patrick.net

"Yellen Still Needs A Course In Residential Lending
Yellen
PROFILE PIC

Fed chairwomen JanetYellen spoke today and as always she is so predictable.

Yellen: “Credit availability remains quite constrained for mortgages.” Those without pristine credit ratings find it quite difficult

Yellen: “housing “remains quite affordable”"

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No Logan, you and Call Crazy need a "course in residential lending" at the national level.
You may have access to some good loan programs, but the Feds have access to the millions of loans that did fund, and the millions that should have funded.
Home builders also reflect the same sentiment. Let me me give you a guarantee.....Housing recovery will be in direct proportion to the ease of getting loans.
Dear Janet Yellen,
Quit complaining about mortgage availability being constrained, do something about it. Set sensible standards, dammit.

Strategist says

No Logan, you and Call Crazy need a "course in residential lending" at the national level.

Actually Not only have I been doing this for 16 years now, family for 28 years. We have to by law know all the core standards.

Mind, almost everyone who says

It's lending standards that are too tight because housing is affordabilty

A. Never worked in finance in their life
B. Never worked on a loan in their life
C. Zero long term financial history in the field of lending
D. Simply don't believe in math, facts and data

As always sentence structure, speech patterns, very predictable... lack of experience in working in finance shows up in every word or lie they say.

Housing softness is all about incomes and assets, not tight lending

Logan Mohtashami says

Housing softness is all about incomes and assets, not tight lending

I don't know anyone who has complained about tight lending. For all of my friends that have not bought a house, it's an affordability issue and worry that they will lose money at these prices.

tr6 says

I don't know anyone who has complained about tight lending. For all of my friends that have not bought a house, it's an affordability issue and worry that they will lose money at these prices.

1. Mark Zandi

http://loganmohtashami.com/2014/01/27/mark-zandi-its-the-economy-stupid/

2. Yun NAR ... I can't post 1,000,000 articles as he complains about the tight lending each month

3. Laurie Goodman Head of the Urban Inst. ( Main person I am refuting now)

http://www.urban.org/research/publication/impact-tight-credit-standards-2009-13-lending

4. Harvard... which actually has the worst thesis of them all

http://www.jchs.harvard.edu/millennials-key-stronger-housing-recovery

Just a few

The lending argument is silly. I have awesome credit and can qualify on family income(low $100k'ish) to about $450k although that would make me house poor.

That's ignoring that the cheapest houses in the city I live in go at $550k plus and those wouldn't be of adequate size for my family.

I'll keep renting at under $1700/mo. Maybe once the kid doesn't need public schools well buy in the town next to us. Nice enough area, but crap schools. A 2000 sq ft 3/2 goes for $450k there.

The only way loose lending could "help" me is to allow those loans from 2001-2007 where I pay interest only for the first five years...and that just ended oh so well.

dodgerfanjohn says

The only way loose lending could "help" me is to allow those loans from 2001-2007 where I pay interest only for the first five years

Banned by CFPB.... lenders can do them if they want to but they have no legal protection if the loans go bust and they get sued

Logan Mohtashami says

Strategist says

No Logan, you and Call Crazy need a "course in residential lending" at the national level.

Actually Not only have I been doing this for 16 years now, family for 28 years. We have to by law know all the core standards.

Mind, almost everyone who says

It's lending standards that are too tight because housing is affordabilty

A. Never worked in finance in their life

B. Never worked on a loan in their life

C. Zero long term financial history in the field of lending

D. Simply don't believe in math, facts and data

A. They don't have to.
B. They don't have to.
C. They don't have to.
All they have to do is try and borrow.

Hi strat.

These are the people I know who bought homes in LA area in the past 3 years:

Couple with one child, household income $185k, paid $565k

Couple with no children. Household income $170k. Paid $450k

Single making $137k. Bought at $435k

Single making $115k. Already owned a condo she bought in 2000 at $130k and presumably sold in high $200's to low $300's

The first three...I'd wager they all make considerably more than their neighbors, most of whom have been living there 15+ years.

Point being is the loans aren't the difficulty. Prices and incomes are too far apart. When you have to make well into the 100k's to be able to purchase in very middle class areas....that's the issue, not the loans

Strategist says

A. They don't have to.

B. They don't have to.

C. They don't have to.

All they have to do is try and borrow.

That is a perfect answer!

Janet's response to my charts as well

dodgerfanjohn says

Hi strat.

These are the people I know who bought homes in LA area in the past 3 years:

Couple with one child, household income $185k, paid $565k

Couple with no children. Household income $170k. Paid $450k

Single making $137k. Bought at $435k

Single making $115k. Already owned a condo she bought in 2000 at $130k and presumably sold in high $200's to low $300's

The first three...I'd wager they all make considerably more than their neighbors, most of whom have been living there 15+ years.

Point being is the loans aren't the difficulty. Prices and incomes are too far apart. When you have to make well into the 100k's to be able to purchase in very middle class areas....that's the issue, not the loans

I'm sure they qualified, but the standards should be based on the ability and willingness to pay back the loan, not necessarily the income.
A 50% loan to value - 800+ FICO - debt free - multiple assets, who cannot prove income, is a far better risk, than someone with a good job who can get laid off.
The lower risk does not qualify, but the higher risk does. The lending standards have gone from stupid in 2005, to stupid as hell in 2015. :(

Strategist says

A 50% loan to value - 800+ FICO - debt free - multiple assets, who cannot prove income,

This isn't an American typical buyer... this isn't the buyer that is holding the housing market back...

What I call cherry picking a single out person loan profile to make a thesis that this buyer is holding the housing market from going back to traditional mortgage sales
I have called out Zillow, Truila, Wall Street Journal, John Burns Real Estate, and others on this tactic

sbh says

Here's a tip, Logan, if you wish to remain a dispassionate reporter of markets and economics and to retain your reputation as a professional, don't give in to the temptation to act like Call It Crazy. Imagine this post finding its way onto the media that actually matters to you. We welcome your analysis and opinion, thank you. But it's truly better for you as a non-anonymous contributor if you don't come to resemble any member of the forum.

Don't listen to him Logan. SBH is so mean, he stopped talking to me. All I did was tell hem the world was round. :(

sbh says

Imagine this post finding its way onto the media that actually matters to you

Everything I write I hope to God everyone reads, there isn't a single post I have ever made that I don't want the entire world to read

That is the only way to tell truth

Math, Facts and Data Matter.... hence why I post a ton of charts and data and have over 70K of economic charts stored in my system.

Numbers... don't lie...

#causation
#correlation
#representation

That model is a

limf(x) =sky
x-a

No perma bear or perma bull here... it's just numbers. Finding out why something is happening.

This is a headline sensationalism world we live, nobody takes their time to read data and find out why something is happening.

Everything I post here, facebook, twitter, linked-en etc etc

I can't hide behind a fake name... because of that... I have to always show discipline in every post, that right there is the separation

Logan Mohtashami says

Strategist says

A 50% loan to value - 800+ FICO - debt free - multiple assets, who cannot prove income,

This isn't an American typical buyer... this isn't the buyer that is holding the housing market back...

What I call cherry picking a single out person loan profile to make a thesis that this buyer is holding the housing market from going back to traditional mortgage sales

I have called out Zillow, Truila, Wall Street Journal, John Burns Real Estate, and others on this tactic

All those self employed people, the backbone of American small business need Stated Income Loans.
Sub Prime borrowers with equity also deserve loans.

Strategist says

All I did was tell hem the world was round. :(

Speaking of which if you want to read some really nerdy stuff

https://medium.com/starts-with-a-bang/ask-ethan-87-the-shape-of-the-universe-bce004916a33

Strategist says

All those self employed people, the backbone of American small business need Stated Income Loans.

A lot self employed buyers needed that 1.25% teaser rate to get through the cyclical nature of there business
plus, self employed Americans are only like 9.3 million and a lot of them have homes and we aren't creating a fast booming small business cycle

2 year tax return
YTP P&L
2 months bank statement

Keep the DTI under 50% you can get a loan

Logan Mohtashami says

Speaking of which if you want to read some really nerdy stuff

Thanks Logan, now you really got me confused.

Strategist says

Thanks Logan, now you really got me confused.

Read that article, I know you will enjoy it.

Logan Mohtashami says

Strategist says

Thanks Logan, now you really got me confused.

Read that article, I know you will enjoy it.

I did. :)

Logan Mohtashami says

Strategist says

A 50% loan to value - 800+ FICO - debt free - multiple assets, who cannot prove income,

This isn't an American typical buyer... this isn't the buyer that is holding the housing market back...

What I call cherry picking a single out person loan profile to make a thesis that this buyer is holding the housing market from going back to traditional mortgage sales

I have called out Zillow, Truila, Wall Street Journal, John Burns Real Estate, and others on this tactic

OK...Here is a real example to make my point.
President Obama is losing his job in 18 months. There is no guarantee of his future income. As per the rules of FNMA, The Most Powerful Man On Earth Does Not Qualify For A Simple Loan.
Now do you see how screwed up we are?

Strategist says

Now do you see how screwed up we are?

President Obama will be fine

Average Net Worth: $3,799,007*

Minimum Net Worth: $953,015
Maximum Net Worth: $6,644,999

Average 2013 Income: $626,205**

Min. Gross Income: $520,409
Max. Gross Income: $732,000

Name: Barack Obama
Last Filing: May 14th, 2014

Title: President
Salary: $400,000

Assets

US Treasury Notes (J) $1,000,001 - $5,000,000

US Treasury Bills - SEP/IRA $250,001 - $500,000

Northern Trust Checking Account (J) $100,001 - $250,000

Vanguard 500 Index Fund (Retirement) $100,001 - $250,000

Vanguard 500 Index Fund (Retirement) (S) $100,001 - $250,000

Vanguard 500 Index Fund (Retirement) (S) $100,001 - $250,000

Bright Directions College Savings 529 Plan (DC) (PIMCO Total Return 529 Portfolio PTTRX) $50,001 - $100,000

Bright Directions College Savings 529 Plan (DC) (Calvert Equity 529 Portfolio CEYIX) $50,001 - $100,000

Bright Directions College Savings 529 Plan (DC) (PIMCO Total Return 529 Portfolio PTTRX) $50,001 - $100,000

Bright Directions College Savings 529 Plan (DC) (Calvert Equity 529 Portfolio CEYIX) $50,001 - $100,000

JP Morgan Chase Private Client Asset Mgmt Checking Account (J) $50,001 - $100,000

State of Illinois General Assembly Defined Benefit Pension Plan $50,001 - $100,000

JP Morgan Chase Private Client Asset Mgmt Savings Account (J) $1,001 - $15,000

JP Morgan Chase Checking Account (S) $1,001 - $15,000

Massachusetts Mutual, universal life (S) $1,001 - $15,000

Income

Dystol & Goderich, NY, NY - Book Royalties - Dreams of My Father $50,001 - $100,000

Vanguard 500 Index Fund (Retirement) $15,001 - $50,000

Vanguard 500 Index Fund (Retirement) (S) $15,001 - $50,000

Vanguard 500 Index Fund (Retirement) (S) $15,001 - $50,000

Random House, NY, NY - Book Royalties - Audacity of Hope $15,001 - $50,000

US Treasury Notes (J) $5,001 - $15,000

Random House, NY, NY - Book Royalties - Of Thee I Sing: A Letter To My Daughters $5,001 - $15,000

JP Morgan Chase Private Client Asset Mgmt Savings Account (J) $201 - $1,000

US Treasury Bills - SEP/IRA $201 - $1,000

Liabilities

Northern Trust, Chicago, IL Mortgage on Residence, Illinois $500,001 - $1,000,000

Agreements

403(b) Retirement Plan University of Chicago, Chicago, IL 9/92

General Assembly Benefit Pension Plan State of Illinois, Springfield, IL 01/97

Call it Crazy says

Strategist says

President Obama is losing his job in 18 months. There is no guarantee of his future income.

So, why doesn't he get a loan and buy NOW??? Can't he produce:

No job security. The poor guy could end up homeless.

Call it Crazy says

Strategist says

No job security. The poor guy could end up homeless.

You should rent him one of your condos....

To an unemployed with no job prospects? Forget it.

Strategist says

Call it Crazy says

Strategist says

No job security. The poor guy could end up homeless.

You should rent him one of your condos....

To an unemployed with no job prospects? Forget it.

Would you co sign for him?

Call it Crazy says

Strategist says

You should rent him one of your condos....

To an unemployed with no job prospects? Forget it.

Wait, wouldn't you rent it to him based on his stated income?? You want banks to give mortgages based on that!

The sign on the window says...."politicians, lawyers, and other criminals need not apply" This is a decent neighborhood.

But prices in some areas have exceeded their peak in 2006/2007. Even here in the Midwest prices are starting to go up and some houses in my neighborhood are being sold in a few weeks-which is rather strange here. I am actually thinking of selling, almost everyone I know here is upside down and are salivating at being able to sell their house for what they bought-I could actually make a profit in a year!!

This is not a population growth area and hordes of Chindians do not descend here to snap up properties-but the prices and rents are going up.

lostand confused says

But prices in some areas have exceeded their peak in 2006/2007.

Adjusted to inflation existing homes aren't higher than 2006 .... adjusted to inflation they're on new homes and on nominal terms they're well above the peak.

In about 2-6 months most likely on nominal median terms (NAR) data line existing homes will be at the peak of 2006

In both case though we had a strong price inflation expansion to go along with a strong rental expansion cycle and from some reason that means home are affordable

lostand confused says

But prices in some areas have exceeded their peak in 2006/2007. Even here in the Midwest prices are starting to go up and some houses in my neighborhood are being sold in a few weeks-which is rather strange here. I am actually thinking of selling, almost everyone I know here is upside down and are salivating at being able to sell their house for what they bought-I could actually make a profit in a year!!

This is not a population growth area and hordes of Chindians do not descend here to snap up properties-but the prices and rents are going up.

If those upside down end up selling when they get their money back, will they be moving out of the area? If they start renting, you will be competing with them if you sell your home.
If the population is increasing - Buy homes.
If the population is decreasing - Sell homes.
If the population is steady - Compare PITI to rents.

Logan, you use the labor participation rate, but not the unemployment rates in your charts. Unemployment is a major variable determining housing health.
"Applications for US jobless aid fall to nearly 15-year low
Applications for US unemployment benefits fall to 267,000, near a 15-year low"

Strategist says

Compare PITI to rents.

There lies the big mistake of PITI to rents because the affordability index is so invalid that if you really took PITI inflation to rents then it would have been easy for anyone to know that this cycle would have been a renting cycle not a home owning own

I will say this more and more people have been open to adjusting their algorithm on this because it was such a big whiff.

That at least shows that some people are wanting to learn why they have been wrong on the demand curve. A lot times people just make excuses on why they have been wrong but the cycle is going into year 8 next year .... cycles run on 7-10 time frames so, it's too late for this cycle.

Come 2020-2024 the demand curve will change and we won't have such a weak demand curve numbers

Strategist says

Logan, you use the labor participation rate,

Labor participation rates are totally misunderstood, people are shocked that it fell even though it was forecasted to fall for decades. It's a more a whistle blow for anger than real economics

Strategist says

"Applications for US jobless aid fall to nearly 15-year low

When I talk to housing people I point at that you leave unemployment claims at a 15 year low and the worst adjust to population demand curve from main street post WWII at the lowest rate curve post WWII

This is where people show their colors in terms of not understanding demographic economics in terms of the demand curve with population. This was the main reason why the sales estimates were a big miss

Again come 2020-2024 the demand curve will change

Dual income college educated Americans having kids in big numbers ... will lead to a higher demand curve than this

It's like people either hate math, facts and data or they just want to have a debate for the sake of debate... But numbers can't lie.. this was the reality of this economic cycle

Call it Crazy says

Strategist says

Applications for US unemployment benefits fall to 267,000, near a 15-year low"

Who's left to fire? You have almost half of the working force age not working now...

It's the confidence my friend, in addition to the ability of buying a home. When unemployment is on a down trend people feel more confident to make major decisions like home buying. Guess what was the chief reason I decided to jump into condos at the start of 2012. :)

and because I knew this was going to be the case....

2010

“The longer term consequences of an unstable residential real estate market may be more serious than just the destruction of individual wealth. The ideal of middle class home ownership may be at stake. The census bureau reported a 7% decline in national rental vacancy rates in 2010, along with an overall decline of 0.7% in home ownership rates compared to a year ago. There were fewer “organic” buyers, more renters and more investment buyers in the market in 2010 and I expect this trend to continue into 2011. Are we at the beginning of a sociological movement away from middle class home ownership and towards a cultural split between the investment property landlords and their renters both of whom may have less personal investment in neighborhood security, local schools and shared public facilities compared to primary homeowners.”

I knew the tight lending myth will be created as has happened... these people Zandi, Goodman, Yun... very predictable if you read their sentence structure... like Yellen as well

Check this out:
The unemployment trend is one helluva predictor of housing.

http://data.bls.gov/timeseries/LNS14000000

Strategist says

Check this out:

The unemployment trend is one helluva predictor of housing.

http://data.bls.gov/timeseries/LNS14000000

Housing is a process ... it doesn't track 1 to 1 on economic model numbers in a cycle...

Low unemployment
Low Rates

Even in 2015 ... if you take out the excess cash buyers in the system in year 7 of the economic ... you're barley over the Great Recession Lows on demand from main street which are heavy ended on the wealthy Americans as well.

Goodness..