patrick.net

crash-olah,
I hope you are right, but when banks like WF are changing these options ARMs into 5-10 year interest only mortgages, are you still confident that this is definitely going to happen in 2010-2012?

camping says

crash-olah,
I hope you are right, but when banks like WF are changing these options ARMs into 5-10 year interest only mortgages, are you still confident that this is definitely going to happen in 2010-2012?

how are they going to do that when nearly (or over) 20% are unemployed, underemployed, or simply don't even qualify for the house they are living in to begin with... I honestly have not heard of this, I've been slacking on my housing research as I've given up on the housing market for the next 5 years... could you please provide an article. Based on your information, I'm still pretty confident that 2010-2012 will produce lots and lots of nice houses at majorly discounted prices from today. also, who in the *bleep* would want a 5-10 year interest only mortgage? is the house really worth every penny you have? let's get real here... and then what happens when they do that 5-10 year int. only?---major crash in 5-10 years? Can we get this bull* over with now, rather than it taking up my entire "young adult" life so that I can buy a house thats affordable... because as of now, I see myself as a renter forever, esp. with all this nonsense

http://online.wsj.com/article/SB125728972492326499.html

I agree with what you are saying. It just seems those in charge are doing everything to keep everyone in their homes (even when they put $0 down and have paid less than $0 principal).

camping says

crash-olah,

I hope you are right, but when banks like WF are changing these options ARMs into 5-10 year interest only mortgages, are you still confident that this is definitely going to happen in 2010-2012?

Well, let's remember that these people are currently paying LESS than the interest on their loans. So even converting them to an I/O loan will result in an increase in their monthly payment. So depending on how close to the edge they are that would put them over the top. The job market isn't getting any better and wages aren't going up. Until those things start happening house prices have nowhere to go but down.

grywlfbg says

camping says

crash-olah,
I hope you are right, but when banks like WF are changing these options ARMs into 5-10 year interest only mortgages, are you still confident that this is definitely going to happen in 2010-2012?

Well, let’s remember that these people are currently paying LESS than the interest on their loans. So even converting them to an I/O loan will result in an increase in their monthly payment. So depending on how close to the edge they are that would put them over the top. The job market isn’t getting any better and wages aren’t going up. Until those things start happening house prices have nowhere to go but down.

It's going to be such a slow bleed though. Before, the hope was huge increase in payment (50%-100%) which would cause tons of foreclosures. With interest only conversions, it's going to be a minor jump. The trickle of homes coming to the market will continue. I don't know about your area, but in the South Bay this slow trickle is working to sustain prices (so far). Anything close to reasonable is gobbled up in less than a week. Crash-olah probably has it right...give up for at least 5 years. But that's a long time to wait; particularly if you've been waiting for a while already.

I know two people personally who are more than financially able to make their mortgage who've had their monthly payments reduced. One guy had his mortgage written down preemptively by their mortgage holders simply because he skipped one month of payment. Instead of a 1700 mortgage payment, he now pays 900. The other person I know is now paying 700 instead of 1600 thanks to HAMP, and is now doubling up on her monthly payments, and looking to invest in future properties as rentals.

camping says

It just seems those in charge are doing everything to keep everyone in their homes (even when they put $0 down and have paid less than $0 principal).

I knew this was happening... but can someone please explain WHY banks are reducing the principal balances of some mortgages? I understand they are trying to keep people in their houses... but seriously, rewarding people for borrowing over their heads? Why doesn't the government just stop bailing out the banks, who are bailing out people who obviously have no financial common sense-and START giving out the money to people that actually know what they are doing? -- like renters, who crunched the numbers and knew they couldn't afford...

That would be nice (giving money to people with common sense), but it's not reality. We need to deal with reality, and unfortunately it means giving money to the crooks and the idiots while screwing the savers.

Unless someone have some real data, I just don't think the principle reduction is going to be happening at a large enough scale to make an affect and prop up the prices. The majority of these exploding loans were diced up and packaged. How are they going to rework the loans if the barely know who holds these loans.

Serpentor says

How are they going to rework the loans if the barely know who holds these loans.

FNM and FRE can buy them back from the MBS at face value, and then rework them as they see fit. They're going to need money for this, luckily they've got Bernanke on speed-dial now.

Troy says

Serpentor says

How are they going to rework the loans if the barely know who holds these loans.

FNM and FRE can buy them back from the MBS at face value, and then rework them as they see fit. They’re going to need money for this, luckily they’ve got Bernanke on speed-dial now.

Yeah, that's great for GSE loans. Hell, they'll refiance you at 125% LTV if you're foolish enough to not just walk.

Securities packaged by investment banks are a much bigger problem, both in dollar terms and complexity.

MarkInSF says

Securities packaged by investment banks are a much bigger problem, both in dollar terms and complexity.

I was going to say they can't be ~that~ much bigger since Fannie and Freddie guaranteed about half of outstanding loans, but I guess much of these loans still date from the 90s and are otherwise safer than the non-conforming, alt-A, and junior liens that were the main transgressions allowed to happen this decade.