patrick.net

To me a good business should be able to halt certain operations if they are deemed unsuitable. It is pointless to squeeze profits when the environment is unfavorable.

Too bad WF has the curse of being a public company.

Wells Fargo has opened a TON of home mortgage offices recently, and invested a chunk of change into this segment. There's a HUGE office in our building, and half of it is for WF Home Mortgages. I'd say they probably invested way too much in it and now need to find ways of having it pay off. Otherwise, they're going to have to do some serious downsizing in that segment.

FYI: email I just sent to CAR.org (California Association of Realt-whores):

"Hey guys,

I noticed that you haven't updated your Housing Affordability Index (HAI) numbers since last December. I was just wondering, could that be because they're trending so low? Even lower than December's record-low 14% (lowest since 1989)?

Oh, wait, I forgot. Leslie Appleton-Young already told the news media that the reason you stopped publishing the number was "because the monthly index did not seem to track closely to reality" and that you "were going to tweak the model to more reflect current market conditions".

Absolutely --I think this is a fabulous idea! Whenever those nasty numbers tell us what we don't want to hear, let's jigger with them until they give us the "right" answer! From now on, housing "affordability" should be based upon the nastiest, most toxic loans that sub-prime lenders can cook up. Something like a $0-down, stated-income, 50-year, negatively amortizing suicide loan.

Hey, why not? These New Paradigm loans can't be considered unusually risky because "it never goes down", right?? LOL"

From now on, housing “affordability” should be based upon the nastiest, most toxic loans that sub-prime lenders can cook up. Something like a $0-down, stated-income, 50-year, negatively amortizing suicide loan.

Wrong.

Housing Affordability Index should be defined as the constant 100.
Inflation should be defined as the constant 2%.

In general,
Does anyone else get the gut feeling that yes, indeed, housing is starting to go seriously the other way? ( good for us of course) but I can almost feel it in the air. Nothing in my hood is selling ( still) and the few that have pended have been pending for well over a month or more. Some have had their signs removed with only a small " price reduced!" sign left. Many have full pamphlet boxes, and some of the lawns are starting to fill up with junk mail and overgrown lawns. Anyone else get that vibe? Kinda sweet to finally see things start to happen.

HARM,
Honestly, if that's the email you sent to CAR verbatim, they will probably just write it off to some wacko bubblehead. It's not like sending a "Jesus Saves" pamphlet to the Grand Ayatollah (sp) is going to have any effect on him.

what they want to do is re-align it buy not using the 30% rule anymore.

30% gross is already a lot.

Why should someone pay 45% of his income just to stay close to work so that he can make an income just to pay 45% away?

Ray W Says:

I asked him where I was going to find money for incidentals like, oh you know……food.

Ramen can be had for $0.25 a pack at Costco - meal of choice for the FB.

I had a broker tell me it isn’t unreasonable to pay 50% of my net to housing.

Net is very different from gross though.

If a household makes 15000 a month and spends 4500 on housing, that would be 30% gross.

Let's say their take-home is 10000 a month, the percentage is now 45% NET. Now if they can deduct 1000 away, the percentage is still 35%.

I had a broker tell me it isn’t unreasonable to pay 50% of my net to housing.

Wow. Are you sure he didn't mean GROSS income, though? 28-33% of gross household income is considered to be the old-school/pre-paradigm benchmark. That would mean closer to 70-80% of NET income, depending upon tax bracket, location, etc.

F@cked Borrower having troubles making your new reset monthly payments? No probalo!

Just go furniture shopping at your local Home Depot!
http://www.cnn.com/2006/US/06/14/home.depot.drugs/index.html

Beef tenderloin can be had for $9/lbs at Costco… the meal of choice for the BJR.

Is that supposed to be a witty comeback? Nice try, but it doesn't even logically follow. Are you trying to say that BJR's can splurge at Costco for beef, but not pay $20/lb for filet mignon? Or are you saying that BJR's can afford meat at Costco, but since they don't have HELOC's to tap, they can't go out to a steak dinner? Try harder next time.

Most of the people at Wells are all very smart (Warren Buffett agrees with me and is a major shareholder), and my guess is that they will do fine and make plenty of money doing option ARMs.

Remember Wells does not care if the option ARM Borrowers ever repay the loans they just care if they can make money originating them and quickly selling the loand to bond buyers (who will buy almost anything).

I just got off the phone with some people still in NY at the CMSA convention (http://www.cmbs.org/) and as long as bond buyers continue to buy crappy loan Wells and other lenders will continue to originate them.

@FAB,

This has indeed been the prevailing paradigm for the past 5 years and running; however, I'm not so sure that this will always remain true in the years to come. If Wells had decided to get into the neg-am game 5 years ago, I'd agree, but now? Will bond buyers be so ready to gobble up these loans when foreclosures really begin to spike (as in 2007-2008, when something like $2 Trillion in loans reset)? If Wells ends up being forced to book a large % of these loans or take a loss in selling them (because investors demand more realistic risk premiums), the timing may not look so smart after all.

Scott,
My bad. Your post sounded a little trollish at first - I totally misread it.

BTW OMG rents are going up aarggggh! My lease is up and my landlord wants to raise my rents by 1.7%. I’m in Foster City in a SFH, 4br 3ba (for datapoint comparisons).

1.7%? Lucky to be outside of Google's orb of influence.

A friend of mine who works there thinks there are tons of people in the Bay Area ready to buy as soon as prices drop. I try to explain that her view of the world is quite skewed by virtue of where she works… somehow she doesn’t believe me. She’s a Bay Area native, and only remembers it going up.

She may not be completely wrong. A ton of people is only ten, if they are fat. If there are thirty people, we have "tons" in my book.

One should not be too concerned about the short-term price fluctuation of a primary residence anyway. There is nothing wrong with buying now. However, this is not a good time to stretch.

A friend of mine who works there thinks there are tons of people in the Bay Area ready to buy as soon as prices drop.

Big Chief Sitting Bubble has new indian name for your unfortunate young friend: Catches Falling Knife.

hmm sorry to go so far OT.

Yes, we should be talking about ceramic knives.

I just adopted a 2 year old cat. Boy! Is he stinky! Not in the cat spray kind of way…I think he has gas! Anyone here know about cats? Are they prone to gas???

Change his diet. Must be the diet. See if he wants fish.

NYTimes Guest editorial about foreign bucks:

http://tinyurl.com/lgjds

It seems like these FBs are almost *tricked* into buying these loans.

Yes, they tricked themselves into these toxic loans.

A ton of people is only ten, if they are fat.

Did not mean to laugh at fat people. I am one of them.

Anyone here know about cats? Are they prone to gas???

I have been a cat servant for approx. 12 years and thus consider myself a "cat expert". To the best of my knowledge cats do not have gas problems, boston terriers on the other hand are a completely different story.

What does he smell like? Farts?

Hmmm, odd very odd. Perhaps my cat is blaming it on the dogs also. I feed them Nutro Max and no observable gas. Perhaps he has a mouse lodged in his colon.

Perhape he’s just punishing us for not letting him outside.

Our cats are fine staying inside. I bet it is the diet. You never know what they used to feed him before.

LILLL put butter on his paws, he'll lick the butter off and any old scent. Good job on getting a PP cat (previsouly petted), and what is the gentlemans name?

Scott Says:

What, having trouble reading the intonation of Arial, 9pt?

Oh yes, that evil, evil Arial font.

10 fat people = 1 ton (2000#)? Heck, that's not even all that fat. The OR table we use for patients has a 350# limit. We not too rarely get patients that have to sign a waiver of liability to get operated on, in case they break the table due to their weight (over 350#). And I hear from colleagues it's even worse in the Midwest.

Apologies if I offend fat people or Midwesterners, or both...

Ramen can be had for $0.25 a pack at Costco - meal of choice for the FB.

Please, you will get sick eating that shit. I mean really sick. If you want those FB suckers to weed themselves out of the human gene pool, please prescribe gentler medicine. Compassion, man.

If you want those FB suckers to weed themselves out of the human gene pool, please prescribe gentler medicine. Compassion, man.

Fuck that, if ramen is FB green kryptonite, I say force feed them a case/day.

I repeat, fuck them.

And using the universal sign language,

The middle finger, followed by pointing that the FB, followed by two fingers up and finally a shaking fist.

Translation: Fuck you twice real hard.

-that
+at

I wrote that:

> Wells does not care if the option ARM Borrowers
> ever repay the loans they just care if they can make
> money originating them and quickly selling the
> loans to bond buyers (who will buy almost anything).

Then H.Z. Says:

> As I understand it securitizers typically take the first
> loss on MBS (and for conforming loans, agencies
> will insure against any loss), so WFC better care
> about loan loss ratio. However they can always
> structure it to make it profitable if they charge enough
> credit spread.

Banks and other loan Originators only take the first loss piece of a CMBS pool when they do safe loans. Fannie Mae DUS underwriters have a reputation for being tough since they loose money if the loan goes bad and Wells has a reputation for only doing safe loans.

I have no idea if the details of the new Wells program, but since I do know many people that work at Wells I would be wiling to bet that Wells will have almost no risk doing the risky loans. I don’t know of any CMBS lender that holds the first loss piece on risky loans.

surfer-x Says:

And using the universal sign language,

Translation: Fuck you twice real hard.

Mr. X, how many fucks is that?

I would have been shocked if I’d found out you’re a stringbean!

I was quite slim during my freshman year. I rode a bike and ate horrible dorm food.

Then I got a car which gave me access to restaurants...

Then a ten year boom...

Thirty percent is totally an arbitrary number Peter and you know it. As I have said before, if you make more, you can spend a larger portion of your total income on housing and still have a good standard of living.

To be honest, I am not really sure what else you would spend it on. Art? Travel? Entertainment?

There are only so many toys one can have.

As I have said before, if you make more, you can spend a larger portion of your total income on housing and still have a good standard of living.

I think those who make more should spend proportionally less on housing. How much is Bill Gate's house?

To be honest, I am not really sure what else you would spend it on. Art? Travel? Entertainment?

Sushi. Kobe beef. Travel can be expensive. ;)

There are only so many toys one can have.

Given enough money, you will be surprised how much one can spend. I read somewhere that it gets difficult to spend more than 200M though.

The latest being the tried and true 30% of gross going to shelter expenses.

I thought that number was 28%. But I guess stretching to 30% will not hurt too much.