Solar, are you TRYING to bait Vern?
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.
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."
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.
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.
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.