patrick.net

eburbed,

Say your income decreases drasticly (sick child/wife/husband/etc) and you want to proactively work to make sure you don't have mortgage problems and need to talk about some sort of plan for your mortgage. (Who knows what this might be.) If some MBS is holding your paper, the servicer can't really do a damn thing until you're delinquent. They have no "My husband can't work for 8 months, but he'll be back in his job and our income will go back up, can we work something out before hand so we don't have to go deliquent/etc" plan in their guidelines.
If you work with a bank or CU that actually holds the mortgage, they can work with you the moment you let them know there is a problem. Otherwise you have to wait until you fall into a pre-defined category of 'deadbeat' before the servicer starts trying to help you out. It's the difference between a mortgage holder and servicer.
And since CUs tend to be very local, they're more likely to be able to get you into the office of the guy you need to see than a branch bank.

If I were taking out a mortgage on a house I was sure I could virtually buy outright because I had better places to stick my money at the time, I wouldn't care where it originated and who it was sold to. That's easily containable leverage. When it's the kind of leverage that could wipe me out and then some, like a mortgage, I'd rather keep it as local as possible.

I got this recruiting email today. The housing bubble is creating more software jobs - default managment solution for mortgage servicers :)

We currently have an immediate need for an Team Lead – Applications Developer for XXX Inc.. ZZZZ has created the first on-demand default management solution for mortgage servicers, embracing rules-driven application workflow technology and meta-data elements allowing business-user configuration. We are building a world-class engineering organization, using state-of-the art technology and would like to speak with you regarding an opportunity.

I’m not aware of any other field that even comes close to RE that has more mis information, crooks, potholes, con men, lies, spin and potential legal disasters than RE.

Oh that's easy: politics.

I absolutely abhor that kind of development community. Ugh.

We actually live there in the same development, but the Cape Cod with no lot is a little too much even for me. Usually I picture that kind of house sitting on 1 acre.

eburbed Says:

I don’t get what they are. They’re non profit but they’re in the mortgage business?

Here's one I can comment on from firsthand experience:

ACORN Housing (not to be confused with just "ACORN", a political action committee/special interest group) does not make loans nor recommend/refer you to specific lenders. They are a nonprofit consumer education/advocacy group specifically designed to help first time buyers, especially low-income FTBs.

When the wife and I first started seriously looking into buying (mid-late 2003), we signed up and took their FTB education classes. I think it was 3 or 4 two-hour sessions, or close to that. Keep in mind this was long before we had even heard of the term "housing bubble", and well before Patrick.net or TheHousingBubbleBlog. In general, their information was pretty helpful and specifically geared towards steering FTBs away from predatory financing --a very good thing. They even gave us advice on how to improve our FICO scores and how to correct wrong information in our credit reports.

Of course, by the time we were pre-qualified and our FICOs/credit reports clean as a whistle, houses in decent areas of LA County were already going northwards of half a $million, so it didn't much matter.

? Do you think there is a possibility that the housing market will start going gangbusters again once the Fed cuts rates, and the 10-yr yield, which has hovered between 4.5-5% starts dropping below 4.5%?

Definitely. I think the Fed is going to cut rates to 0.5% again - that way, the median home price/median income ratio will finally reach 10x!

Heck, dare I say... 20x!

They are a nonprofit consumer education/advocacy group specifically designed to help first time buyers, especially low-income FTBs.

Do they work with lenders to get you a better rate? Or is it strictly educational?

OMG Harm, those people on the other board were snooty. I was embarrassed for them. It was awkward just reading the exchange.

I wouldn't count on the Fed cutting rates.

At some point, protecting the dollar internationally probably wins out over tweaking the economy. It's not unlikely to see further increases if the dollars keeps dropping. In case the Fed does decide it doesn't care if the dollar becomes worthless, am hedged against this with ETF in foreign currency.

TOS,

I just read your post. While I don't agree with it, I think it is good theory. I can't make the connection until I see upward pressure on interest rates.

After buying and selling real estate for the last 30 years, what seems most important in my estimation, are honest inspections on the property when you are a buyer. That way you know what you are getting into, without needing litigation. Once you have some accurate information on a property, you can choose to buy, or back out, or negotiate. Attorneys complicate the process.

Big Brother,

As I recall, you liked to use the term "gangbusters" a lot when you were posting as ConfusedRenter/MarinaPrime/FaceReality. Nice to know your limited acquisition of American colloquialisms hasn't changed.

HARM,

That Jeff guy is still being a f$cking moron! He's talking about short sales still! He has assets he can sell (at a profit) to cover the losses for selling his negative cashflow properties and yet he STILL whines about what he needs to do in order to make the banks eat the cost. Total asshole.

To continue from my last post. If you are a seller, you want to encourage your buyers to get all the inspections they want. That is a good way to prevent litigation.Attorneys complicate the process.

As long as you fully disclose all known issues with a property you are pretty much free from liability as a seller. This is at least for deals in CA. There is no implied warranty that I'm aware of on a house. In order to recover in court, a buyer would have to demonstrate that the seller withheld known material defects. Inspections are the buyer's responsibility as part of their due dilligence.

Newsflash! Honesty is the best policy!

Phoenix market is slow but prices are not coming down much yet. Some on the perimeter, but not closer in.

I don't think we are even close to emotional panic yet; Those on these boards saying they will buy when price hits X may end up cathing a falling knife. This thing has many many years to work itself out.

I own three properties, and next year the last one will be paid off; I really dont care what happens if prices rebound I will sell one, if they drop like a rock I will buy more.

That is, unless you want to end up in court.

TOS,
Even though it seems far fetched; the surprisingly bipartisan subprime bailout discussions are evidence that 'important' people are losing money. Understanding human nature, it would not surprise me to see crazy schemes come out of our current government. Devaluing the dollar is to me the economic doomsday device a government could use to preserve the status quo. I have to accept the given that uncertainty in the housing market is built in to share price.

My disconnect happens because if the price is built in, the uncertainty, and the likelihood of allowing our currency to slide to encourage foreign price supports should push interest rates up. I am seeing first hand an excess of money available to lend in real estate. This is only getting worse as credit standards tighten and there are yet even fewer viable deals. As someone with a process control understanding, it seems to me that the current money supply is in a robust state.

Danville woman,

I've had so many situations in my dealings that could have deteriorated to a court case but for the fact that I am honest and reasonable. If you are selective about who you deal with, most things can be worked out in good faith. Most people are good, and the few predatory plaintiffs out there quickly get a reputation, or give themselves away through slip ups in things they say. Honesty really is the best policy.

Azrob, I've always been in doubt as to whether this was going to be a nice quick dive, or a long horrible dragged out ordeal. Properties are so fundamentaly overvalued, that if we start having declines of 5% per year this really could last a decade. Wait a little longer to see what tightening credit does to prices. That is a very clear milestone in many scenarios.

Malcolm

I totally agree!

Malcom:

I agree. that said, I didn't see the 50% increase coming 05 to 06, so obviously I am not Nostradumus here!! I sold 2 other proberies in 04/early 05 and had i held them 12 more months I would have made a ton more money. But real estate no longer made sense to me; I began buying on the "get rich slowly" idea, and the "get rich quick" plan just didn't compute.

Now I travel the world alot, and to be honest, there are many places where price to rent and income are much worse. The whole country of Spain comes to mind; Also, Bangkok and Shanghai have sky high prices, but very cheap rents. I just don't understand it anymore

SP Says:

> At lunch, I met an old friend who is a real-estate
> investor - the old-fashioned type, he was in the
> business for decades. He is now retired, and
> volunteers at a group where I worked with him.

Do you have any details on when and wear he invested in real estate?

There is a big difference between people like my Dad who really just “got lucky” investing in Real Estate (who would have known that the rental property within 5 miles of where I grew up would appreciate so much in the last 40 years) and people like Sam Zell and Ned Spieker are true students of real estate playing a game like chess masters over the past 40 years…

> I asked him what he thought about me buying a house.
> As expected, his advice was to hold off for now, which
> wasn’t surprising. But he made a couple of points that
> were interesting enough that I figured I would share it
> here. For what it is worth, he lives up on the peninsula,
> west of 280.

I’m guessing Woodside or Portola Valley vs. Westlake, SSF or San Bruno…

> His view is that the credit crunch is going to hit the _
> lower_ end, the tract homes in the working-class and
> middle-class neighborhoods are likely to fall a lot.
> i.e. POS that is currently lists at 700K-900K, could
> drop as much as 50%

I predict just the opposite in that higher priced homes will see a bigger hit. This is not just a wild ass guess on my part but based on a study of every modern real estate bust. I’m not saying that some Redwood City sit boxes selling for $700 to $900K will not drop 50% I’m saying the (just like in the early 90’s) the higher priced property will drop even more (most “average” bay area home s have tripled in value in the past 10 years while prime area homes are up about 5x on average)…

> The upper-end, 2M+ is unpredictable - homes with large
> lots (1+ acre) and in really great old neighborhoods would
> do okay. But 2M+ homes in the newly expensive areas
> would fall up to 20%.

In 1994 you could buy a prime Woodside, Hillsborough, Presidio Heights or Ross home for just under a million since after 4 years of piece drops the rich were not in any hurry to buy. When prices are dropping less sophisticated people are more likely to jump in especially since the own to rent premium is not as big. With a $5mm home the property taxes alone may be more than the rent and with a $4mm fixed rate loan at about $24K a MONTH the rich will be in no hurry to get in to bidding wars until they feel that prices are on the way up again…

> Anyways, that’s just one guy’s opinion.

Every post here is just one guys opinion (but I always like to see some background info to see where the guy is coming from)...

bigbrother: your high as a kite;

Fed is unlikely to make a substantial rate cut this year, while other central banks are raising rates (china/japan) and the us dollar is in serious danger of falling into the toilet.

Furthermore, a rate cut is unlikely to truly stop the downward spiral in prices, as the Fed cuts the short end of the yield curve, and mortgage rates are determined by the long end of the curve. Long term rates are much more sensitive to perceived inflation risks then to the short term rates.

Housing is very unlikely to resume upward price moves in the near term (at least 5 year) future.

BigBrother Says:

> Guess nobody is willing to go against my
> expectation that the Fed will cut rates end of year

Why will the fed need to cut rates with almost everyone in their 30’s making $300K to $1.5mm a year and the C level guys in their 40’s and 50’s making $1mm to $10mm a year?

Anyway, I just have a quick question survey for all of you. Do you guys think the the Fed will cut rates end of this year, and also in 2008?

Probably yes. The only reason I can think of that they might *not* be likely to cut rates (in a vain attempt to help 'rescue' the mortgage lenders & banksters), is if the dollar really crashes hard.

Do you think there is a possibility that the housing market will start going gangbusters again once the Fed cuts rates, and the 10-yr yield, which has hovered between 4.5-5% starts dropping below 4.5%?

Hell no. Japan had ZIRP for over a decade, and it *still* did not stop RE real price declines in the neighborhood of 65-75%. It might possibly prolong the inevitable correction (like Japan), but this market's toast. Stick a fork in it.

@eburbed (re ACORN housing):

They were mainly educational and not allowed (as a non-profit) to steer you to one particular lender or another, but I do recall they had something called "ACORN partnership loan programs" with some local banks like BofA, Citibank & Chase-Manhattan. Basically, if you qualified as "low income" (tough to do in CA), they would shave a point off the loan, only require 3% down and waive PMI, or some such.

I'm sure the details vary by area (and the current lending environment). You might also look into the CalFHA program like Surfer-X did, whenever you're ready to start seriously looking.

I got a good deal on a refi by going to LendingTree and doing the "three mortgages bid against each other" deal. One wheeler-dealer from ABN Amro offered me 5 1/8% on a jumbo for a 2-unit building, which the E*Trade Bank woman claimed was "illegal" since the best she would offer me was 5 3/4%. The ABN guy told me he was going to bundle up my loan with a bunch of other $1M San Francisco properties and get me single family home rates that way. I didn't complain. On the day of closing he bumped the rate up to 5 1/4% but it was still by far the best I could get, so I took it. I made sure on the closing papers that I disclosed that it was a two unit building.

My first loan, when we bought the property, I got a far worse deal. We took the mortgage broker our realtor recommended and she initially tried to ream us with a 6 1/2% loan. When my wife, who works in real estate, told her that was too high, they immediately lowered it to 6%. It didn't matter in the long run, since rates when down after that and we re-fied.

Randy, San Francisco homes are mostly going for over asking, at least according to the Alexander Clark newsletter I get every week. Maybe he is lying, I don't know, but he includes the asking and sales price for every property in The City. Last month in Noe Valley, 17 single family homes were sold, all for over asking, with an average sales price of 10% over asking. The average price is $1.5M which is up, but part of that is because the homes here are getting bigger. Quite a few larger, luxury homes have been built over the last few years and they are pushing the market up.

I said earlier that a 3/2 was $1.2M and reviewing the recent sales data I guess I have to admit that I am wrong. The last four 3/2's all sold for $1.4M. Take that for what it is worth.

Everything Jimbo writes is nonsense...
building more homes does not push the market up ...anybody heard of supply and demand?
sf homes are not in general selling over asking...
a 30yr fixed rate is flat not available from anyone anywhere at the rates he is quoting. Nobody with any experience in real estate (as allegedly this mogul with a realtor@ wife is) would bother with the scam artists one finds at lending tree... what a crockpot full...

Sorry reality is such a bummer to you azrob. I refi-ed in March 2004. I can send you a copy of the loan papers if you like.

If you want to review the data on home sales yourself, subscribe to the sfnewsletter and tell me what you think:

http://www.sfnewsletter.com/

Like I said, perhaps the guy is perpetuating some kind of elaborate scam, but he seems legitimate to me.

My wife is not a Realtor, btw, she actually works for an insurance company, helping finance non-profit real estate. I am not necessarily endorsing Lending Tree, but I am sharing my experience with them. I thought things worked out well.

I don't know if anyone has heard of Ted Lui, and what he's proposing, but I thought I'd post what I found on another board.

"TED LUI (CA assemblyman) and others on the California banking and finance committee passed a proposal Monday to use money from the Affordable Housing Bond to bail out homeowners who were “victims” of “predatory” financing and can’t make their mortgage payments. CALL Ted Lui’s office, talk to Tiffany or Mark, 916-319-2053, and call every assemblyman on the appropriations committee (that’s where it goes to a vote next), and call your local state assemblyman, tell them you don’t want your hard-earned tax dollars going to bail out buyers who overpaid and didn’t read their loan documents, tell them the affordable housing bond money was to be used for affordable housing not for bailouts, call or don’t complain when it happens!"

Here's a response that one poster received after calling Mark...

"I gave Mark every completely rational argument I could give, not screaming or yelling, just speaking in a controlled, professional voice, against this bailout idea…all he could counter was “that’s your opinion”, “I’m sorry you feel that way”, “we’ll just have to agree to disagree so there’s no point discussing this”, and he just kept going on and on about how many people were “victims” of “predatory” lending and that was what this was trying to correct. No explanation as to how such lending was predatory, why the ADULTS who signed the loan documents were not responsible for their actions, why it is my problem as a taxpayer, nor why we should reward those alleged predators by making payments that didn’t pencil for the borrowers to begin with. I hope every one on this board calls him and every other assemblyman you have time to harrass, I mean contact."

Sounds like a prick, but I'm going to call him tomorrow. Might not help, but it certainly won't hurt to give this idiot a call.

Correction, the assemblyman's name is Ted Lieu.

jimbo quote, "my wife, who works in real estate"

but now she doesn't work in real estate, she works in insurance? interesting.

Real estate reality isn't a bummer to me, read my previous posts. I own 3 homes free and clear, so I don't need to refi any of them. I have been an active realtor for almost 20 years, now I am less active as I don't need the money, and prefer my other business and academic endeavors.

But i reiterate, there is no way in hell you got a 5.25 fixed loan on a refi in the last 2 years, period. Perhaps you are in the 35% of people who don't know what type of loan they have. Take another good look, and see if a disclosure box about adjustment isn't marked on page one or two. Second, it wouldn't make too much sense to refi a 6% loan into that product anyways, the payment difference would take a half dozen years to offset the expenses of writing the loan. And if your going to say you got a no cost refi to fixed at 5.25% you might as well say the toothfairy brought the docs to the closing. There are enough other people on this blog who will recognize that as nonsense, not just me

Not advice of any kind, but:

My experience is that agents and lenders use the standard model form without alteration. I handle my parents' contracts and they always use the cheapest services, so I always see forms that come straight out of the form book with absolutely no alteration.

On the other hand, based on a couple professors who are good transactional attorneys, they always revise their forms based on client. Including excessive language or inappropriate language can get you in trouble if you ever have to go to court.

azrob,

Jimbo is what's known around here as a "reason-a-bull". To be distinguished from "perma-bull". Even though he and I disagree from time to time (he's generally flirting with the truth).

Interesting snippet on the "Father of MBS"

http://www.economicpolicymonitor.com/2007/04/ranieri-first-time-in-history-median.html

HARM's "buddy" :)

@Portland Girl,

No one appreciates the last few relatively rain free days more than I but we shouldn't let that go to our heads. We have problems here in Stumptown. I certainly hope that with the exodus of some major employers and a city council that is outright HOSTILE toward business that you're not implying somehow our "special-ness" will provide insulation from a NATIONAL BUBBLE? (Yes I said national).

The last time we had 2 (let alone 3) decent days in a row would have been in September. Enjoy! :(

Raider Jeff,

Too funny! From now on, any time I get caught with my pants down I'll simply say "I'm sorry you feel that way. We'll just have to agree to disagree so there's no point discussing this" and see if my clients let me off the hook?

You will wish me luck, won't you?