patrick.net

DS,

The Treasurer refuses to let them do it anyway

He'd be overruled in a heartbeat if little Johnny thought there might be a few votes in it...

(Errrrrr, that crack might need clarification, since I suppose it's possible that one or two readers here do NOT follow Australian politics closely. :D

Anyway, we're having a Federal election in the next 5 months and the party in office has a Senate majority but is doing badly in the polls. Since our Prime Minister is what you call the House Majority Leader, this is roughly equivalent to a US Presidential election where the incumbent is running again, the incumbent's party has control of both Houses of Congress, and the polls are strongly in favour of the other party.

Let's just say the pork is being thrown around and policy decisions are, ummm, not always receiving an appropriate level of deliberation.

In passing, I would suspect that DS is not generally aligned towards the policies of our current Federal Government.)

http://www.mercurynews.com/ci_6580138

"Loann Tran, a real estate agent with Judy Wang Realtors in Milpitas and San Jose, says an influx of young Asian families buying homes has insulated her from some of the pain of this year's real estate slowdown.

"Most of the buyers are either from China or India; they are a majority of those that are still buying," said Tran, whose clientele is predominantly Asian."

Eliza,

Oh mercy no! (I just try to slip it in where and whenever possible). She's our only remaining troll you know!

It really saddens me this has become such a common practice. I really had no idea. What's worse is those so willing to "do anything to get into a house" they abandon working within the (rather generous limits) of the tax law and decide to just go ahead and "take their lumps".

When they further compound the problem by "starving" their retirement account by cutting off even so much as the employer match level contribution, well, no good can come of it.

AP
BNP Paribas Freezes Security Funds
Thursday August 9, 9:52 am ET
BNP Paribas Freezes 3 Securities Funds Amid Subprime Market Problems

PARIS (AP) -- A major French bank, BNP Paribas, announced Thursday that it was suspending three of its asset-backed securities funds, saying it could no longer value them accurately because of problems in the U.S. subprime mortgage market.
ADVERTISEMENT

The announcement by the bank's BNP Paribas Investment Partners unit sent shock waves through an already sensitive money market.

The bank, France's largest bank by market value, said it was suspending three funds worth a total of 2 billion euros ($2.75 billion): Parvest Dynamic ABS, BNP Paribas ABS Euribor and BNP Paribas ABS Eonia. All funds combined at BNP Paribas Investment Partners are worth more than 350 billion euros ($482.79 billion).

This article:

http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/08/09/BU3IREG2E.DTL

is splashed on the front page of the Chronic-le today. I guess the "rumors" of Wells Fargo and other banks increasing rates on jumbo loans are more than just rumors, at least for the MSM.

“Loann Tran, a real estate agent with Judy Wang Realtors in Milpitas and San Jose, says an influx of young Asian families buying homes has insulated her from some of the pain of this year’s real estate slowdown.

With her name, "Loann Tra(i)n" should have been a mortgage broker, not a Realtor (TM)!

PermaRenter,
BNP appears to be just the next in line to let everyone know how much crap it's holding and how much it's lost in this mess. It just makes you wonder how long this parade of "loosers" will go on...

skibum,

What's incredible about the article is that MB's are eating their own fees just to make good on the promises they made to borrowers! (I hate when "mortgage planners" use the term "clients") as if there's a relationship that goes past the signing?

Can someone please explain to me how these funds can simply "freeze" or fail to honor requests for redemptions? I realize you're supposed to read and understand the prospectus but this is ridiculous. I'm lost here. Don't most fund mgrs. keep a certain amount in cash for this exact reason?

Oh, everybody wants out.

Believe it or no, I know one mortgage broker who actually seems to have "clients." He's a pretty reasonable guy and closely associated with a realtor of the sort who will sell your first house and your last house and help you sell all the houses in between. The mortgage broker has been in the business for 25 years or so himself, so he actually sees the same people over and over again (and their neighbors and friends) and behaves accordingly.

It's nice to be reminded now and again that there are people in these professions who are not total slimebuckets. I've never been a fan of these sorts of professions, but back before all the used car salesmen and waitresses got in the game, there were some professionals (and a few of them are still around and will soon be the only ones left).

Eliza,

Rare indeed! I only know a handful of MB's that pre-date "the boom". In your friend's case, he can properly apply the term. The other 98%? And you're right, they're dropping out like flies and soon the industry will resemble what it once did.

Bush against lifting Fannie, Freddie mortgage cap
Says reform of government-sponsored mortgage buyers needs to come first

I am in 100% agreement with President Bush on something.
OMG, has Hell frozen over?

I hear that HARM.

I said to my wife this morning, "You know, I'm actually happy at this moment that Bush is in there. Maybe it's time to buy beach front property in Hades."

Apologies in advance for the off-topic post. What happened to the graphs of median rental prices? My bookmarks are broken, and I can't find any link on the site!

Thanks,

Wnt

@Randy, ;-)

@Wnt,

Honestly, I don't know. I haven't checked those since Patrick upgraded the site from WordPress 1.x to 2.x, so that might have been a factor.

I guess the “rumors” of Wells Fargo and other banks increasing rates on jumbo loans are more than just rumors, at least for the MSM.
Skibum,
Saw the article last night on SFGate and was going to post it , but thought I'd give you the satisfaction. :-)
However, I would like to point out that if you have good credit and CAN DOCUMENT your income, jumbos stand at 7% (see Wells Fargo website for rates). I think this, unfortunately, is the profile of many of the types who buy in Fortress BA (pay no attention to the ~25% option ARMers, they buy in Non-Fortress areas :-) ).
As you noted a couple of days ago, the secondary market has ground to a halt (truly an awesome thing to watch) so I don't doubt the noose is tightening. If you are a non-depository mortgage lender, buh-bye... and these were the folks who offered the more "creative" loan packages.

btw HARM

I'm sure you're happy to see the ECB binging on liquidity injections while the Fed held back to under half of what was expected. For all his faults, Bernanke is holding the line far more than the cacophony of screaming market chicken littles thought he would be able to. Futures pricing 100% chance of cut in September. I think those futures are 80% wrong.

@Randy,

Yeah, I have to admit, so far I'm quite impressed that Ben has not lived up to his "helicopter drop" moniker. However, as time goes by and politicians start to become aware of how the credit meltdown is impacting their well heeled constituents (the ones that really matter), the pressure may become unbearable for him. I still think a rate cut by EOY is all but inevitable, despite the fact I'd like to see the exact opposite.

"those futures are 80% wrong"

I tend to agree. This is why DL was so emphatic about rate cuts earlier. Back then they might have been able to stem some of the damage? At this point it might keep some FB's on life support but anyone that's thinking a cut here will stop the slide and set the stage for a recovery has got to fooling themselves.

EBGuy,
Thanks for giving me the satisfaction... :)

Seriously though, this credit freeze-up is truly amazing to watch. I was but a mere lad during the S+L crisis, so this to me is much more interesting to see. Not to harp, but even in the Fortress, these putative buyers you mention need to sell their "starter homes" to someone, and likely that's the subprime/Alt-A market, which is now a mere shell of its (recently) former self...

DOW down 380 points.

Let's see what will happen tomorrow. Rate cut or not will totally depend on the job situation. No rate cut until job market visibly worsen. After all, both parties will need to worry about election next year, and whoever is going to win will have to promise employment.

When job market worsens, there won't be just one or two cuts, but a hastened pace of a series of rate cuts. At that point, I think all currencies will get into a competitive devaluation mode.

EBGuy,

bank rate is not the driver of fortress area, it is the job that matters. As long as these people can hold down a high-paying job and are instilled with the confidence that they can continue to do so, they will buy, because most of them do have enough dp and a good lending profile.

However, when layoff starts, even those who can buy a home with 50% down will think hard about the decision.

Tokyo is a good example of this. Many Japanese have loads of savings. When the Tokyo core market bottomed, rent was actually more expensive than buying, yet most of those Japanese with substantial savings still stayed on the sideline because the job market did not pick up until later.

Committing oneself to a 30-year loan, or 15-year loan, especially with a couple of mouth to feed, is a game of confidence. The most effective way of shattering that confidence is a nasty job market.

Bank rate +2% : cool housing
Job Market going down: crush housing

Seriously though, this credit freeze-up is truly amazing to watch. I was but a mere lad during the S+L crisis, so this to me is much more interesting to see.
Yes, a once (hopefully) in a lifetime ringside seat. I tell my friends to take notes. In the past, I wondered how we'd ever be able to hit the "down slope" on the Shiller graph. There was always the hint that the FBers could do a workout or refinance to mediate the fall. Workout? The cost of translators alone makes this untenable. Refinance? Oops, sorry, no more loans. Makes perfect sense (in hindsight), as the market is now behaving rationally. ARMageddon is unavoidable and it's going to be brutal on the way down, one foreclosure at a time. I am now carrying around a copy of the Credit Suisse ARM reset chart in my wallet, along with the Shiller graph. Two pictures, two thousand words.
As the mortgage nazi says: "No loan ... FOR YOU!"

This is a bit OT, but I read in another blog that the Bay Area RE infolink (local MLS) has adopted a policy where the buyer and/or seller can have the final sale price of a home withheld from the MLS database. This is presumably to prevent developers, or perhaps Realtors (TM) from letting lowering comps from seeping into the system. Has anyone else gotten wind of this?

If true, this is yet another REIC truly evil ploy.

OO,

I would really invite you to read the Chronic-le link EBGuy allowed skibum to post above. In spite of sterling credit, great jobs and respectable down payments BA MB's are having a tough time getting financing for their "clients". One even had to eat his fees just in order to be able to deliver as advertised.

At this point it isn't so much a matter of the borrower being willing to strap a board to his/her @$$ and take the plunge into debt, it's the fact that there is no market for MBS right now.

"No loan... FOR YOU!"

"The cost of translators alone makes this untenable"

EBGuy, well... YOU'RE in rare form today! Outstanding! (Just make sure you get a heap plenty big wallet to carry that chart around in!)

@skibum

I believe this is correct. It is why the RE self-reported data shows incredible gains in the face of overwhelming, easily observable evidence to the contrary. All I have to do is search PropertyShark on houses I've seen sold in the past 6 months to know they're full of shit and those sales are going through well below asking.

I just told the selling agent for a house I've been watching for months (and refused to accept an offer from me earlier) that I'm now willing to pay them their purchase price in 2004 plus their commission. That's only about 22% off asking, which doesn't make me happy, but I note even this healthy offer is so low it utterly offends the seller.

I told her they can wait until spring when I'll be willing to offer about 35% off asking, even less if I find out their ARM reset.

@Randy
Have you noticed your lowballs being given more respect/consideration than in the past?

If I were a listing agent I would try to get the offer approved since I can double dip the commission and times are tough for realtors, although most of them seem to be semi retired housewifes that work for vacation money.

I'm not buying for quite some time, I'm getting to like renting more and more. I just follow the bubble out of habit now plus its really getting interesting. Its like all my bearish dreams are coming true (in super slow motion).

DinOR,

I did read that piece, the issue is more with the marginal borrowers. The example quoted is a no-doc loan with no income verification despite 25% down, and based on the info, it seems like he is buying a $2M home! No wonder the bank won't lend him the money. If he were buying a $1M home, the story would have been different.

Things are a bit different here in the fortress, and I concur with you that fortress will be affected in the end, but the process will just take much longer. There are, sadly or fortunately, enough buyers in the fortress with much more than 20% down and a high household income to qualify full-doc loans. In fact, full-doc rate for the solid borrowers will actually improve because the raison d'etre for banks is to lend money.

Maybe the banks' attitude changed towards anything less of a full-doc, conventional and compliant loan, at least I haven't seen the rates move much for the conventional categories.

Most importantly, the job prospect of BA is still very hot, it is still in the mini-1999 phase. Unless the job market tanks, which I believe it will a few months later, I don't see the housing price coming down significantly in BA.

OO,

Well, I'm not sure what was meant by "employment hiccup" but they did say the borrower had a high FICO score, 500k in the bank plus he was putting 1/4 down. He had two offers for funding on Thursday, then one, then none?

In all of this, the one thing I -didn't- want to see was the job market tank! So now you're telling me we have to "hit the wall doing 100 m.p.h" from a financing standpoint AND have employment hit the skids to see a meaningful correction in the BA!?

OO,

What I "should" have said was this shows more of a lack of faith on the lender's part being skittish about the underlying asset than the credit worthiness of the borrower?

With 1/4 down, (your credit shouldn't matter) right?

DinOR,

well, job and housing is highly correlated, it is just impossible to imagine that job market keeps humming along while the housing value tanks. Housing market tanks only because the sellers HAVE TO sell at whatever price they can unload as they get foreclosed upon, if the sellers can all hang on to their homes, there will be no housing bust!

I have yet to see a housing bust WITHOUT the job market bleeding. BA went through the 70s with double digit inflation, and a minor recession without much job loss, so the housing market never went through major correction nominally.

Back to the article, this guy is buying a $2M home, that is a totally different risk category. After he put down $500K on the house, how much does he still have left in the bank? If this guy cannot show a dependable track record of IRS-verifiable earnings, he would not have gotten any money right around the time when I bought my home. Banks care more about your reliable income stream than just savings, unless you put half down or something.

DinOR,

I am not saying that I wish for a bloody job market, I just think it is going to happen when the home ATM runs dry. 2/3 of our economy is supported by consumption, if we run out of consumers, we run out of steam.

That's why it is important for all the bears here to live under our means and save up as much as possible so that we can do some bottom fishing when things look really nasty.

To be honest, we're looking at putting between 45% and 60% down, depending. And my wife has a long history of uninterrupted, very high income (mine is sporadic and often comprised of gains). Yet I'm not certain we could get a mortgage without a full visit to the proctologist.

I am not saying that I wish for a bloody job market, I just think it is going to happen when the home ATM runs dry. 2/3 of our economy is supported by consumption, if we run out of consumers, we run out of steam.

OO,
That is probably true, but don't forget that it's not merely a matter of personal consumption drying up that will slow down the economy. This drying up of corporate credit will do wonders to M+A activity, corporate spending (capital upgrades, hiring, etc.), and Wall Street bonuses. That's another blow to the jobs outlook.

"Bottom line" (to quote our friend): it's looking more and more likely to me that job cutbacks are in our near future. This also means Fed rate cuts will follow soon after that. It may or may not be this calendar year, but I think it will happen soon.

Randy,

You are fine. Even if there is tightening for borrowers of your profile, it will be very short-term. If banks don't lend to people like you, they might as well close down and call it quits.

I told her they can wait until spring when I’ll be willing to offer about 35% off asking, even less if I find out their ARM reset.

Evil Randy, just Evil. I like it! :twisted:

OO,

Oh I wasn't suggesting you'd delight in seeing soup lines by any means. And yes, I realize we simply can't have a correction without some pain. I just hope the majority of it stays where it belongs (in da' REIC!)

I get the impression that most here live below their means in good times and in bad.