Loan types dwindle as mortgage mess widens

http://www.msnbc.msn.com/id/20164529/ ^ | 8-8-07

[starfish923]

I understand everything you said. There are always exceptions. My comment was general, as I think you know, so I stand by what I said.

Homes are usually a person's biggest debt. It is insanity to buy a house without the means to do it. It's a set-up for failure. And, the bigger the investment of money, heart and hope, the bigger the failure when the bank repossesses. Who needs that?

[econjack]

Man...do I hate this solution. It's like the old Savings and Loan crisis of years ago. Back then, the S&L's were offering very high savings rates to depositors. Most were not federally insured. The reason the S&L's could offer such high rates was because they were making high-risk loans, much like we are seeing in the mortgage market now. When they went belly-up, in comes the federal gov't with a bailout.

Sorry, people, high returns are associated with high risk. You put your money in the high return because you were greedy and didn't want the lower (safer) return. You gambled...you lost. Not my problem, and sure as Hell don't use my tax dollars to reward those companies or investors who played that game.

To me, the same logic applies here. Those mortgage companies and their investors made their bed, now let them sleep in it, even if it is out on the sidewalk.

[DCPatriot]

Okay...been reading your Chicken Little screeds on the real estate market for months.

You obviously need to take a Economics 101 course.

Vacant, boarded homes are a physical and economic blight on any neighborhood. They devalue EVERYBODY's home. The only help these people who are upside down in their mortgages is government intervention

People who are liquid will be able to take advantage of the inventory glut. Right now, it's 'investors' with cash who are buying bank/REO properties before they even reach the papers.

I know of one who services the network of the largest law office that specializes in going after people behind in their mortgage or condo/HOA fees. He's purchased 3 of them already this year.

[DCPatriot]

Well, if it's my responsibility as a taxpayer to give a damn about rebuilding New Orleans..then the government can co-sign (guarantee) for the shmuck who sees his interest rate jump to an unaffordable one which will:

1) See him lose his house
2)See the lender incur costs foreclosing (It's expensive)
3) See the investor who funded the 2nd trusts..the 10%, 15% or 20% mortgages get out of the market.

[RockinRight]

One more thing: Don't expect your mortgage company to inform you when your loan-to-value ratio falls below 80%. When that happens, most loans allow you to drop your credit life insurance that is often tacked onto your loan. The bank gets a cut of this premium and it is some of the most expensive insurance on the planet. When I was buying some investment property, the lender told me I had to have mortgage insurance because I was putting less than 20% down. I said: "Fine. I'll find my own insurance company and make you the beneficiary." In a surprise move, they more or less said forget it...probably because they weren't going to get their slice of the premium.

Unlikely that they saw a dime from the mortgage insurance, or would have. I've been in the business for 7 and a half years. more likely, they did a "lender-paid" MI program, which is normally a slightly higher rate with no MI, and ate the cost to "shut you up" (no offense intended.)

As far as the first point, yes, you do often have to remind them. Just like I have to remind my car insurance company I am turning 30 this weekend to get my corresponding rate drop.

[RockinRight]

He would be a foll to do it.

What's a "foll?" ;-)

[RockinRight]

Oh, you are correct, completely. Just saying that subprime does not always equal disaster, and, for many years, subprime loans were profitable.

[RockinRight]

People fail to realize that just because they think "I've got mine" that they are immune to a crash in the real estate market. They don't get it.

The ones that really make me chuckle are the ones that are cheering on a 75% drop in prices (which is more than I think we'd ever see...) so they can get "good deals" on real estate...but fail to realize...if that happened across the board, they too would probably lose their job or otherwise be in a situation where they aren't buying ANY property.

[ccmay]

If Bush wasn’t so busy steering hurricanes, he could be holding ‘common sense lending practices’ seminars for these mortgage lenders. He makes me so mad.

Rubbish! He should be personally inspecting and fixing every crumbling bridge in every deteriorating Rust Belt s**t-hole. Presidents have to set priorities, after all. Lives are at stake.

[Hydroshock]

So? I am not talking about your neighborhood or mine. I am talking about sound banking and economic policy. And again I say it is very hypocritical of many who for years have decried any form of governmental regulations or intervention to now be screaming for if, like Mr. Cramer is. What is stopping the mortgage companies from offering to convert all the arms to 30 fixed loans at 4% interest. Nothing, but the fact that it does not help them it helps the home owners. They do not care about the homeowners as they claim. They are running scared.

[laotzu]

He should be personally inspecting and fixing every crumbling bridge...

I'm afflicted with a bald patch, and have been standing in line longer. I can't believe how he could turn his back on me...a fellow Texan.

[jennyjenny]

Credit life insurance is not the same as private mortgage insurance.

[ex-Texan]

Mortgage Renewals Set to Prick U.S. Property Bubble

Excerpt:

The peak month for the resetting of mortgages will come this October, according to Credit Suisse, when more than $50 billion in mortgages will switch to a new rate for the first time. The level will remain above $30 billion a month through September 2008.

In all, the interest rates on about $1 trillion worth of mortgages, or 12 percent of the U.S. total, will reset for the first time this year or next. A couple of years ago, by comparison, only a marginal amount of mortgage debt - a few billion dollars a month - was resetting each month.

So all the carnage in the mortgage market thus far has come even before the bulk of mortgages have reset. "The worst is not over in the subprime mortgage market," analysts at JPMorgan recently wrote to the firm's clients. "The reason for our pessimism is that loans originated in late 2005 and all of 2006, the period that saw peak origination volumes and sharply decreased underwriting quality, are only starting to reset in large numbers." * * *

This slow motion train wreck is just getting started.

[durasell]

This is misleading. It gives the impression that the thing implodes all at once when the rates re-set. Not true. It’s going to be a slow leak and then a very fast one.

Like the character in the Hemingway novel who answers the question of how he went broke, “Two ways,” he says. “First slowly, and then very fast.”

[stephenjohnbanker]

Tip of the iceberg.

[ex-Texan]

Watch This Video !

Sort of sums up the real estate agent sales game . . .

[stephenjohnbanker]

Looks like North Rodeo Drive in Beverly Hills..........she missed a nice commission : )

[Clemenza]

What will this mean for all of the recent divorcees and former strippers who thought they would make "a killing" selling real estate.

A friend of mine purchased a lot of property along Biscayne Boulevard in Miami following the Overtown Riots. Sold most of it three years ago at the height of the boom, and he is a very wealthy man. Which puts me in mind of Rothschild's old axiom to buy at the sound of cannons and sell at the sound of trumpets. Or, when there's blood in the streets, its time to buy.

[Hydroshock]

Ouch!!! But between the symbolism of them being blindsided by a truck a perfect metaphor for how the rapid changes in the market have hit them. And the ad for a company willing to undercut the traditional 6% commission is telling on how many will be saling there properties in the future.

[durasell]

It’s the folks who did what they thought they should be doing who will get hurt. It always is.