patrick.net

google ad says:

"Banks Said No?
Over 10k in debts? Get approved to reduce your debts within 10 minutes"

Owner financing can work IF the seller has enough equity. For instance, if the owner has 20% equity and the borrower gets a conforming first mortgage, then the lender can "carry" the second mortgage for the balance of the purchase price. But it doesn't make sense for an FB with 0% equity to carry paper.

One reason that I am not worried about a spike in interest rates affecting home affordability is that I suspect good rates will still be available from banks and/or owners. Even though, technically, most mortgages are currently non-assumable, I am sure that most lenders would gladly allow you to assume the seller's favorable financing if the alternative is a foreclosure. Millions of people refi'd their mortgages in '03 and '04 into long term fixed rate mortgages. Some of these folks will need to sell their homes in the coming years due to death, divorce, job loss, etc... The lenders will probably allow a qualified buyer to assume these rates. And even if rates spike, if some of these sellers are desperate enough, they will gladly carry a second at a low rate (like 4 or 5%) because they pay more attention to the nominal sale price of the home than the opportunity cost of tying up their money.

As for FBs with NegAm/IO loans (including Casey), they are just screwed and they won't have room to negotiate in a down market because they have no equity (therefore nothing to sell and nothing to carry back). They will almost certainly end up in foreclosure. At that point, the lenders will just have to take whatever they can get.

I don't think it will be too long before Wall Street stops buying these loans. They are already trying to get the lenders to buy back the bad loans. After most of their eggs turn up rotten, they will stop buying them! They can't write loans if noone is going to buy them because the banks certainly aren't going to hold on to them. The perfect storm is brewing; the inventories are building at the same time the money fountain is being turned off. I think alot of you bubbleheads have no idea of how bad it's really going to get! Hold on tight, it's going to get mighty windy!

I like question number 3 - answer "not sure", that is the correct answer if you bought a house. :lol:

3. Do you currently own your home, or do you rent?

* Not sure, 2 percent

By the way, these polls don't mean very much, although they are entertaining. It's basically pot luck who takes these polls. If you were to put the poll up on this website, the results would be a hell of alot different than if you put it up on lets say a housing cheerleader site. Being that 70% of the people who took the poll said they own (or should I say 72%), I'm sure very few people who own are going to admit that housing is overpriced and poised for a crash. People don't want to believe they are going to lose alot of money even though it's inevitable.

Glen,

Excellent summation on "When the Music is Over (turn out the lights)"!

How could it end differently?

Almost without exception my wife and I have used a VA Loan. As Doug H has said, you need to do everything but provide a DNA sample! Long, tedious and difficult does not begin to describe the process. For those that may not be familiar the VA doesn't actually loan money, they simply guarantee the first 25K (might be higher now) to enable eligible veterans to have access to loans. It actually used to be a pretty good deal. Well now that anyone that can "fog a mirror" has access to 100% financing needless to say mortgage brokers are steering vets away from these loans.

Why? They're a hassle to begin with and the loans are heavily scrutinized. The process is protracted meaning it takes more time for MB to get paid and when he/she does get paid it's almost certainly to be less. Most MB's HATE VA Loans and many refuse to do them or more commonly profess to be a "specialist" and then bait and switch the applicant at some point in the approval process.

While I'm not quite ready to pursue "HARM's American Dream" I do want off the FICO go-round! I just don't want to play anymore. Every spare moment I can afford I'm actively seeking solutions toward having a fully paid residence, be it through acceleration of debt re-payment, timing the bottom or damn near "homesteading" if I have to! Whatever the solution, it does not involve making "someone elses retirement one payment at a time" for the next 30 years. That's a promise.

Mr. Invisible Hand. Normally he’s not so bad, but his ‘friend’ Mr. Moral Hazzard got him drunk, so he probably shouldn’t be on the road right now.

lol

Unfortunately, Mr Invisible Hand has had the DTs ever since he started drinking heavily with Adam Smith... And I've always had the suspicion and often stated that Adam Smith had quite a close relationship with Mrs Hand and her 5 daughters, tho I usually put it more succinctly...

*unlurks*

I seem to notice far fewer credit card offers coming through in the mail.

Unfortunately, the pop-up ads on the Internet offering you cheap mortgages / refinancing / lower rates are still as ubiquitous as ever...

Totally OT: Does anyone know anything about becoming acclimatized to cats when you have a cat allergy? I keep hearing anecdotes about people with mild cat allergies getting a cat and eventually having the allergies go away...

*relurks*

TOLurker,

There are breeders of allergen free cats. The company wants to charge $5K for one, but it sounds like this trait occurs naturally so you might be able to locate a breeder who charges much less.

http://www.msnbc.msn.com/id/6343637/

ThomHall Says:

> My wife believes their appraisals are legit and I agree.

After she spends a little more time in the appraisal business she will learn that you have to "hit the number" or go out of business. Mortgage Brokers to not work with appraisers that actually "appraise" the property, they work with appraisers that "give them a number that makes the loan work"...

FAB,

Would "legit" appraisers find work in a bad housing environment, doing appraisals on foreclosures and short sales for the bank?

OT, but I couldn't resist - has anyone thought of suggesting Casey should set himself up as a religious order? They get tax breaks right?

TOLurker,

I am allergic to cats, but I used to be fine with my own cat. I stopped owning them, couldn't take them being run over all the time, and now my cat allergies are worse - I just have to step into a house and I get set off - often times I don't know they've got a cat, until I'm in the house.

TOLurker: do you have the cat already?

If you have easy access to a doctor, I would get a skin test done. Also, keeping the house free of dander should help reduce symptoms. (e.g. Regularly washing bedding in hot water, using a good-quality vacuum cleaner, and rubbing down the cat with a damp microfiber cloth.) Results vary by human and cat, of course. Supposedly there are some desensitizing treatments out there as well.

Allerca (the hypoallergenic cat company) decided to find cats with naturally reduced levels of the most common allergen and breed them, rather than trying to knock out the gene directly.

OT, as I understand the draft loan standards recommendations, they will only apply (in their current form) to banks/lenders that participate in the Federal Reserve System.

Therefore, all the exotic, aggressive loan products won't go away simply because of the new standards. Instead, most every big and/or reputable institution will no longer be able to offer those products. This is actually why the big guys like BofA are fighting the proposed rule change. Not because they so much want to keep writing bad loans, but because they don't want to see any market barriers erected that might benefit their competitors.

Randy,

At least that would decrease taxpayer exposure to bad loans and the big mutual funds/pensions might think twice before buying risky paper.

Ugh, who am I trying to kid...

Allah,

Dresses are not houses. The utility derived from each is vastly different, as are the microeconomic factors affected each ones respective markets.

They don't print sale coupons for houses (excepting some homebuilders of late, of course). I know *you* are absolutely certain that *you* know housing will lose 50-70% of its value. But others may not, and that's what makes a market.

I also find it odd that you (correctly) point out that gains are not real -- unrealized in other words -- during a rising market, if one does not sell. But you somehow purport that losses are real, even if one doesn't sell in a down market. It is possible that someone buys before the bottom yet stays there long enough to still realize gain.

Hey, Randy H

I hear Casey may have a buyer for one of his houses - and he's blogging about it before he's even closed the deal........

You know if I was in the market for buying I'd steer well away from any of his houses. Or use his blog against him. Sounds like he's selling to a real shark though, so I doubt it'll go through once they realise he's blogging?

Sure, why not? I would buy it. In a heartbeat!

So they came in w/ a whopping 5% down (90k on 1.8 mil) and net of the 6% comm. they should walk away w/ $263,300 (before taxes). Sure. A 66% return on your money in exactly a year is very reasonable.

SFWoman,

The house itself is pretty ugly but two other things really strike me.

1. 6 bdrms and 5 baths in a 2,700 sq ft structure? Peter P ought to have a word with that architect!

2. That place looks super staged, everything looks like a furniture store showroom.

astrid

The big mutual funds don't buy risky paper. They buy prime tranches of MBS, which are, as some of us pointed out last thread, probably about equivalent to Government paper. I'm quite happy to beat up on funds, but where is a better place for Average Joe to park his money? Get him out of funds and he'll probably end up in gold coins.

Randy H,

It's a dog and pony show. A lot of these Fed. Chartered lenders also own driftbag sub-prime shops too! So they jump through a few hoops in a feigned effort to "get you the best possible loan" but you had some late fees on DVD you rented back in 1999 so they'll refer you "in house" (of course) to their fellow that specializes in dealing with people that have "bruised credit" such as yourself!

Didn't WFC just buy out some slime shop and act like they were doing the world a favor?

The big mutual funds don’t buy risky paper.

I wouldn't be so sure about that. There have been a number of articles posted at Ben's blog (and here in in the news links page) about toxic waste ending up in supposedly AAA+ safe MBS tranches, where they should not be. Then there's those pesky accounting "irregularities" over at Aunt Fannie's that have prevented her from issuing an earinings statement now for 2 years running. Luckily, though, Aunt Fannie has powerful friends, otherwise she might face delisting from NYSE.

I guess it's good to be too big to fail.

Um, or would that be a 192% return?

GixxerGuy,

Only too happy to help. Here at Patrick.net, friends don't let friends buy overpriced POS!

OT: Lending "guidance" with no enforcement teeth/significant penalties for disobeying them mean almost nothing.

As many have already pointed out, there has been no appreciable reduction in the number of subprime bucket shops willing to lend FBs rope to go hang themselves, nor improvement in the quality of loan terms. If anything, terms have gotten even more extreme than ever (50 years? why not 100, like Japan?).

If you want to improve ("reform"?) lending standards in the U.S. it's real easy: force originating lenders to buy back any loans/MBS/CMOs they sell downstream to investors at face value if/when they go bad. It used to be once upon a time that originating lenders were also the same institutions that actually HELD the mortgages for the lifetime of the loan (S&Ls, credit unions, etc.).

Perhaps going back to that pre-MBS lending model in the age of eLoans/LendingTree and international carry-trades is impossible. Global credit markets have evolved to take advantage of Internet/e-commerce technology, and have become orders of magnitude more efficient/liquid than ever. That's fine. All I'm asking is that we re-align risk with reward.

If you want to lend $2.2 million to every unemployed 24-year-old mouth-breather out there and take your profits, no problem. But if your New Lending Paradigm blows up, it should not be Mr. Taxpayer nor Mr. Fixed-income Investor who takes the hit: it should be YOU, the originating paper pusher, who failed to perfom due diligence in the first place by qualifying said retard.

THAT would clean up this mess in a hurry. I guarantee it.

SFWoman,

I'm sorry. Was that "sells for" or "reduced to"?

about toxic waste ending up in supposedly AAA+ safe MBS tranches, where they should not be.

Like everything in finance, the system is not 100% fullproof. The fact that they find subprime in prime tranches, should encourage you, not discourage you. It means (a) they are looking; (b) they have an audit process; (c) that audit process is credible.

I would be much more worried if I heard the claim that their prime tranche was "100% guaranteed", so there was no need to even be wary of contamination.

I will agree with HARM and DinOR that the risk premium to subprime tranches is most likely not fully priced into those securities. Many a hedge fund will learn that the hard way in the coming months, I imagine.

They don’t say it that plainly. This only works if the insurance coverage is adequate. Care to bet the over or under on that spread?

No kidding. And the guys over at LTCM built their empire based on the notion that risk could always be precisely forecast, quantified and insured/hedged. And look how well that turned out...

GixxerGuy,

I did a post earlier today that was moderated and deleted b/c perhaps Patrick didn't appreciate the "prison humor" I applied to Casey Serin.

Anyway, we do have several vets here and my more recent experience with VA Loans and their very demanding standards is that they are far too bothersome for most mortgage brokers. Invariably the broker that "specializes" in VA loans ends up pulling a bait and switch just so he/she can get paid more, quicker and with less hassle. If everybody did loans like the VA (as they once did) we wouldn't be in the mess we're in today.

Who was it that said, "If buyers want to pay more than CPI and a point or two above last years assesed value, let 'em pay it out of pocket or shore up their reasoning with an objective appraisal as to why this home is now selling at 20-25-40% more than it did last year!" Step forth and be recognized!

(That'd put a screeching halt to this BS)

I delete DinORs posts for fun and sport because he keeps refusing to send me Leinenkugels.

@SFWoman,

Though it's no beauty queen, I wouldn't call that the Ugliest house in America or even NoCal (remember the infamous shell?). According to the listing it's actually "charming and spacious" and "lovely". For more adjectives, please refer to:

Examples of stupid comments I’m tired of reading in real estate reports and listings:
and
Embracing Realtwhores’(tm) Common Expressions

SFWoman,

While I'm sure I can't explain the wild discrepancy in this listings price I think we can agree it is about butt ugly. But I'm careful not to be too judgemental. Perhaps one could play handball or "squash" off of the concrete bunkers to the side? I'll check to see if it meets regulations.

They still brew Leinenkugels? I'll have to get down to "House of a Thousand Ales" my bad.

I was actually just kidding, some of my posts are as early as DS's and it was probably just a glitch. Besides, prison humor (even when applied to Casey) is pretty gross.

SFWoman,

Now you're talking! We'll check in w/LILLL and see if the owner of her "X-home" can hook us up w/some rapper tenants on a long term lease!

Seriously though, myself and Mrs. DinOR are looking at a 2,300 sq. ft. place right here in town that's already set up for "seperate living" two kitchens, fireplaces etc. It's been on the market for nigh on a year and has been reduced twice so w/lowball offer I'm thinking a 100 bucks a square foot. Logistically it would meet all of our personal/business needs and also have a little wiggle room for aging parent or "boomerang" child. Very similar layout BUT equally ugly! My little bird told me it belongs to Happy Happy Good Time Ent. LLC of Garbage Grove, CA so we'll see.

This may not be completely on topic, but CNBC just reported that a number of mortgage brokers and real estate agents are being laid off in San Francisco.

@Raiderjeff,

Once you've been following this blog a while, you'll learn there really is no such thing as "on topic". Topics will meander from RE to food to SciFi to Haiku to politics to economics to clothing then back to food.

Hey harm,

"Once you’ve been following this blog a while, you’ll learn there really is no such thing as “on topic”..."

LOL, you're right. I've been following this blog off and on for about two years. I just thought I'd include my little disclaimer anyway.

"I think it goes with the general drift of things."

True. I'm wondering if anyone is shedding a tear for these people? I don't like it when people are laid off, but some of the people within the RE industry have really pissed me off.

"I’d say you were more on topic than I am most days."

why thankya, thankya very much (my best Elvis impersonation).