20% down mortages may return as the norm

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nonlnear

Platinum Member
Jan 31, 2008
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0
76
That's a reasonable solution. Most banks wouldn't make those loans if they had to hold them, or they would charge a much higher rate for the added risk.
In some ways it's less drastic than what's being proposed. I'm in favor of forcing the original lender ot hold the loan until it's <80% LTV. That's harsher than what they are talking about. However I'd still be in favor of giving federal guarantees to 80% of the LTV - even on 0% down loans. i.e. the lender has to hold the loans, but is able to access the same guarantees as they could before, but only for 80% of the assessed value. In some ways it would be less radical a shift than what's being proposed because every loan would still have access to federal guarantees for the bulk of the principal (if it meets the relevant underwriting standard).

Personally I'd rather pull federal guarantees out of the market, but I understand that's not going to happen. Even if it were to happen they would have to be phased out gradually.
 

Darwin333

Lifer
Dec 11, 2006
19,946
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That may have been true in some places, but in others rent went up. If more people are renting of course the demand increases prices... but maybe the people renting instead of buying is balanced out for emigration in some areas.

It gets evened out by the people that must/want to move but can't sell their house so they must rent it in order to cover the costs.

If no one can buy that also means no one can sell.
 

Jhhnn

IN MEMORIAM
Nov 11, 1999
62,365
14,681
136
It gets evened out by the people that must/want to move but can't sell their house so they must rent it in order to cover the costs.

If no one can buy that also means no one can sell.

That won't work for people who are desperately underwater, who bought at the height of the deception, the ownership society. After their teaser rate ARM resets or recasts, their mortgage payments are way more than they can possibly collect in rent, for the most part. Lots of affected properties are also too big and too expensive to serve as rentals, anyway. Anybody who can afford large rent, for example, will probably buy instead, or rent a much cheaper place to save money to buy in the future. They can also get more for their money renting from landlords whose properties were purchased pre-bubble.

Remember how GWB pushed faith based initiatives? Buying into the bubble, it turns out, really was an act of faith, faith in his leadership and that of his party. Given that it hasn't worked out well at all for many might lead them to think twice before exercising any more leaps of faith based on promises from the same sources... Probably not, huh?
 

the DRIZZLE

Platinum Member
Sep 6, 2007
2,956
1
81
That won't work for people who are desperately underwater, who bought at the height of the deception, the ownership society. After their teaser rate ARM resets or recasts, their mortgage payments are way more than they can possibly collect in rent, for the most part. Lots of affected properties are also too big and too expensive to serve as rentals, anyway. Anybody who can afford large rent, for example, will probably buy instead, or rent a much cheaper place to save money to buy in the future. They can also get more for their money renting from landlords whose properties were purchased pre-bubble.

Remember how GWB pushed faith based initiatives? Buying into the bubble, it turns out, really was an act of faith, faith in his leadership and that of his party. Given that it hasn't worked out well at all for many might lead them to think twice before exercising any more leaps of faith based on promises from the same sources... Probably not, huh?

I don't understand why you love 0% down mortgages and hate ARMs. Most of the people defaulting are not defaulting because their ARMs adjusted upward. They either couldn't afford the house in the first place or they lost their jobs.
 

Jhhnn

IN MEMORIAM
Nov 11, 1999
62,365
14,681
136
I don't understand why you love 0% down mortgages and hate ARMs. Most of the people defaulting are not defaulting because their ARMs adjusted upward. They either couldn't afford the house in the first place or they lost their jobs.

Actually, lots of people have lost or are losing their homes when their short term ARM's recast or reset. Because they now owe more than the property is worth, they're high risk... and the interest rate is adjusted accordingly. The likelihood that raising payments will push borrowers into default isn't part of the calculation at all. The fact that they thought they could afford the house in the first place was part of the deception inherent in introductory rate short term ARM's. They're like "no interest for one year" furniture loans, except the borrower can't pay the balance in the allotted time. They don't have the money in the first place & can't refinance in a falling market.

Job loss is a symptom of an economy overheated and overextended with credit, with the real estate bubble being the chosen vehicle this time around. In 1929, it was the stock market bubble. In 1873, it was a railroad building bubble. It's the story of every financial crash in history- they've all been preceded by a bubble. It's not like people need to be in the target sector of the economy to lose their jobs because the losses are systemic.

I thought I made it clear that I support low down payment fixed rate mortgages for people with good jobs and good credit, not zero down mortgages. I'm not even terribly adverse to long term adjustable rate notes with reasonable and well defined interest limits. People need to know what their maximum monthly payment might be under such circumstances, not "we'll see when we get there".

I'll even grant that there may be a place for short term ARM's, but they should never be securitized. When they first became available in the early 1980's, People often used them as credit repair vehicles after divorce or whatever. Savvy investors made good returns with those arrangements, too, but it was small scale & personal. They carefully selected the borrowers, took the risks and held the notes themselves. Modern mortgage originators' only risk was getting the bombs they built out the back door to investors before they exploded...
 

Darwin333

Lifer
Dec 11, 2006
19,946
2,329
126
That won't work for people who are desperately underwater, who bought at the height of the deception, the ownership society. After their teaser rate ARM resets or recasts, their mortgage payments are way more than they can possibly collect in rent, for the most part. Lots of affected properties are also too big and too expensive to serve as rentals, anyway. Anybody who can afford large rent, for example, will probably buy instead, or rent a much cheaper place to save money to buy in the future. They can also get more for their money renting from landlords whose properties were purchased pre-bubble.

What does that have to do with the topic? Those people are fucked regardless.

Remember how GWB pushed faith based initiatives? Buying into the bubble, it turns out, really was an act of faith, faith in his leadership and that of his party. Given that it hasn't worked out well at all for many might lead them to think twice before exercising any more leaps of faith based on promises from the same sources... Probably not, huh?

Remember how Obama literally bribed people into purchasing homes that he knew damn well, or has chosen a advisers that are utterly incompetent, would further depreciate, likely for far more than the bribe? Or how about how he, which he continues to this day, refuses to go after them for blatant and provable crimes or at the absolute least claw back their illgotten gains as to not give incentive to do it again? How about the FDIC taking over a bank and finding their assets worth half of what the bank valued them at? You give that a try and see how it works out for you, wanna know how it worked out for the banksters? How about sworn testimony in front of Congress admitting fraud by one of the top banksters yet somehow not even a peep about an investigation (shouldn't an admission make an indictment rather easy to get?)? I could go on and on.

Bottom line: Bush and Obama are owned by the same people. Its not that one is less or more bad on this particular subject, they are the exact same damned thing. Sure their might be differences in what they say but not what they actually do.

At any rate, back on topic, what do people that are going to be foreclosed on regardless of what is done, short of propping up the entire housing market which I argue is impossible, have to do with the topic at hand?
 

Darwin333

Lifer
Dec 11, 2006
19,946
2,329
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Actually, lots of people have lost or are losing their homes when their short term ARM's recast or reset. Because they now owe more than the property is worth, they're high risk... and the interest rate is adjusted accordingly. The likelihood that raising payments will push borrowers into default isn't part of the calculation at all. The fact that they thought they could afford the house in the first place was part of the deception inherent in introductory rate short term ARM's. They're like "no interest for one year" furniture loans, except the borrower can't pay the balance in the allotted time. They don't have the money in the first place & can't refinance in a falling market.

It might sound cruel but stupid is supposed to hurt. My biggest issue with this entire ordeal is that it is supposed to hurt BOTH sides as they were equally stupid. Both parties have made sure that it only hurts one side of the deal and I don't see that changing.

Regardless, if you can't do the math on what the biggest investment of your life might cost you in a few years or hire someone to do it for you then you have made a stupid mistake. If someone loans your dumbass a very large sum of money they have also made a stupid mistake. The two parties are equally at fault in my book because there isn't much due diligence required on the buyers part to figure out they were getting in way over their heads. The banksters didn't care because they fraudulently packaged and sold the loan to someone else who eventually got really hosed.

A very large portion of the people upside down with an ARM type of loan intended to flip/refinance the house a few years after purchase when it went up in value by 10-20%. That is called speculation or a bet. When you make a bet you gotta be prepared to lose and I don't feel all that sorry for you if you aren't. If you go all in at the poker table and don't know that a pair of 3's usually isn't a good hand, sucks to be you.
 

Jhhnn

IN MEMORIAM
Nov 11, 1999
62,365
14,681
136
What does that have to do with the topic? Those people are fucked regardless.



Remember how Obama literally bribed people into purchasing homes that he knew damn well, or has chosen a advisers that are utterly incompetent, would further depreciate, likely for far more than the bribe? Or how about how he, which he continues to this day, refuses to go after them for blatant and provable crimes or at the absolute least claw back their illgotten gains as to not give incentive to do it again? How about the FDIC taking over a bank and finding their assets worth half of what the bank valued them at? You give that a try and see how it works out for you, wanna know how it worked out for the banksters? How about sworn testimony in front of Congress admitting fraud by one of the top banksters yet somehow not even a peep about an investigation (shouldn't an admission make an indictment rather easy to get?)? I could go on and on.

Bottom line: Bush and Obama are owned by the same people. Its not that one is less or more bad on this particular subject, they are the exact same damned thing. Sure their might be differences in what they say but not what they actually do.

At any rate, back on topic, what do people that are going to be foreclosed on regardless of what is done, short of propping up the entire housing market which I argue is impossible, have to do with the topic at hand?

There's a continuum of people from hopelessly underwater to underwater but still able to make it in the current situation. I'm sorry if I didn't make that clear. Whatever their reasons, many underwater buyers will hold on when they can, but that doesn't mean they can successfully rent their places out, either, for a variety of reasons I offered above.

Right now making the whole 20% down scenario reality will just depress prices much further faster, discouraging holdouts, encouraging strategic default.

The whole homebuyer credit was about reducing inventories, favoring current home owners, bankers and investors, no doubt, but being underwater isn't a horribly big deal if it's something the buyer can afford. Many buyers don't care about that because they don't plan on going anywhere and their new fixed rate 30 year note is something they can truly afford. When TCO is nearly the same as rent, it makes sense, because rent goes up while payments on fixed rate mortgages never do.

The bailout was a done deal before Obama took office, something he basically inherited, warts and all. And Bankers' testimony before Congress isn't admissible in a court of law, because they haven't been mirandized, something they know full well. It's also prejudicial to juries. Talking a case and making one are very different.

I've never been happy with the bailout, but it was the best we were going to get with the Bush Admin in power. When the bankers, who basically run Washington, fell to their knees, the Bush Admin was right there to stand 'em back up, return them to glory in return for obvious financial support for their party's candidates.

The best answer, nationalizing the bastards, sacking the bankers and the shareholders, cleaning up their balance sheets and selling them back into the market never was on the table for ideological reasons. Handing out money to welfare moms so they can feed their kids is not OK, but handing out billions to Wall St so they can keep their place in the Hamptons clearly is, in a wonderful and magical Reaganomic sort of way. Extreme wealth has extreme privileges for Republicans, obviously.
 

Darwin333

Lifer
Dec 11, 2006
19,946
2,329
126
There's a continuum of people from hopelessly underwater to underwater but still able to make it in the current situation. I'm sorry if I didn't make that clear. Whatever their reasons, many underwater buyers will hold on when they can, but that doesn't mean they can successfully rent their places out, either, for a variety of reasons I offered above.


Right now making the whole 20% down scenario reality will just depress prices much further faster, discouraging holdouts, encouraging strategic default.
[/quote]

Damn, the banks get fucked... My heart is bleeding.

The whole homebuyer credit was about reducing inventories, favoring current home owners, bankers and investors, no doubt, but being underwater isn't a horribly big deal if it's something the buyer can afford. Many buyers don't care about that because they don't plan on going anywhere and their new fixed rate 30 year note is something they can truly afford. When TCO is nearly the same as rent, it makes sense, because rent goes up while payments on fixed rate mortgages never do.

Artificially propping up home prices for a short period of time, because they simply can't afford to do it forever, on the tax payers dime was a good thing? And the only people that really benefited were banksters, are you really for that type of policy?

The bailout was a done deal before Obama took office, something he basically inherited, warts and all.

That is inaccurate but rather irrelevant to the larger topic.

And Bankers' testimony before Congress isn't admissible in a court of law, because they haven't been mirandized, something they know full well. It's also prejudicial to juries. Talking a case and making one are very different.

I could dig up the mountains of evidence that the banksters committed uncountable counts of fraud (among other things), including very specific names and very specific crimes. FFS their is proof they bribed municipal .gov officials to the tune of the person who took the bribe plead guilty and is currently in friggen jail. Yet no indictment. I could literally spend days posting all the proof of crimes committed and you are arguing that they couldn't come up with a single damned indictment? Give me a break, you don't want to argue this one.
I've never been happy with the bailout, but it was the best we were going to get with the Bush Admin in power. When the bankers, who basically run Washington, fell to their knees, the Bush Admin was right there to stand 'em back up, return them to glory in return for obvious financial support for their party's candidates.

Funny, the Obama admin not only spent half of the bailout money but also created new programs to give the banksters boatloads of money.
The best answer, nationalizing the bastards, sacking the bankers and the shareholders, cleaning up their balance sheets and selling them back into the market never was on the table for ideological reasons. Handing out money to welfare moms so they can feed their kids is not OK, but handing out billions to Wall St so they can keep their place in the Hamptons clearly is, in a wonderful and magical Reaganomic sort of way. Extreme wealth has extreme privileges for Republicans, obviously.

I agree completely with the above. Matter of fact, I think we should still do that to this day because nothing has been really fixed. Just because we let them legally commit accounting fraud doesn't mean they are actually solvent. The math always wins in the end. The only problem is that both parties are bought and paid for by the assholes in question, not just the one you dislike.
 

gingermeggs

Golden Member
Dec 22, 2008
1,157
0
71
I agree completely with the above. Matter of fact, I think we should still do that to this day because nothing has been really fixed. Just because we let them legally commit accounting fraud doesn't mean they are actually solvent. The math always wins in the end. The only problem is that both parties are bought and paid for by the assholes in question, not just the one you dislike.[/QUOTE]



Yes, first sentence these crooks to death or banish them to Britain(where they came from).
Then,
Make the "Bank of America" public owned (like the commonwealth bank in Australia was or as the bank of china is now). Dump the Fed and peg your dollar value where you need it to be(lower then Turkish drakmahs!!!!).
That's your only way out from here in my view- unless going down and out is better, get carved up between Mexico and Canada!
 
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ShawnD1

Lifer
May 24, 2003
15,987
2
81
Any loan should be 20% down, not just mortgages!
That's pretty much how it works with cars.
"Hi I'd like to buy this $25,000 car with no money down. I would put money down if I had it but this is actually all of the money I have."

It doesn't come as a shock to anyone when you can't buy a new car with no money down. If you don't even have $5k in the bank, you're probably poor as fuck and cannot afford a new car.
 

nonlnear

Platinum Member
Jan 31, 2008
2,497
0
76
That's pretty much how it works with cars.
"Hi I'd like to buy this $25,000 car with no money down. I would put money down if I had it but this is actually all of the money I have."

It doesn't come as a shock to anyone when you can't buy a new car with no money down. If you don't even have $5k in the bank, you're probably poor as fuck and cannot afford a new car.
Should I recalibrate my sarcasm meter?
 

ShawnD1

Lifer
May 24, 2003
15,987
2
81
Should I recalibrate my sarcasm meter?
Nope. Dealers around here will not give out 0 down loans. The car loses 20-30% of its value the second it drives off the lot. If you bought the car then started welching on it, they would take a huge loss when taking the car back.

When you put money down, there's no risk at all. They take the car back, give you the trade in value, and it didn't cost them anything. That's also why the interest rate is so low; it's a no risk loan. Right now Honda's rate is 0.9% which is actually below inflation, they are losing money on that loan.
 

irwincur

Golden Member
Jul 8, 2002
1,899
0
0
Guess I'll keep my duplex. With all of the people needing to rent, I will be able to raise rents through the roof. Might actually make it worth the pain of keeping it.
 

dullard

Elite Member
May 21, 2001
25,476
3,976
126
A long and old thread, I shouldn't start now. But, I have to chime in and bring reality to the thread. The MEDIAN home sold last month was $156,100. Thus a 20&#37; down payment is $31,220. And half of all homes sold in the US were cheaper than that (the definition of median). That means really, only $20k to $25k is necessary for a 20% down payment in many areas of the country. The $60k number tossed around here is rediculous.

$25k isn't that hard to save. Pack a sack lunch instead of eating out everyday and you'll eventually get there. Delay buying that new car you've wanted a few years and you'll get there. Cancel the digital cable TV and you'll get there. Add a minimum wage job on weekends and you'll get there in under 5 years. Do them all and you'll be there in 2 years (even less if your spouse does the same). It is doable for just about anyone.

Sure, some areas are far pricer. Those areas are often overpriced and prices will keep falling. The 20% downpayment isn't the problem to that. The overpriced homes is the problem there. Prices took a nose dive in the last 2 months (as in far lower than past winter months in past years). They likely will continue to dive in the pricier areas. The 20% suggestion might just save a struggling family from prematurely buying in this drop.
 
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alkemyst

No Lifer
Feb 13, 2001
83,769
19
81
20% has almost ALWAYS been the level needed to get the best rates, even more on jumbo and investment property.

I don't see it ever becoming the requirement to get a home though. Good credit, a verifiable income and 5-10% will be more a norm.

Loans that did not require down payments (and worse that gave cash back at closing), went on stated incomes only and that will qualified based only on the 3-6 month teaser rate were big red flags.

Guidelines are going to be tougher pushing home payment back closer to 28-36% overall rather than 50%+ in the boom.

IMHO if one cannot come up with a 5-10% downpayment they have no business buying a home. That 5-10% is easily a major repair that may be needed and the borrower should have that savings on hand.

Sadly owning a home is a responsibility not a 'right', some people are never meant to own one.
 

alkemyst

No Lifer
Feb 13, 2001
83,769
19
81
A long and old thread, I shouldn't start now. But, I have to chime in and bring reality to the thread. The MEDIAN home sold last month was $156,100. Thus a 20% down payment is $31,220. And half of all homes sold in the US were cheaper than that (the definition of median). That means really, only $20k to $25k is necessary for a 20% down payment in many areas of the country. The $60k number tossed around here is rediculous.

$25k isn't that hard to save. Pack a sack lunch instead of eating out everyday and you'll eventually get there. Delay buying that new car you've wanted a few years and you'll get there. Cancel the digital cable TV and you'll get there. Add a minimum wage job on weekends and you'll get there in under 5 years. Do them all and you'll be there in 2 years (even less if your spouse does the same). It is doable for just about anyone.

Sure, some areas are far pricer. Those areas are often overpriced and prices will keep falling. The 20% downpayment isn't the problem to that. The overpriced homes is the problem there. Prices took a nose dive in the last 2 months (as in far lower than past winter months in past years). They likely will continue to dive in the pricier areas. The 20% suggestion might just save a struggling family from prematurely buying in this drop.

Saving $25k is a pretty hard deal for most when they are only making $50k household income and may have a kid or two. I don't believe that 20% will ever be required...only for the best rates like it always has.

Finding an extra job right now would be a miracle to many people. It's just not always a possibility to just pick up a minimum wage job for the weekend.
 

bfdd

Lifer
Feb 3, 2007
13,312
1
0
Right now making the whole 20&#37; down scenario reality will just depress prices much further faster, discouraging holdouts, encouraging strategic default.


Damn, the banks get fucked... My heart is bleeding.



Artificially propping up home prices for a short period of time, because they simply can't afford to do it forever, on the tax payers dime was a good thing? And the only people that really benefited were banksters, are you really for that type of policy?



That is inaccurate but rather irrelevant to the larger topic.



I could dig up the mountains of evidence that the banksters committed uncountable counts of fraud (among other things), including very specific names and very specific crimes. FFS their is proof they bribed municipal .gov officials to the tune of the person who took the bribe plead guilty and is currently in friggen jail. Yet no indictment. I could literally spend days posting all the proof of crimes committed and you are arguing that they couldn't come up with a single damned indictment? Give me a break, you don't want to argue this one.


Funny, the Obama admin not only spent half of the bailout money but also created new programs to give the banksters boatloads of money.


I agree completely with the above. Matter of fact, I think we should still do that to this day because nothing has been really fixed. Just because we let them legally commit accounting fraud doesn't mean they are actually solvent. The math always wins in the end. The only problem is that both parties are bought and paid for by the assholes in question, not just the one you dislike.

Good post.
 

dullard

Elite Member
May 21, 2001
25,476
3,976
126
Saving $25k is a pretty hard deal for most when they are only making $50k household income and may have a kid or two. I don't believe that 20&#37; will ever be required...only for the best rates like it always has.

Finding an extra job right now would be a miracle to many people. It's just not always a possibility to just pick up a minimum wage job for the weekend.
If it is pretty hard to gather up 20%, how the hell do they think they'll ever reach 100%? At some point, you have to pay off the house or ditch it. If finances force you to ditch it (ie you didn't pay it off before retirement), then you probably couldn't have afforded it in the first place.

I think a 10% minimum is just fine, but you should really be able to get to 20%. Otherwise, you can't afford what you think you can afford.

By the way, the average household size of a $50k income household is 2.6. Your example of 4 people with $50k income isn't unheard of but it is a bit of an extreme example. That family probably can't afford to buy a house in most places in the US. Even if a 0% down payment mortgage lets them buy it doesn't mean that they can truely afford it. They'd be sacrificing too many more important things to do it.
 
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TheSlamma

Diamond Member
Sep 6, 2005
7,625
5
81
I think it's long overdue. I also think lenders should have to offer free classes to potential buyers on how mortgages work, things like amortization, PMI, Escrow and the amount you really get back on your taxes.
 

Throckmorton

Lifer
Aug 23, 2007
16,829
3
0
If it is pretty hard to gather up 20%, how the hell do they think they'll ever reach 100%? At some point, you have to pay off the house or ditch it. If finances force you to ditch it (ie you didn't pay it off before retirement), then you probably couldn't have afforded it in the first place.

I think a 10% minimum is just fine, but you should really be able to get to 20%. Otherwise, you can't afford what you think you can afford.

By the way, the average household size of a $50k income household is 2.6. Your example of 4 people with $50k income isn't unheard of but it is a bit of an extreme example. That family probably can't afford to buy a house in most places in the US. Even if a 0% down payment mortgage lets them buy it doesn't mean that they can truely afford it. They'd be sacrificing too many more important things to do it.

They can afford the house if you aren't making them waste money on rent while saving a 20% down payment....
 

Macamus Prime

Diamond Member
Feb 24, 2011
3,108
0
0
Just take out a loan to pay for the 20% down payment of that loan. That way, you can get fucked over by TWO banks at the same time.