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
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.
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.
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.
Gettin close to time for Bernanke to fuel up the chopper.
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!!!!!
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.
Why is that?
Not in New York City...it's heating up again this fall.
I'm getting seriously tired of the lead suspect in Natalie Wood's unfortunate death trying to convince me to sell my house one piece at a time (reverse mortgage) and then trying to read the reams of fine print at the bottom of my analog screen every morning at 5:00 AM on AMC.
All lenders are predators when it comes right down to it.