubble since there's too much regional variation in housing markets.

That said, there were some commonalities in many parts of the US and it was obvious that those bubbles were obviously ripe - when a large number of buyers are buying on spec and relying on prices going up to make money, that's obviously not sustainable - it's a standard pyramid scheme.

>>> Or does it just seem like that now?  What's ripe? Should I sell my beach house?  Buy it back next year? in five years?

I have no fucking idea... it depends on where you are.  If you have a beach house here in Vancouver I can tell you to hold on to it, it's gonna keep going up.  If the bubble here bursts, it might fall for a while, but it'll recover.
Permalink Send private email Ward 
March 23rd, 2007 1:38pm
It's too bad, right now, I cannot afford a home in Vancouver.
Permalink Send private email Wayne 
March 23rd, 2007 1:41pm
Yes, but then again, Canada hasn't been deficit spending over a trillion dollars (american) in the last 6 years.

So the Canadian dollar is probably more secure at this point.  Meaning Canadian housing values are also more secure.
Permalink SaveTheHubble 
March 23rd, 2007 1:41pm
Sure you can, lots of nice little apartments in Mount Pleasant...

You _are_ additcted to crack, aren't you?
Permalink Send private email Ward 
March 23rd, 2007 1:42pm
>> I'm beginning to worry about whether my FHA insured mortgage can get called in. <<

As long as you're making the payments, they aren't going to do anything.  You're good.

Even if you're occasionally late, aside from screwing your credit history, as long as you make it up, they won't foreclose.
Permalink xampl 
March 23rd, 2007 1:48pm
>>It's too bad, right now, I cannot afford a home in Vancouver.

and that's why the bubble won't burst there.  all the homes are owned by people rich enough to handle dips in property value.
Permalink Send private email Kenny 
March 23rd, 2007 1:48pm
Yup.  Unfortunately, it's forcing the "real" people out.
Permalink Send private email Wayne 
March 23rd, 2007 2:00pm
There are a lot of problems that individually would be "not a big deal," but adding up at the same time, they're going to make a huge mess. Some people like to use "perfect storm" to describe the problems piling on each other.

One of the phrases you'll hear are NINJA. No Income, No Job or Assets. Which will be from someone falsely filling out mortgage applications. Another is "first payment default" where the person "buying" the house never makes the first payment. If you're tracking these things, look for filings of "notice of default" 6 months after the house was nominally sold.

There are several states where more than 50% of the mortgages are ARMs and in particular Option ARMs. CA and GA come to mind. One of the nasties involved is that the payments for the first 2 years of many Option ARMs is below the interest that is acruing, so the amount owed is going up each month. Then, when the balance hits 110%  or 115% of the original balance, the loan ratchets up into an amortizing loan. For many people that ratchet doubles or triples their monthly payment.
Permalink Peter 
March 23rd, 2007 3:54pm
"It is easy to laugh and point after..."

Well, I cashed in on the dot-com hysteria in early 2000. That accounts for the $1.2M nest egg I have.

The housing thing was also trivially easy to see, and I warned many friends who bought homes in the last few years to stay away from those ballooning interest deals. They did, and now they thank me.

Nothing unusual about not being stupid, or being able to see the obvious.
Permalink Regular Poster 
March 23rd, 2007 4:02pm
LOL.  Nothing unusual about posting BS on the web.
Permalink z-z-zed 
March 23rd, 2007 4:04pm
Companies expected a fair proportion of sub-prime loans to default. The idea was that the extra-high interest would compensate (same with credit card interest). Now with sub-prime default rates in the States hitting 30% its doubtful the lenders are still going to break even (with 15% default rate they well might have made a nice profit).
Permalink Send private email Stephen Jones 
March 23rd, 2007 5:46pm
>  hitting 30%

BS.

http://www.politicalgateway.com/news/read/64980

The delinquency rate for loans made by subprime lender NovaStar Financial of Kansas City, Mo., jumped to 7 percent in 2006 from 2 percent in 2005, the company said.
Permalink Get a checkie or stop BSing 
March 23rd, 2007 6:32pm
Some of the blogs and sites that point with glee to the impending financial wreck are puzzled that the finance industry is writing off huge amounts on loans, including the ones which were grossly over priced. I too am puzzled that when properties end up at auction, and the finance companies lose $100k+ on a property, that they're writing it off and not chasing after the debtor. I went through hell back in the 80s to get an S&L to forgive about $10k on a house I owned, so watching folks walk away from 10x-25x the amount I had to walk away from, with less hassle, doesn't make me happy. Back then I had to put 20% down, and these days folks put far less down.

Huge amounts of foreclosures and auctions with banks/finance companies losing tens to hundreds of thousands of dollars on transactions. And they aren't screaming. Why? I can't come up with an answer that doesn't sound like I should be wearing a tinfoil hat.

One of the significant frauds involves willing appraisers who puff up the price of the purchases. Sometimes by 25 or 40%. The purchaser then claims that they're going to do "rennovations" or "improvements" so they end up with a check at closing (even though that check is made out to the remodellers, the, and then never make a payment. There have been a couple criminal convictions in this area here in CO last year, and I suspect there will be a lot more down the road. One of the perps was already behind bars again while he "bought" a couple million dollars of properties. Expect state licensing for appraisers, as most states have none.

One fraud/scam appears to be sham sales by construction companies. They'll find one brownoser at the office, usually an immigrant who doesn't fully understand what's going on, to sign blank forms. The forms get filled in and recorded as sales, so that the construction company can book higher sales, get better financing. I think the companies are betting that they can sell the properties for real before the carrying costs eat them up. Sometimes they can't and the dupe ends up in court.

Another fraud scheme involves "selling" properties to friends/subordinates at inflated prices, then taking out home equity loans on the properties and then letting the properties go into default. These sort of fell in the cracks during the pump and dump frenzy of the last couple years.

Another scam/fraud I don't fully understand appears to involve shady realtors who claim X is a good rental property. They fool the gullible "investor" into purchasing the property at an inflated price, get part of the sales commission, get a kickback from the purchaser to handle escrow of rent or something and then let the purchaser dangle on a line to try to make payments. It is rare for a house that is rented to end up in default/foreclosure, but lately there have been a lot of rented houses going to auction with tenants who have cancelled checks for rent. Those make interesting sob stories in the newspapers.

The libertarian circus is trying to pitch the collapse of the subprime lending industry as some sort of racist event: "you don't want brown people to own a home!" or some such drivel. Many of the subprime products are as jammed full of fees, charges and hidden headachs as the cash advance predators that also cruise this market.

I think there are going to be some interesting opportunities for forensic accountants in the next couple years.
Permalink Peter 
March 23rd, 2007 6:59pm
Weighted average for Q4 2006 was 14.44%
http://www.finfacts.com/irelandbusinessnews/publish/article_10009416.shtml

The thirty per cent figure was for one particular area, or lender. The figure had stuck in my head. It is also the estimate of the proportion of all loans that will default.
Permalink Send private email Stephen Jones 
March 23rd, 2007 7:22pm
From that link "Default rates for subprime adjustable rate mortgages reached 14.44%" 

From your email "(with 15% default rate they well might have made a nice profit)."

Hmm. 

From your email: "The thirty per cent figure was for one particular area, or lender. The figure had stuck in my head."

No. It's just a number you made up.  You read a few headlines on this. Maybe an article.  You thought your email would sound better with a number in it so you made one up.

You, Stephen Jones, are full of shit.  Go tamper with a scale.
Permalink BSer 
March 23rd, 2007 7:30pm
Dear BSer,

your handle sums you up. I note you give a figure half the actual one. The point I am making still stands; that subprime and sub-subprime lenders expect a certain proportion of loans to default. Whether they make a profit or loss depends on what proportion do that.
Permalink Send private email Stephen Jones 
March 23rd, 2007 8:03pm
Yes, you made the very obvious point that some portion of loans are going to default.  A point so obvious that you felt the need to dress it up with a couple of made up numbers.

I note that I included a link and company with my number.  Making it quite actual. I also note that your original email refers to "sub-prime loans."  Your follow up email takes the 14% for subprime *adjustable rate mortgages*.  The same paragraph contains the correct number for all subprime loans which is 13%.  Are you stupid?  A liar? A stupid liar? 

Your posting name should be arrogant angry man who says obvious and stupid things.  Perhaps you can ask Wayne to update fruitshow to fit all that in the name box, you fucking cunt.
Permalink BSer 
March 23rd, 2007 8:15pm
-----"Your posting name should be arrogant angry man who says obvious and stupid things.  Perhaps you can ask Wayne to update fruitshow to fit all that in the name box, you fucking cunt."----

Taken up transcendental meditation I see.
Permalink Send private email Stephen Jones 
March 23rd, 2007 8:41pm

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