Posted on 12/08/2006 10:07:04 AM PST by RobRoy
Still, at least the lenders can take comfort in the fact that they’ve got all the risk off their books, can’t they? Not quite. MBS buyers may have been very reckless recently, but they’re not completely stupid. Usually the lender must buy back mortgages that go bad within the first few months. That could prove a trap for reckless lenders. This week, Ownit Mortgage, a formerly fast-growing subprime lender in California, shut its doors after apparently running out of cash to meet its repurchase obligations. It’s unlikely to be the last firm to meet that fate.
Thought some of you might be interested
Recession cometh.
They ought to write about UK housing market - a market where you can now get a mortgage up to five times annual salary. Talk about risk.
They do that in California now.
Don't they also have a 100 year mortgage in the UK now?
I was under the impression that to be securitizable loans had to meet some threshold requirements - either because the market required it, or the government regulators did, and that the really flaky loans were not turned into Mortgage Backed Securities.
How many loans go bad in the first few months???? I would guess almost none. Much to do about nothing.
They've got no room to talk. A dear friend of mine is a young married woman, lives in Bristol England. Her husband has advanced degrees in physics and computer science and a good job. They were looking ten or more years of renting before they could afford their first home until her parents came along and loaned them the money. There really is no such thing as a "starter home" over there.
They do more than than in California. With the average price of a home approaching $500,000, you can't honestly believe but a small percentage of the people buying these homes are clearing $100,000 per year. It's just not realistic.
And then there is that whole divorce thing...
Thanks for posting this.
The author of the article - Heaton - is both stupid and ignorant.
He's stupid because he doesn't understand that lower interest rates cause higher home prices. You can buy twice as much home at 4% as you can at 8% interest rates.
He's ignorant because he doesn't know that inflation has dropped to 2% from 6% in the past decade, lowering the real rate of interest.
Another example of half-wit whooping from the undeducated and inexperienced.
>>How many loans go bad in the first few months???? I would guess almost none.<<
One would think so or, in your case, "guess" so. But read the last paragraph again. One important point is that if that IS happening, then "Houston, we have a problem". That is what the author is saying.
Gettin close to time for Bernanke to fuel up the chopper.
>>He's stupid because he doesn't understand that lower interest rates cause higher home prices. You can buy twice as much home at 4% as you can at 8% interest rates.<<
Actually, thanks to the rule of 72, you can buy MORE THAN twice the home at 4%. Actually, I mean twice the price, as you accurately mention in the first sentence.
But I don't see where the author doesn't understand that lower interest rates cause higher home prices. Very few people that can fog a mirror don't understand that axiom. It is a given that he is going beyond.
>>He's ignorant because he doesn't know that inflation has dropped to 2% from 6% in the past decade, lowering the real rate of interest. <<
I doubt that as well. It is also based on doctored figures. But that is a topic of another thread.
I think your main issue is not that he is "stupid" but that he did not specifically bring up basic details to educate the reader. He assumes perhaps a more sophisticated reader. Not too much, of course, because he does feel the need to expain an acronym. But you can only cover so many basics without turning an article into a textbook.
Don't worry! Mrs. Clinton will be along to save common people from those waskely weblicins--while the Dixie Chicks will have one hit after another!!!!!
My sister in law once was a realtor, she quit to raise kids adn went back to teaching after. She told me once that at a large agent seminar and development course held for agents belonging to Century 21 agencies that one of the presenters told them that the most common time for mortgages to go into default was the first 6 months. The reasons are the owners go into hock to mach on things for the house like furniture and such or they did not count on higher bills (taxes, insurance, utilities), and they did not leave enough room in their budgets to cover maintenance and life emergencies. In other words they cut it to close.
The agent and the loan officer go their money so they did not care if the buyers were on the bubble.
Why would Bernanke need a chopper?
I'm not sure I buy into this. In my own experience, my mortgage on my first house became less and less of a problem simply because over time I started earning more from raises and even cost of living increases.
Unless these people have a balloon rate, or continue to spend beyond their means, the fact that the mortgage payment doesn't rise over time should make it easier to pay over time.
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