Housing Collapse II: Electric Boogaloo!
PING!
Posted on 12/10/2014 7:21:18 AM PST by TurboZamboni
WASHINGTON (AP) — Some Americans will soon be able to buy a home with a down payment as low as 3 percent, compared with the current minimum of 5 percent, the mortgage giants Fannie Mae and Freddie Mac say.
The new lending guidelines announced by the companies Monday are designed to help more low-income and first-time buyers afford homes. Millions of Americans lost their savings or no longer had the income needed to set aside money for a home in the aftermath of the 2008 financial crisis and the Great Recession. That has held down the sales of houses and condominiums and slowed the economic recovery.
The guidelines are designed to prevent the kind of reckless lending that fueled a housing bubble and eventually triggered the recession. Borrowers must have enough income to repay loans on a monthly basis for homes that would be their main residence. This guideline would be intended to limit financial speculation.
(Excerpt) Read more at twincities.com ...
Also, when you buy a home with an FHA loan... you the buyer pays every month the insurance. Its built into your payment. So you get it for 3% down, but you pay every month the principle and interest, plus the loan insurance.
Housing Collapse II: Electric Boogaloo!
PING!
“Those who don’t learn from the past are condemned to repeat it.”
So you are against offering loans to those who are bad credit risks, and then calling those loans a first class product when they are resold to investors? I am too.
Interesting how we the whole mortgage crash is always the fault of the least sophisticated player in the whole game.
Just tell me how to become the next John Paulson... ;-)
My friend in the business basically bribes them to move out . . . he knows the time of month when they are short on money and tells them he will give them $300 cash (or thereabouts, depending on the situation) if they are out by a given date (usually just a few days before their government check arrives).
So they move out and the place isn't totally trashed. Quite often, they leave behind flat screen televisions and other appliances which he can resell to recoup a lot of the $300.
Of course, he still loses money in the process and takes steps to minimize the number of these renters, but he can't avoid them completely.
With my bad luck, I'm afraid I'd get too many of these types. The bribe to move out really goes against my grain, even though I understand it is a lot cheaper and quicker than a foreclosure, particularly in localities where Democrats make the rules.
But its not unique to real estate investment. Half of the business world financials are overstated.
The problem shouldn’t return if banks are not dishonest. If they make that loan and hold the paper, they will be cautious about getting repaid.
If they intend to sell the paper as almost always happens, then all they need to do is be honest that its a loan that will likely default.
Our deep problems came from banks basically selling flood damaged cars as brand new, while hiding the fact they were flood damaged. If the final investors knew what they were being asked to buy, they would have paid far less and there would have been much less investment money available for the bad loans in the first place.
And it all comes from government. Who is incestuous with the banks.
But at the lowest level of culpability overall is the individual borrower.
And now we're going to start the whole thing over again with 3% down loans? If you don't have a good piece of skin in the game in the form of an equity down payment, the loan will default sooner or later and we'll be right back in the same mess we haven't even recovered from yet.
Stupid is, as stupid does is the motto of the federal government, especially under the democRATS.
Thank you for educating me on this subject, kjam. Seemed more straight forward “back in my day”. Seems very complicated now.
“I agree with you, but investors buying these loans aren’t ignorant as to the system. “
Very very true. That was just my on the fly BS. But the buying investors most certainly knew. And they also knew they could act like innocent dupes (Euro banksters) and demand the US taxpayer bail them out. Which the congress will quickly do because they created the problem by demanding Freddie and Fannie make loans to people who could never hope to buy. (at the request of bankers who own them)
Its all a big reach around merry go round, and occasionally as they fly past, they point the entire blame at the average consumer.
You are right though,
The closest I've come is I sold one and provided the financing. (I've done that on a few) But this one in particular, it went south. I just blew the call and this couple crashed and burned bad. (drugs, gambling, and divorce) We offered them the cash for keys etc but he wouldn't take it because he didn't want her to get any thing. They had paid 15k down on the house, and were 4 years into a loan. He would not sell it. It took about 3 months but we finally got the house back and it only needed carpet and a couple of rooms repainted. I sold it again about 3 months later with same type deal.
The thing I have learned is that it takes anger and emotion to destroy a house. I don't let that happen. You be NICE to them. You treat them with respect. You tell them that your sunday school class is praying for them. You treat them very careful during the time they are leaving or you're getting them out. You have to manage their emotions. To many landlords think "I just gotta get em out". That is what gets a house torn up.
Just my two cents worth.
We did a similar deal. Only ours was an FMHA (USDA) loan with a small amount down. We signed the papers in 1996, and own it outright today. It’s a good feeling.
While the mortgage bankers helped the problem along, it was the federal government pushing them into making poorly underwritten loans so the poor and disadvantaged could get their piece of the American Dream, was what started and fueled the problem. I remember times when Janet Reno threatened jail time to bank officials if they wouldn't comply with the Community Reinvestment Act. Much like the Affordable Care Act, the name is a misnomer. It should have been called the "How To Make Bad Loans Act" instead.
Underwriting standards, long established in the industry to qualify borrowers and lessen the chance of default on their loans, were thrown out the window when the feds started forcing the industry to make loans they wouldn't have normally made. New loan products were developed to accommodate the pressure from the feds. Instruments like Adjustable Rate Loans with low, initial qualifying and start rates, low-to-no down products, no-qualifying loans and many others that were bad products created to accommodate the feds desire to qualify more folks who didn't normally qualify. When FNMA and FHLMC started buying the poor quality loans and packaging them for the secondary market to be sold to investors around the globe, the industry was changed forever.
Without the federal government involved in pushing for more underperforming loans, the mortgage banking industry would not have made all of the poor quality loans that resulted in the housing collapse. They were forced to change their long-standing underwriting standards under duress, with the feds holding a gun to their heads.
You, my FRiend, have wisdom.
Increasingly rare these days.
It was 3% for a few years ago and then they raised to 5%. Big deal. Even a $150k house, which was bottom cost in Denver when the market crashed, would require $4,500 down plus some closing costs, about $7,000 in total. Most people can’t put together $1,000, much less $7,000.
yeah I call that a real stretch. We get a lot of “we’ll rent out a room to whoever.”
Our loan guy does a very through job and he’s kept us and clients from wasting time. My wife did loans until the regs changed and she didn’t want the hassle of putting up with everything. We were lucky to find this guy.
Is this Electric Boogaloo 2 or 3?
I’m a Realtor working for a Broker. Sometimes I get buyers who come with a pre-approval letter from a local lender already in hand. Other times I tell them we need to get them pre-approved. I’ll point them to a lender or they can go to one of their choice. But honestly... unless they’re buying a house I own... I don’t get into their pre-approval process. We have an in house lender that can work the deal for them, but most often they know someone at a bank or something.
As Bawney Fwank used to say, “Pwedatowy Wending”.
(and if it’s not that, it’s “Wedwining”)
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