Mortgage company suddenly closes doors

Seattle Times ^ | Saturday, August 16, 2003 | Bradley Meacham and Peter Lewis

[mrweb]

Credit bubble about to burst.

[John W]

So,if you have an existing mortgage with this company,what happens?

[Always Right]

Credit bubble about to burst.

Bubble Boy alert! Bubble Boy Alert! Bubble Boy Alert!

[Always Right]

So,if you have an existing mortgage with this company,what happens?

Nothing. The only people who should be impacted are the people in the process of getting a loan.

[FReepaholic]

>>...So,if you have an existing mortgage with this company,what happens?...<<

As I understand it, companies like this immediately sell your loan. They don't hold it.

Or either they never "own" it in the first place, just act as brokers for other underwriters.

Of course, I could be wrong. :-)

[Hoosier-Daddy]

FYI I am a mortgage broker and just to let you know, the people at the Phoenix branch of Capitol Commerce, are amongst the finest people I've met in my 10 years in this industry. Many employees were hurt as well, all fine people. In addition to many consumers who now are looking at the prospect of higher rates, we brokers probably lost hundred of thousands, maybe millions of dollars. I would not walk a second in the shoes of the fellow who failed to hedge: he's probably been losing his mind in the past month hoping rates would turn around so that hundreds of his company's employees wouldn't lose their jobs and the company not lose millions (maybe billions) of dollars. Damn shame. They are truly great people to work with.

[upchuck]

Looks like the housing industry's "house of cards" (pun intended) is beginning to get a little shakey.

This should not come as a surprise. Too many people buying too many houses for too little money using every creative financing scheme in the books. You know it can't last forever.

A friend of mine just sold her house for 130K. The folks that bought it went FHA and put down less than 2K. The market won't stand for funny business like this.

Damed glad my house is pd for.

[lelio]

Another story from yesterday about it. I expect to see a lot more of this.

[lelio]

A friend of mine just sold her house for 130K. The folks that bought it went FHA and put down less than 2K.

$2k? Must not of heard of the latest thing: getting a mortgage for 80% of your house and then a 2nd one for the 20% downpayment that you don't have in cash. I overheard two coworkers talking about this, I thought I was taking crazy pills. And in this economy where everyone is loosing their jobs. Amazing.

[Friend of thunder]

Credit bubble about to burst.

Barring a miracle, you are correct. Personal debt is extremely high. The growth in credit card debt is freighting. Something has to happen and I am afraid it will not be pretty.

[Lijahsbubbe]

What scenario do you envision?

[M0sby]

I understand what you are saying...

But if someone has enough money to pay both loans in their monthly budget but not enough to save for a down payment.. what's wrong with the senario??

If you are going from a apt. rent of $1,000-$1,200/month to a total payment of $1200-$1400/month -that will get you about $180,000 -$200,000 house (including taxes and insurance per month..)...
That's not too much of a stretch for a couple who makes $40,000-$50,000/year (without a lot of CC payments or huge car payments).
I help people at my work figure this out all of the time-
3 couples who thought thwy would never be able to get a home are now home buyers with 30 year FIXED rates between
%5.5 and %6.5...
I understand the doom and gloom senario of "What if you lose oyur job or something" but I don't know very many people who have the means to survive that(for very long) no matter what they put down...
Just wondering..

[templar]

If it doesn't last long enough, the whole economy may come down around our ears. Every aspect of the financial system seems to be a whole lot shakey lately, IMO. And the financial system powers the economy.

[Eva]

My husband heard something about this on the radio last week. It didn't sound as though this was the only company having this problem.

[Windcatcher]

I'm in the market to buy a house, and they recommend this on realtor.com. I thought it sounded fishy, too. So far I've only been looking at listings, but now I'm wondering what this will do to rates. Maybe the fed should have done that 10-year bond buyback after all to keep long term rates down.

[July 4th]

I would not walk a second in the shoes of the fellow who failed to hedge

I remember several years ago, someone at Merrill Lynch screwed up a hedge with mortgage-backed securities. The guy filed papers on Monday, instead of the previous Friday. I think it cost Merrill $100 million or something like that.

[Uncle Hal]

Expect more of this. They obviously were exposed when rates went up suddenly. They had funded some loans that they had not sold and these loans were now only saleable at deep discounts. Somebody goofed. They were probably so successful during the mortgage boom of the last few years they thought they could do no wrong. You always have to cover your backside.

[Glenn]

Credit bubble about to burst.

Money about to dry up, is more like it. You have to wonder how Fannie and Freddie Mac keep assuming risk on goofy loans at such a low rate of return. If the credit bubble does burst, i.e., the money does dry up, you're looking at a real hit on the GDP as well. Should be interesting.

[Friend of thunder]

What scenario do you envision?

With average household credit card debt close to $9,000 dollars and personal savings rate at about 3.8% there is not a lot of wiggle room. Especially considering that half of all American families have savings of $1,000.00 or less .

If people cannot pay back their loans then the lenders must eat them (the loans not the people). Depending on the solvency of the lenders massive defaults could trigger bank failures. I am not sure how it will turn out but many people are living way beyond their means, this cannot go on indefinably. Something has to give.

[Windcatcher]

Tell me about it. Housing prices have been going up 20% per year in my area, and they're still selling like hotcakes. I talk about it to my friends all the time and none of ud can understand where the salaries are coming from to pay these insane prices.