patrick.net

Things are slowing down...

New thread: 1000% hedge fund wins subprime bet

I read today that over 16% of home equity loans are over 60 days past due. And this was a acros the full spectrum of credit quality...this was not just the lower tiers. This smells like so much trouble, and here's why: even if housing prices stopped their descent today, and just stayed flat, there would be no additional equity for these folks to extract. So the banks will take a hit in 2 ways: no new home equity originations, and some losses due to the ones which won't be repaid.

Devil's in the details. If what they do is leave the payments fixed at the low rate while the unpaid balance balloons at a (reasaonble) market rate, then I'm OK with it, although you gotta wonder if you're already upside-down in a house why you'd just sit there while the hole gets deeper. If, on the other hand, they're gonna let these idiots and greedy speculators have below-market fixed-rate loans at 3%, then I and everyone else who did not overpay, did not borrow more than we can pay back, and that got a fixed-rate loan are gonna be royally pissed off. I mean, where's my 3% 30-year fixed-rate loan? I don't get one because I was conservative enough to lock in 5.25%? It's time to break out the pitchforks and torches.

This Paulson proposed bailout plan will fail all on its own. It will bailout a small sliver of the subprime homeowners, but not stop price declines and all the rest of the complex housing and credit market mess. Consumers and the markets are expecting a miracle...they won't get one...the banks haven't even completely figured out how to implement this plan.

My husband was a mortgage broker for 2 years. We can't lump everyone into the same "mold" and stereotype the whole industry. Before my husband had his own business as a broker, he worked for one of the bigger companies doing mortgages. The whole reason he got into doing it for himself is that he hated the way most lenders "talk over people's heads" so that they don't really understand what they're getting into and put stuff into the contract that they know nothing about because they don't know how to read it. He wanted to be more than that - real to the customer. He would show up to do signings and meet customers wearing shorts, a polo shirt, and sandals, because he didn't want them to see him as another one of those stuffy salesmen. He got alot of business that way and made some good money, yes, but more importantly, he helped many people out of very bad financial situations and into good ones that would help them get out of debt. If you do it for the right reasons, it's not so bad. Don't lump them all together into one stereotype - it's just not fair to all the ones that are doing the right thing. Just like stereotyping Catholic priests as all of them being pedophiles - its just not true.