Author Topic: Here We Go Again (Housing Bust, Anyone?)  (Read 1942 times)

Online Solar

  • '
  • Hero Member
  • *****
  • Posts: 34269
  • Gender: Male
Here We Go Again (Housing Bust, Anyone?)
« on: February 01, 2013, 12:27:24 PM »
No-money-down mortgages are back

Some affluent buyers are getting the keys to their new home without putting a penny down.

It’s 100% financing—the same strategy that pushed many homeowners into foreclosure during the housing bust. Banks say these loans are safer: They’re almost exclusively being offered to clients with sizable assets, and they often require two forms of collateral—the house and a portion of the client’s investment portfolio in lieu of a traditional cash down payment.
http://www.marketwatch.com/story/no-money-down-home-loans-are-back-2013-02-01


Koolaid is for kids, TEA is for adults

Offline JustKari

  • Hero Member
  • *****
  • Posts: 1911
  • Gender: Female
Re: Here We Go Again (Housing Bust, Anyone?)
« Reply #1 on: February 01, 2013, 01:15:19 PM »
Solar, are you TRYING to bait Vern?  :ttoung:

Online Solar

  • '
  • Hero Member
  • *****
  • Posts: 34269
  • Gender: Male
Re: Here We Go Again (Housing Bust, Anyone?)
« Reply #2 on: February 01, 2013, 01:22:06 PM »
Solar, are you TRYING to bait Vern?  :ttoung:
Trying to blow down that strawman house he lives in. :laugh:
Koolaid is for kids, TEA is for adults

Offline Vern

  • Full Member
  • ***
  • Banned!
  • Posts: 105
huff and puff all you want solar.
« Reply #3 on: February 01, 2013, 05:56:43 PM »
from your link

"It’s 100% financing—the same strategy that pushed many homeowners into foreclosure during the housing bust. Banks say these loans are safer: They’re almost exclusively being offered to clients with sizable assets, and they often require two forms of collateral—the house and a portion of the client’s investment portfolio in lieu of a traditional cash down payment."

How do you pretend to miss the part about "the client’s investment portfolio " as  collateral? 

But lets examine the first sentence.  100% financing didnt push "homeowners into foreclosure".  It simply gave them no incentive to not walk away from the home when the value of their home plummeted. I think we can both agree that 100% financing with no other form of collateral is a bad idea.   

check this out. (what a coincidence, another Bush housing policy from 2004)

BUSH ADMINISTRATION ANNOUNCES NEW HUD "ZERO DOWN PAYMENT" MORTGAGE
Initiative Aimed at Removing Major Barrier to Homeownership

http://archives.hud.gov/news/2004/pr04-006.cfm

Offline Vern

  • Full Member
  • ***
  • Banned!
  • Posts: 105
why is 2004 important?
« Reply #4 on: February 01, 2013, 06:04:00 PM »
from the link above.

"President Bush has pledged to create 5.5 million new minority homeowners this decade, and this historic initiative will help meet this goal."

mmmm, do you think they pledged their investment portfolio as collateral in lieu of a downpayment. 

Online Solar

  • '
  • Hero Member
  • *****
  • Posts: 34269
  • Gender: Male
Re: Here We Go Again (Housing Bust, Anyone?)
« Reply #5 on: February 01, 2013, 06:52:31 PM »
You completely miss the point, these homes will not go to the average American, they will be bought up by investors, which isn't entirely bad, but when you have this many homes entering the MKt, it upsets the Mkt all over again.


When I said here we go again, I was talking about bubbles popping.
Koolaid is for kids, TEA is for adults

Offline Vern

  • Full Member
  • ***
  • Banned!
  • Posts: 105
sorry solar, my house of straw is still really really really really intact.
« Reply #6 on: February 01, 2013, 07:52:25 PM »
You completely miss the point, these homes will not go to the average American, they will be bought up by investors, which isn't entirely bad,

mmmm, I seem to recall pointing out that these borrowers needed to use their portfolios as collateral. So I dont think I missed the point that these home will not go to average Americans. 

but when you have this many homes entering the MKt, it upsets the Mkt all over again.

When I said here we go again, I was talking about bubbles popping.

how many homes?  from your link

"While these loans make up a small portion of banks’ overall lending, demand for them has been rising. BNY Mellon Wealth Management’s mortgage team says it experienced a 10% increase in requests for 100% jumbo-mortgage financing involving clients’ investment portfolios in 2012 compared with a year prior."

"BOK Financial, which offers up to 100% financing just to medical doctors through its private-banking divisions in eight states, including Arizona, Oklahoma and Texas, says there has been a roughly 25% increase (or about 100 more borrowers)"

So solar, if its bad that a couple of hundred of rich people got 100 % financing but with collateral then it must be really really really really really really really really bad that the federal gov't gave 100 % financing without collateral to 150,000 people. 

from the HUD link

"Preliminary projections indicate that the new FHA mortgage product would generate about 150,000 homebuyers in the first year alone."

Online Solar

  • '
  • Hero Member
  • *****
  • Posts: 34269
  • Gender: Male
mmmm, I seem to recall pointing out that these borrowers needed to use their portfolios as collateral. So I dont think I missed the point that these home will not go to average Americans. 

how many homes?  from your link

"While these loans make up a small portion of banks’ overall lending, demand for them has been rising. BNY Mellon Wealth Management’s mortgage team says it experienced a 10% increase in requests for 100% jumbo-mortgage financing involving clients’ investment portfolios in 2012 compared with a year prior."

"BOK Financial, which offers up to 100% financing just to medical doctors through its private-banking divisions in eight states, including Arizona, Oklahoma and Texas, says there has been a roughly 25% increase (or about 100 more borrowers)"

So solar, if its bad that a couple of hundred of rich people got 100 % financing but with collateral then it must be really really really really really really really really bad that the federal gov't gave 100 % financing without collateral to 150,000 people. 

from the HUD link

"Preliminary projections indicate that the new FHA mortgage product would generate about 150,000 homebuyers in the first year alone."
Seriously, do you really think these cheap homes will go to people planning on living in them?
Just because a few stated an increase, doesn't speak for the investment companies that will be scooping up these deals and turning them over, that's how investment works.

I am in the process of selling a home in the Summer, now I have to move that time frame up to beat the glut about to hit the Mkt, a small bubble if you will, a bubble that will drive down demand forcing me to lower my price.

But to be honest, I knew this was coming, just not this soon.
Koolaid is for kids, TEA is for adults

Offline redlom xof

  • Hero Member
  • *****
  • Posts: 821
Re: Here We Go Again (Housing Bust, Anyone?)
« Reply #8 on: February 02, 2013, 09:04:32 AM »
Good post Solar, I agree completely.

It seems we're doing exactly the same practices that got us into the 2007 troubles.

I wonder what the credit agencies are giving these potentially toxic assets ? AAA again ?

Also, I wonder when people will start betting against this and take out the credit default swaps like they did last time.
"Christians are expected to pacify angry Muslims, Communist brats and homosexual radicals and Mexicans who convinced themselves that they own our land. That tells me the Christians are the better people among brutal and violent beasts."  Yawn - 15th May, 2013

Online Solar

  • '
  • Hero Member
  • *****
  • Posts: 34269
  • Gender: Male
Re: Here We Go Again (Housing Bust, Anyone?)
« Reply #9 on: February 02, 2013, 10:10:06 AM »
Good post Solar, I agree completely.

It seems we're doing exactly the same practices that got us into the 2007 troubles.

I wonder what the credit agencies are giving these potentially toxic assets ? AAA again ?

Also, I wonder when people will start betting against this and take out the credit default swaps like they did last time.
That's just it, it appears nothing was learned from the last debacle, just putting a different color of lipstick on a new Pig, means nothing, it's still a damn pig with lipstick.
Glad to see you too get this mess that's building, one that will definitely develop in another bubble all it's own.

The world will inevitably lose faith in the dollar if we continue down this path and begin looking for a more stable currency, assuming one exists.
Though I predict one will be created just for this purpose alone, be it oil or gold, if the wealthiest in the world get behind it, we are doomed.
Koolaid is for kids, TEA is for adults

Online supsalemgr

  • Hero Member
  • *****
  • Posts: 3866
  • Gender: Male
Re: huff and puff all you want solar.
« Reply #10 on: February 02, 2013, 10:49:01 AM »
from your link

"It’s 100% financing—the same strategy that pushed many homeowners into foreclosure during the housing bust. Banks say these loans are safer: They’re almost exclusively being offered to clients with sizable assets, and they often require two forms of collateral—the house and a portion of the client’s investment portfolio in lieu of a traditional cash down payment."

How do you pretend to miss the part about "the client’s investment portfolio " as  collateral? 

But lets examine the first sentence.  100% financing didnt push "homeowners into foreclosure".  It simply gave them no incentive to not walk away from the home when the value of their home plummeted. I think we can both agree that 100% financing with no other form of collateral is a bad idea.   

check this out. (what a coincidence, another Bush housing policy from 2004)

BUSH ADMINISTRATION ANNOUNCES NEW HUD "ZERO DOWN PAYMENT" MORTGAGE
Initiative Aimed at Removing Major Barrier to Homeownership

http://archives.hud.gov/news/2004/pr04-006.cfm


Unlike Vern's blind allegiance to Obama most on this board have quite a few disagreements with Bush. This is one of those areas that I don't believe anyone will find much support for Bush.
"If you can't run with the big dawgs, stay on the porch!"

Online Solar

  • '
  • Hero Member
  • *****
  • Posts: 34269
  • Gender: Male
Re: huff and puff all you want solar.
« Reply #11 on: February 02, 2013, 11:10:16 AM »
Unlike Vern's blind allegiance to Obama most on this board have quite a few disagreements with Bush. This is one of those areas that I don't believe anyone will find much support for Bush.
Bingo! And here is Vern's guy repeating the same process with a few rule changes, but still a manipulation none the less.
This has to be damn frustrating. :laugh:
Koolaid is for kids, TEA is for adults

Offline three_rights

  • Newbie
  • *
  • Posts: 14
Re: Here We Go Again (Housing Bust, Anyone?)
« Reply #12 on: February 03, 2013, 07:53:20 AM »
The Monetary Control Act of 1986 was the legislation that allowed adjustable rate and alternatively structured mortgages, in addition to allowing banks and credit card companies to charge the interest rate of the state in which they are chartered to residents of other states, regardless of the usury laws of those residents home states. 

Prior to this point in time there was strict income testing that restricted the amount you borrow. The requirement to have 20% cash equity and capping the maximum monthly payment, including escrowed  property taxes and insurance to 30% of income created stability in the marketplace. 

Basel II was the final nail in the proverbial coffin, because it removed the requirement that the Tier I capital reserve for a loan actually reflected the credit risk of the Borrower. I.e. The Tier I reserve requirement for a borrower  that had to borrow the equity and interest reserve for a land loan, had the same 1/2 of 15% reserve requirement as a well capitalized borrower that actually put up there own cash.

Fannie and Freedie were created in a time prior to the Monetary Control Act and the loosing of Tier I capital requirements under Basel, and banks served specific communities, and there was a need for a central marketplace that allowed them to efficiently sell mortgages and Freddie and Fannie was created to fulfill that need.  It was a great program with no risk in that context.  However, that changed once strict income testing was removed from the equation, and was replaced with negative amortization.





Online Solar

  • '
  • Hero Member
  • *****
  • Posts: 34269
  • Gender: Male
Re: Here We Go Again (Housing Bust, Anyone?)
« Reply #13 on: February 03, 2013, 08:15:30 AM »
The Monetary Control Act of 1986 was the legislation that allowed adjustable rate and alternatively structured mortgages, in addition to allowing banks and credit card companies to charge the interest rate of the state in which they are chartered to residents of other states, regardless of the usury laws of those residents home states. 

Prior to this point in time there was strict income testing that restricted the amount you borrow. The requirement to have 20% cash equity and capping the maximum monthly payment, including escrowed  property taxes and insurance to 30% of income created stability in the marketplace. 

Basel II was the final nail in the proverbial coffin, because it removed the requirement that the Tier I capital reserve for a loan actually reflected the credit risk of the Borrower. I.e. The Tier I reserve requirement for a borrower  that had to borrow the equity and interest reserve for a land loan, had the same 1/2 of 15% reserve requirement as a well capitalized borrower that actually put up there own cash.

Fannie and Freedie were created in a time prior to the Monetary Control Act and the loosing of Tier I capital requirements under Basel, and banks served specific communities, and there was a need for a central marketplace that allowed them to efficiently sell mortgages and Freddie and Fannie was created to fulfill that need.  It was a great program with no risk in that context.  However, that changed once strict income testing was removed from the equation, and was replaced with negative amortization.
Welcome Three_rights.
Well done, clear and on point.  Why do I get the feeling you were an accountant? :wink:
I'm curious, have you looked into Basel III yet, and what kind of mess it might perpetuate?
Koolaid is for kids, TEA is for adults

Offline three_rights

  • Newbie
  • *
  • Posts: 14
Re: Here We Go Again (Housing Bust, Anyone?)
« Reply #14 on: February 03, 2013, 12:15:01 PM »
Solar,

My educational background is Economics and Finance, but my professional career experience is in Construction and commercial real estate. 

Basel III is beyond my comprehension, but my what little understanding of Basel III I do have is that it relies heavily on derivatives and other synthetic instruments to prop up the balance sheet and provide liquidity to the system.

The transparent solution to solve the Banks balance sheet problem and introduce liquidity into the system would have been to reinstate the measures that were introduced during the Resolution Trust days, and that was to allow the banks to gradually recognize the loan losses over 10 or 20 year period. 

The big question is how do we ever reintroduce positive real interest rates without collapsing the system?




 

Powered by EzPortal