80/20 gone...

[Vic]

Originally posted by: Demon-Xanth

Originally posted by: Vic
Let's say for example you get a $300k mortgage at 5%, the monthly payment is $1610.46/mo. Lending guidelines tighten, large downs are required, rates go up, prices fall, and now the house is only $200k but rates are 9% -- your payment is now $1609/mo. and less homebuyers are like to qualify.

Exactly what have you "won"?

I've always said I'd rather buy with a low price and high interest rate than a high price and low interest rate. Because you can always refinance or pay more on the prinicple to lower the interest paid, but you can't change the price that you paid.

Hey, I wish I could have bought a home in the early 80s too, but I was still in junior high school then!

No, your logic is sound, except that it represents the mindset of the easy credit era, which is ending if all this pans out the way that it looks to be. That's the thing that I think most people aren't looking at here. Easy credit made it possible for you to so easily refinance. But the "When banks compete, you win" was the first causality here. And that whole mentality was a relatively recent phenomenon in the world of lending anyway. Now we're going back to the days of begging borrowers, and guidelines so strict that the only people getting loans are those who don't actually need them.

Legend Killer mentioned the P&N housing thread, where we have had quite the lively debate. I'd like to point out that this issue here has been the crux of most of the arguments from my perspective. Many posters there are under the highly mistaken impression that home values will simply fall, but nothing else will change, and then they'll be able to easily walk right into a home at a cheaper price. Sorry no.

 

[sao123]

how much did the buy low/sell high real estate get rich quick scams play a part in this also? That does nothing but artificially inflate prices aswell, and the default rate for those people is probably higher than the typical first time home purchaser...

 

[vi edit]

Originally posted by: sao123
how much did the buy low/sell high real estate get rich quick scams play a part in this also? That does nothing but artificially inflate prices aswell, and the default rate for those people is probably higher than the typical first time home purchaser...

You'll see that the markets that were ripe for flipping are also the ones seeing the greatest corrections right now.

 

[LegendKiller]

Originally posted by: Vic

Originally posted by: LegendKiller

Originally posted by: Gooberlx2

Originally posted by: Fritzo
It may be a blessing- all those 80/20 loans and other entry level loans are what caused the forclosure epidemic. I read in the paper yesterday that there was a 96% rise in forclosures in my part of the state. That's pretty scary.

That's all? I heard on the local public radio this morning that it's about a 500% increase around here compared to the same time last year.

Keep in mind that the foreclosure rates were artificially low for the latter couple months of 2005 and most of 2006 due to the bankruptcy legislation.

I have no sympathy for these people either. Only extremely foolish people couldn't see what was happening.

And now the rates are artificially inflated, and the fearmongerers are helping the secondary market in their pump and dump scheme of the housing market.

It's said to see that NPR is in on this. They, of all groups, should IMO understand the larger ramifications of restricting access to homeownership AND what a decline in property values will do to local governments who depend on the tax revenue.

Foreclosure rates aren't "artificially inflated", they are in line with what needs to happen to shake out the idiocy that has been driven by a credit dominated housing cycle.

I love how you try to say that it's a "pump and dump", when, in fact, it's far from that.

Keep saying I am a "fear mongerer", you calling me names doesn't change the fact that we deviated from the mean, significantly, and we will regress to the mean, significantly. Nobody is restricting access to home ownership, all they are doing is restricting those who can't afford it from getting it.


http://www.nationmaster.com/gr...-people-home-ownership

Many of the countries on that list have much lower debt/income ratios than the US but marginally lower, or even higher, home ownership rates. In having the #2 highest DTI we are only exceeding the worldwide average of homeownership by 2%. In having the world's highest DTI the UK exceeds it by 4%.

As the worlds highest DTI, UK is actually probably facing a larger subprime and credit crisis than we are. I know for a fact that credit card debts have skyrocketed and in the last year bankruptcies and defaults have also. They are up 30% YOY now.

I am all for home ownership. However, I am for it when people can actually afford it, not through artificial means such as exotic mortgages. Piling people into the market through credit only results in rampant price inflation. This naturally will go down once people who can't afford it, don't.

 

[Aharami]

Originally posted by: Xavier434
Be patient OP. In about a year, a lot is going to change in the world of real estate. My father has been working at a bank for longer than I can remember. He gives me updates on this kind of thing all the time.

can you elaborate on that? Im looking to buy my first condo or townhouse within the next year

 

[Vic]

Originally posted by: LegendKiller

Originally posted by: Vic

Originally posted by: LegendKiller

Originally posted by: Gooberlx2

Originally posted by: Fritzo
It may be a blessing- all those 80/20 loans and other entry level loans are what caused the forclosure epidemic. I read in the paper yesterday that there was a 96% rise in forclosures in my part of the state. That's pretty scary.

That's all? I heard on the local public radio this morning that it's about a 500% increase around here compared to the same time last year.

Keep in mind that the foreclosure rates were artificially low for the latter couple months of 2005 and most of 2006 due to the bankruptcy legislation.

I have no sympathy for these people either. Only extremely foolish people couldn't see what was happening.

And now the rates are artificially inflated, and the fearmongerers are helping the secondary market in their pump and dump scheme of the housing market.

It's said to see that NPR is in on this. They, of all groups, should IMO understand the larger ramifications of restricting access to homeownership AND what a decline in property values will do to local governments who depend on the tax revenue.

Foreclosure rates aren't "artificially inflated", they are in line with what needs to happen to shake out the idiocy that has been driven by a credit dominated housing cycle.

I love how you try to say that it's a "pump and dump", when, in fact, it's far from that.

Keep saying I am a "fear mongerer", you calling me names doesn't change the fact that we deviated from the mean, significantly, and we will regress to the mean, significantly. Nobody is restricting access to home ownership, all they are doing is restricting those who can't afford it from getting it.

Of course, it's a pump and dump. Look at AHM's recent collapse. Who's gonna buy up all their billions in unsold paper for pennies on the dollar? C'mon... just 'cause the media is stupid doesn't mean everyone else is. The buying frenzy of "distressed paper" has only just begun.

Foreclosure rates are near where they historically always are. Hell, FHA/VA is still leading that as always, with rates pushing 10% in some markets (once again, as always). The greatest factor pushing foreclosures right now is that those who need to sell can't due to the declining market.

I love the Orwellian doublethink in your last sentence BTW. That is simply awesome. Who is "they"?

 

[Demon-Xanth]

Originally posted by: Vic
No, your logic is sound, except that it represents the mindset of the easy credit era, which is ending if all this pans out the way that it looks to be. That's the thing that I think most people aren't looking at here. Easy credit made it possible for you to so easily refinance. But the "When banks compete, you win" was the first causality here. And that whole mentality was a relatively recent phenomenon in the world of lending anyway. Now we're going back to the days of begging borrowers, and guidelines so strict that the only people getting loans are those who don't actually need them.

In my case, I have excellent credit and a notable chunk of cash to put down. But the market in my area literally got to the point where I couldn't afford a house if it had a 0% loan. The cheapest house on the market was a $190k townhouse like thing. That was just two years ago. Currently, those same townhouse like things are going as low as $100k. The former, a 20k chunk of change would be 10% down, the latter, 20%. At which point does a low rate 170k mortgage have payments equal to a high rate 80k mortgage?

And where my logic comes in:
If you pay an extra $1k payment on the 80k mortgage, it'll lower the payments by much more than an extra $1k on the 170k mortgage.

 

[LegendKiller]

Originally posted by: Vic

Originally posted by: LegendKiller

Originally posted by: Vic

Originally posted by: LegendKiller

Originally posted by: Gooberlx2

Originally posted by: Fritzo
It may be a blessing- all those 80/20 loans and other entry level loans are what caused the forclosure epidemic. I read in the paper yesterday that there was a 96% rise in forclosures in my part of the state. That's pretty scary.

That's all? I heard on the local public radio this morning that it's about a 500% increase around here compared to the same time last year.

Keep in mind that the foreclosure rates were artificially low for the latter couple months of 2005 and most of 2006 due to the bankruptcy legislation.

I have no sympathy for these people either. Only extremely foolish people couldn't see what was happening.

And now the rates are artificially inflated, and the fearmongerers are helping the secondary market in their pump and dump scheme of the housing market.

It's said to see that NPR is in on this. They, of all groups, should IMO understand the larger ramifications of restricting access to homeownership AND what a decline in property values will do to local governments who depend on the tax revenue.

Foreclosure rates aren't "artificially inflated", they are in line with what needs to happen to shake out the idiocy that has been driven by a credit dominated housing cycle.

I love how you try to say that it's a "pump and dump", when, in fact, it's far from that.

Keep saying I am a "fear mongerer", you calling me names doesn't change the fact that we deviated from the mean, significantly, and we will regress to the mean, significantly. Nobody is restricting access to home ownership, all they are doing is restricting those who can't afford it from getting it.

Of course, it's a pump and dump. Look at AHM's recent collapse. Who's gonna buy up all their billions in unsold paper for pennies on the dollar? C'mon... just 'cause the media is stupid doesn't mean everyone else is. The buying frenzy of "distressed paper" has only just begun.

Foreclosure rates are near where they historically always are. Hell, FHA/VA is still leading that as always, with rates pushing 10% in some markets (once again, as always). The greatest factor pushing foreclosures right now is that those who need to sell can't due to the declining market.

I love the Orwellian doublethink in your last sentence BTW. That is simply awesome. Who is "they"?

Yeah, that's what it was. Nobody had any choice in the scheme. WHen you knew yuo couldn't afford something, you had no option.

Please, you have set your mind to one explaination and that obviously doesn't lie with the consumer. How dare we even implicate their greed in this scheme.

I am sure you love seeing an orwellian tint in it, since you're the one running around blaming the mysterious forces at work. I am sure you hear the thump thump of black helicopters when you sleep at night. Better wear your tinfoil beenie.

Anybody who lends money does so on their own voilition according to the risk and return of the situation. Whether that is a friend lending another $10 or a bank extending a 300,000 mortgage. It is up to them to determine what risks they want to take. Simply taking risks to somehow pump homeownership is not only stupid, but it also results in greater lending costs to all of society since all of society has to bear the burden of the smaller section.

Thus, restricting that lending to those who can truly afford it is in everybody's interest.

 

[m1ldslide1]

I bought my first house in March, and got 100% financing from a single 40-yr. fixed loan (I know I know, I'd never heard of 100% financing or a 40 year mortage either). I could afford the 80/20 I was staring down too, but this was a far better deal. I'm an example of the person who doesn't save a dime and so couldn't afford to save up $40k for my downpayment, at least not this decade. This loan program was a god-send for me to be able to get into a house and start building some equity.

It's interesting here in Portland, OR - we have some strict zoning laws that restrict the boundaries of the City in order to prevent sprawl. It's kept us from experiencing the same correction as the rest of the country. Prices still seem inflated and new houses are going up all the time (especially in my neighborhood). But I think the flipping isn't quite as rampant as it was a year ago. Hopefully the correction won't be as severe here as it has been everywhere else. I was kind of hoping to refi in 2-3 years...

 

[waggy]

what i wanted to know is what the fuck did the banks think was going to happen? someone makeing $35k is not going to be able to pay for a mortgage on a $300k when the % goes up 12+%

Also wtf did the buyer think was going to happen? that there credit or income was going to get better in 3 years? really it shouldnt have happened. I know i wouldnt buy a house where my interest hs the potental to go up to 12-15%.

 

[Vic]

Originally posted by: LegendKiller

Originally posted by: Vic

Originally posted by: LegendKiller

Originally posted by: Vic

Originally posted by: LegendKiller

Originally posted by: Gooberlx2

Originally posted by: Fritzo
It may be a blessing- all those 80/20 loans and other entry level loans are what caused the forclosure epidemic. I read in the paper yesterday that there was a 96% rise in forclosures in my part of the state. That's pretty scary.

That's all? I heard on the local public radio this morning that it's about a 500% increase around here compared to the same time last year.

Keep in mind that the foreclosure rates were artificially low for the latter couple months of 2005 and most of 2006 due to the bankruptcy legislation.

I have no sympathy for these people either. Only extremely foolish people couldn't see what was happening.

And now the rates are artificially inflated, and the fearmongerers are helping the secondary market in their pump and dump scheme of the housing market.

It's said to see that NPR is in on this. They, of all groups, should IMO understand the larger ramifications of restricting access to homeownership AND what a decline in property values will do to local governments who depend on the tax revenue.

Foreclosure rates aren't "artificially inflated", they are in line with what needs to happen to shake out the idiocy that has been driven by a credit dominated housing cycle.

I love how you try to say that it's a "pump and dump", when, in fact, it's far from that.

Keep saying I am a "fear mongerer", you calling me names doesn't change the fact that we deviated from the mean, significantly, and we will regress to the mean, significantly. Nobody is restricting access to home ownership, all they are doing is restricting those who can't afford it from getting it.

Of course, it's a pump and dump. Look at AHM's recent collapse. Who's gonna buy up all their billions in unsold paper for pennies on the dollar? C'mon... just 'cause the media is stupid doesn't mean everyone else is. The buying frenzy of "distressed paper" has only just begun.

Foreclosure rates are near where they historically always are. Hell, FHA/VA is still leading that as always, with rates pushing 10% in some markets (once again, as always). The greatest factor pushing foreclosures right now is that those who need to sell can't due to the declining market.

I love the Orwellian doublethink in your last sentence BTW. That is simply awesome. Who is "they"?

Yeah, that's what it was. Nobody had any choice in the scheme. WHen you knew yuo couldn't afford something, you had no option.

Please, you have set your mind to one explaination and that obviously doesn't lie with the consumer. How dare we even implicate their greed in this scheme.

I am sure you love seeing an orwellian tint in it, since you're the one running around blaming the mysterious forces at work. I am sure you hear the thump thump of black helicopters when you sleep at night. Better wear your tinfoil beenie.

Anybody who lends money does so on their own voilition according to the risk and return of the situation. Whether that is a friend lending another $10 or a bank extending a 300,000 mortgage. It is up to them to determine what risks they want to take. Simply taking risks to somehow pump homeownership is not only stupid, but it also results in greater lending costs to all of society since all of society has to bear the burden of the smaller section.

Thus, restricting that lending to those who can truly afford it is in everybody's interest.

Please refrain from your usual straw men and personal attacks. This isn't P&N. If you can't argue my arguments, then don't fsckin' bother, eh?

 

[LegendKiller]

Originally posted by: Vic

Originally posted by: LegendKiller

Originally posted by: Vic

Originally posted by: LegendKiller

Originally posted by: Vic

Originally posted by: LegendKiller

Originally posted by: Gooberlx2

Originally posted by: Fritzo
It may be a blessing- all those 80/20 loans and other entry level loans are what caused the forclosure epidemic. I read in the paper yesterday that there was a 96% rise in forclosures in my part of the state. That's pretty scary.

That's all? I heard on the local public radio this morning that it's about a 500% increase around here compared to the same time last year.

Keep in mind that the foreclosure rates were artificially low for the latter couple months of 2005 and most of 2006 due to the bankruptcy legislation.

I have no sympathy for these people either. Only extremely foolish people couldn't see what was happening.

And now the rates are artificially inflated, and the fearmongerers are helping the secondary market in their pump and dump scheme of the housing market.

It's said to see that NPR is in on this. They, of all groups, should IMO understand the larger ramifications of restricting access to homeownership AND what a decline in property values will do to local governments who depend on the tax revenue.

Foreclosure rates aren't "artificially inflated", they are in line with what needs to happen to shake out the idiocy that has been driven by a credit dominated housing cycle.

I love how you try to say that it's a "pump and dump", when, in fact, it's far from that.

Keep saying I am a "fear mongerer", you calling me names doesn't change the fact that we deviated from the mean, significantly, and we will regress to the mean, significantly. Nobody is restricting access to home ownership, all they are doing is restricting those who can't afford it from getting it.

Of course, it's a pump and dump. Look at AHM's recent collapse. Who's gonna buy up all their billions in unsold paper for pennies on the dollar? C'mon... just 'cause the media is stupid doesn't mean everyone else is. The buying frenzy of "distressed paper" has only just begun.

Foreclosure rates are near where they historically always are. Hell, FHA/VA is still leading that as always, with rates pushing 10% in some markets (once again, as always). The greatest factor pushing foreclosures right now is that those who need to sell can't due to the declining market.

I love the Orwellian doublethink in your last sentence BTW. That is simply awesome. Who is "they"?

Yeah, that's what it was. Nobody had any choice in the scheme. WHen you knew yuo couldn't afford something, you had no option.

Please, you have set your mind to one explaination and that obviously doesn't lie with the consumer. How dare we even implicate their greed in this scheme.

I am sure you love seeing an orwellian tint in it, since you're the one running around blaming the mysterious forces at work. I am sure you hear the thump thump of black helicopters when you sleep at night. Better wear your tinfoil beenie.

Anybody who lends money does so on their own voilition according to the risk and return of the situation. Whether that is a friend lending another $10 or a bank extending a 300,000 mortgage. It is up to them to determine what risks they want to take. Simply taking risks to somehow pump homeownership is not only stupid, but it also results in greater lending costs to all of society since all of society has to bear the burden of the smaller section.

Thus, restricting that lending to those who can truly afford it is in everybody's interest.

Please refrain from your usual straw men and personal attacks. This isn't P&N. If you can't argue my arguments, then don't fsckin' bother, eh?

First off, I'm not the one who started it, so quit playing little miss victim. Second, nothing up there was a personal attack except for the continuation of your orwellian train of thought. Don't go down the tracks if you don't want to ride that train.

I am arguing your arguments and obviously doing a better job of it if you're already resorting to whining about personal attacks.

 

[Vic]

Originally posted by: waggy
what i wanted to know is what the fuck did the banks think was going to happen? someone makeing $35k is not going to be able to pay for a mortgage on a $300k when the % goes up 12+%

Also wtf did the buyer think was going to happen? that there credit or income was going to get better in 3 years? really it shouldnt have happened. I know i wouldnt buy a house where my interest hs the potental to go up to 12-15%.

They thought it wasn't their problem so long as the packages met purchaser guidelines on the secondary markets.

What did the buyer think? Dude, from personal experience let me tell you that many buyers are just freakin' whacky. You could explain the terms and documents to them until you're blue in the face and they'll just tell you that all they want to know is if they're getting the house or not.

 

[Vic]

Originally posted by: LegendKiller

Originally posted by: Vic

Originally posted by: LegendKiller

Originally posted by: Vic

Originally posted by: LegendKiller

Originally posted by: Vic

Originally posted by: LegendKiller

Originally posted by: Gooberlx2

Originally posted by: Fritzo
It may be a blessing- all those 80/20 loans and other entry level loans are what caused the forclosure epidemic. I read in the paper yesterday that there was a 96% rise in forclosures in my part of the state. That's pretty scary.

That's all? I heard on the local public radio this morning that it's about a 500% increase around here compared to the same time last year.

Keep in mind that the foreclosure rates were artificially low for the latter couple months of 2005 and most of 2006 due to the bankruptcy legislation.

I have no sympathy for these people either. Only extremely foolish people couldn't see what was happening.

And now the rates are artificially inflated, and the fearmongerers are helping the secondary market in their pump and dump scheme of the housing market.

It's said to see that NPR is in on this. They, of all groups, should IMO understand the larger ramifications of restricting access to homeownership AND what a decline in property values will do to local governments who depend on the tax revenue.

Foreclosure rates aren't "artificially inflated", they are in line with what needs to happen to shake out the idiocy that has been driven by a credit dominated housing cycle.

I love how you try to say that it's a "pump and dump", when, in fact, it's far from that.

Keep saying I am a "fear mongerer", you calling me names doesn't change the fact that we deviated from the mean, significantly, and we will regress to the mean, significantly. Nobody is restricting access to home ownership, all they are doing is restricting those who can't afford it from getting it.

Of course, it's a pump and dump. Look at AHM's recent collapse. Who's gonna buy up all their billions in unsold paper for pennies on the dollar? C'mon... just 'cause the media is stupid doesn't mean everyone else is. The buying frenzy of "distressed paper" has only just begun.

Foreclosure rates are near where they historically always are. Hell, FHA/VA is still leading that as always, with rates pushing 10% in some markets (once again, as always). The greatest factor pushing foreclosures right now is that those who need to sell can't due to the declining market.

I love the Orwellian doublethink in your last sentence BTW. That is simply awesome. Who is "they"?

Yeah, that's what it was. Nobody had any choice in the scheme. WHen you knew yuo couldn't afford something, you had no option.

Please, you have set your mind to one explaination and that obviously doesn't lie with the consumer. How dare we even implicate their greed in this scheme.

I am sure you love seeing an orwellian tint in it, since you're the one running around blaming the mysterious forces at work. I am sure you hear the thump thump of black helicopters when you sleep at night. Better wear your tinfoil beenie.

Anybody who lends money does so on their own voilition according to the risk and return of the situation. Whether that is a friend lending another $10 or a bank extending a 300,000 mortgage. It is up to them to determine what risks they want to take. Simply taking risks to somehow pump homeownership is not only stupid, but it also results in greater lending costs to all of society since all of society has to bear the burden of the smaller section.

Thus, restricting that lending to those who can truly afford it is in everybody's interest.

Please refrain from your usual straw men and personal attacks. This isn't P&N. If you can't argue my arguments, then don't fsckin' bother, eh?

First off, I'm not the one who started it, so quit playing little miss victim. Second, nothing up there was a personal attack except for the continuation of your orwellian train of thought. Don't go down the tracks if you don't want to ride that train.

I am arguing your arguments and obviously doing a better job of it if you're already resorting to whining about personal attacks.

Oh God, now you're not even reading your own posts...

 

[LegendKiller]

Edit: Not going to drag this down further as, while we disagree, it should be stopped.

Now if you want to debate my points, do so.

 

[waggy]

Originally posted by: Vic

Originally posted by: waggy
what i wanted to know is what the fuck did the banks think was going to happen? someone makeing $35k is not going to be able to pay for a mortgage on a $300k when the % goes up 12+%

Also wtf did the buyer think was going to happen? that there credit or income was going to get better in 3 years? really it shouldnt have happened. I know i wouldnt buy a house where my interest hs the potental to go up to 12-15%.

They thought it wasn't their problem so long as the packages met purchaser guidelines on the secondary markets.

What did the buyer think? Dude, from personal experience let me tell you that many buyers are just freakin' whacky. You could explain the terms and documents to them until you're blue in the face and they'll just tell you that all they want to know is if they're getting the house or not.

Also how did "liar loans" ever come up? hell i can't get a loan for a 3k car without proving my income (well now i can. but have gotten maybe 6 loans from my bank over th eyears).

how is it ANYONE would give a loan to someone without makeing sure they can afford it?

just seems the whole mess could have been avoided with a sliver of common sense. yeah i know many many people made tons of money and most wont be in forclosure.

guess the only good thing is those who normally wouldnt be able to get a house now have one (long as they keep it heh) I know a few families who got in on these weird loans. they wouldnt be able to get a house with putting 20% down.

 

[LegendKiller]

Originally posted by: waggy

Originally posted by: Vic

Originally posted by: waggy
what i wanted to know is what the fuck did the banks think was going to happen? someone makeing $35k is not going to be able to pay for a mortgage on a $300k when the % goes up 12+%

Also wtf did the buyer think was going to happen? that there credit or income was going to get better in 3 years? really it shouldnt have happened. I know i wouldnt buy a house where my interest hs the potental to go up to 12-15%.

They thought it wasn't their problem so long as the packages met purchaser guidelines on the secondary markets.

What did the buyer think? Dude, from personal experience let me tell you that many buyers are just freakin' whacky. You could explain the terms and documents to them until you're blue in the face and they'll just tell you that all they want to know is if they're getting the house or not.

Also how did "liar loans" ever come up? hell i can't get a loan for a 3k car without proving my income (well now i can. but have gotten maybe 6 loans from my bank over th eyears).

how is it ANYONE would give a loan to someone without makeing sure they can afford it?

just seems the whole mess could have been avoided with a sliver of common sense. yeah i know many many people made tons of money and most wont be in forclosure.

guess the only good thing is those who normally wouldnt be able to get a house now have one (long as they keep it heh) I know a few families who got in on these weird loans. they wouldnt be able to get a house with putting 20% down.

Stated Income loans were meant for self-employed people who made a decent amount of money. Naturally they couldn't prove their income through normal means, so they just said what they made.

Much like Option Arms (which were for high-end, good credit, but low-monthly and high-bonus borrowers) these moved down-credit as an "affordability" product. What used to be used for high credit obligors on a smaller basis was pitched to lower credit obligors to move them into bigger and better houses, to realize huge appreciation.

 

[dullard]

Originally posted by: waggy
how is it ANYONE would give a loan to someone without makeing sure they can afford it?

just seems the whole mess could have been avoided with a sliver of common sense. yeah i know many many people made tons of money and most wont be in forclosure.

I like your viewpoint waggy.

Companies and investors were stupidly buying mortages from banks and brokers. Stupid buyers were begging and pleading for mortgages that they can't possibly afford. Insurance companies were stupidly insuring the whole transaction. Other people and companies are involved too, all of which did stupid things.

So what did the banks and brokers do? They acted as middle men between the many stupid parties. Everyone was happy. Everyone was happy until reality hit.

I wish somewhere there were more checks and balances. Someone should have stepped in and said "No, this is a stupid manuever." Everyone in the mix had the ability to stop it, but no one did. They were all caught up in a feeding frenzy.

I naively thought banks and brokers had the BEST opportunity to stop it. They were the ones that the borrowers dealt with directly. They were the ones who ultimately either shook the buyer's hands or sent them out the door. They of all people, should have stepped in. Yes, many other parties should have too, but how often do buyers talk directly to the other parties? Rarely if ever.

I have since been educated. My should-haves and could-haves were just a pipe dream. I just had much higher expectations of brokers and bankers.

 

[lokiju]

Originally posted by: spidey07

Originally posted by: ZeroIQ

Originally posted by: HomeBrewerDude
whats wrong with a 80.20 loan?

My understanding is the economy went down a bit, everyones forclosing. Therefore I get screwed.

Nothing is wrong with them if only people who can afford them were give one.

Ummm, of course they are gone.

Wanna buy a house? Put down a payment, also known as a downpayment. Can anybody really blame a bank for recovering what they put out?

But I honestly think if you want to do this kind of loan there are plenty of people out there that want to sell it to you. You may not like the terms however.

That's what PMI is for, with a favorable interest rate and PMI the different in monthly isn't much different than it'd be with a 80/20, though it'd usually be less with a 80/20.

Just because it's harder to get a 80/20 doesn't mean it can't be done but regardless there are many other methods to get into a home with little or no money down, trust me I know as I'm right now going through the financing process for a mortgage.

 

[V00DOO]

Originally posted by: waggy
what i wanted to know is what the fuck did the banks think was going to happen? someone makeing $35k is not going to be able to pay for a mortgage on a $300k when the % goes up 12+%

Also wtf did the buyer think was going to happen? that there credit or income was going to get better in 3 years? really it shouldnt have happened. I know i wouldnt buy a house where my interest hs the potental to go up to 12-15%.

They were all thinking "Real Estate always go up". For all the info on the Housing Bubble

 

[waggy]

Originally posted by: V00DOO

Originally posted by: waggy
what i wanted to know is what the fuck did the banks think was going to happen? someone makeing $35k is not going to be able to pay for a mortgage on a $300k when the % goes up 12+%

Also wtf did the buyer think was going to happen? that there credit or income was going to get better in 3 years? really it shouldnt have happened. I know i wouldnt buy a house where my interest hs the potental to go up to 12-15%.

They were all thinking "Real Estate always go up". For all the info on the Housing Bubble

that does not even explain it.

Even if it continued to go up (which no way it could). that is not going to make sub-prime borrows have more money when the ARM came due.

sure if it was still hot they might be able to make a buck. but anyone should been able to see that there was going to be a influx of forclosures.

 

[Vic]

Originally posted by: waggy

Originally posted by: Vic

Originally posted by: waggy
what i wanted to know is what the fuck did the banks think was going to happen? someone makeing $35k is not going to be able to pay for a mortgage on a $300k when the % goes up 12+%

Also wtf did the buyer think was going to happen? that there credit or income was going to get better in 3 years? really it shouldnt have happened. I know i wouldnt buy a house where my interest hs the potental to go up to 12-15%.

They thought it wasn't their problem so long as the packages met purchaser guidelines on the secondary markets.

What did the buyer think? Dude, from personal experience let me tell you that many buyers are just freakin' whacky. You could explain the terms and documents to them until you're blue in the face and they'll just tell you that all they want to know is if they're getting the house or not.

Also how did "liar loans" ever come up? hell i can't get a loan for a 3k car without proving my income (well now i can. but have gotten maybe 6 loans from my bank over th eyears).

how is it ANYONE would give a loan to someone without makeing sure they can afford it?

just seems the whole mess could have been avoided with a sliver of common sense. yeah i know many many people made tons of money and most wont be in forclosure.

guess the only good thing is those who normally wouldnt be able to get a house now have one (long as they keep it heh) I know a few families who got in on these weird loans. they wouldnt be able to get a house with putting 20% down.

Stated income programs were never designed to be "liar loans." That's just how they were abused. Initially, they were because self-employed persons might have a good cashflow but (due to writeoffs, etc etc) be unable to document it through the traditional means (tax returns, etc).
Likewise, interest-only and Option ARM programs were developed for people with inconsistent income, i.e. those whose pay consists of large commissions or bonuses.
Interest-only's were actually developed as an alternative to bridge loans (a loan made so one could buy a new house while their current home was still up for sale). Instead of the bridge loan (which most lenders didn't like), they got a 100% I/O on their new home. When the old one sold, they could transfer the equity across to pay down the principal on the new loan, and the I/O loan would (unlikely a traditional P&I mortgage) reamortize allowing for a similar low payment as if they had used the transferred equity as a down payment.

The whole mess and lack of common sense came, not from the programs themselves, but in the manner in which they were abused.
Look at the all-too-prevalent home equity lines of credit, which are now most banks' bread and butter. They were NEVER intended to be such. They were originally created as commercial loans for small business owners to be able to periodically dip into the equity of their homes when necessary for cash flow. And now everyone has one to use like a credit card.

 

[Vic]

Originally posted by: V00DOO

Originally posted by: waggy
what i wanted to know is what the fuck did the banks think was going to happen? someone makeing $35k is not going to be able to pay for a mortgage on a $300k when the % goes up 12+%

Also wtf did the buyer think was going to happen? that there credit or income was going to get better in 3 years? really it shouldnt have happened. I know i wouldnt buy a house where my interest hs the potental to go up to 12-15%.

They were all thinking "Real Estate always go up". For all the info on the Housing Bubble

Complete myth. Contrary to the prevailing bullsh!t, no one has been more concerned about the potential and impact of a housing bubble than the actual bankers (bankers, not brokers) themselves.

The problem was that all the excess liquidity in the markets was forcing lenders to lend. It was either lend or go out of business. Remember, "when banks compete, you win." Why do you think the banks were competing so much?

 

[jamesave]

Originally posted by: Fritzo
It may be a blessing- all those 80/20 loans and other entry level loans are what caused the forclosure epidemic. I read in the paper yesterday that there was a 96% rise in forclosures in my part of the state. That's pretty scary.

That really depends of the actual number of foreclosures and the actual market. If there is only 100 previously, then it just become 196 this year. Now, you have to compare it with the number of total loans (was it 1000, 10000 or 100000?) that could set the alarm.

Nonetheless, yes 96% increase is something that someone has to take notice (but may not necessarily at an alarmed state).

 

[Vic]

Originally posted by: Demon-Xanth

Originally posted by: Vic
No, your logic is sound, except that it represents the mindset of the easy credit era, which is ending if all this pans out the way that it looks to be. That's the thing that I think most people aren't looking at here. Easy credit made it possible for you to so easily refinance. But the "When banks compete, you win" was the first causality here. And that whole mentality was a relatively recent phenomenon in the world of lending anyway. Now we're going back to the days of begging borrowers, and guidelines so strict that the only people getting loans are those who don't actually need them.

In my case, I have excellent credit and a notable chunk of cash to put down. But the market in my area literally got to the point where I couldn't afford a house if it had a 0% loan. The cheapest house on the market was a $190k townhouse like thing. That was just two years ago. Currently, those same townhouse like things are going as low as $100k. The former, a 20k chunk of change would be 10% down, the latter, 20%. At which point does a low rate 170k mortgage have payments equal to a high rate 80k mortgage?

And where my logic comes in:
If you pay an extra $1k payment on the 80k mortgage, it'll lower the payments by much more than an extra $1k on the 170k mortgage.

I understand all that, but you're missing the point because you're still in the easy credit mindset. I'm not sure how I can get this across to you.
First, large down payments are for the benefit of the bank, NOT the borrower. It means the borrower takes his own liquid funds and invests them into an illiquid asset.
Second, outside the easy credit world, that borrower would no longer have access to those funds without selling the home (and incurring all the additional costs, taxes, etc of doing so). For example, not 10 years ago, I worked for a large lender whose policy (at the time) was to categorically deny any and all refinance applications above 80% LTV. Cash-out refi's at 75% LTV. And this was common practice at the time. So sure, you might have 20-25% equity in your house, but you couldn't touch it. And the interest rate on your current mortgage might be double-digits, but you couldn't refi it lower either.