The Mortgage Lender Implode-O-Meter

So is it true that soon people applying for mortgages may actually have to 'prove' they can pay the money back??? I mean, they may have to provide some sort of {real} documentation that they actually have a job and salary--and that the mortgage broker and underwriter may actually 'check' to make sure they're telling the truth???

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This may surprise you Shelly, but even people with pristine credit whose loans were run through Fannie Mae and Freddie Mac came up as not having to prove income due to good credit scores, job histories, low LTV. But, a verbal verification of employment was done by brokers, AND repeated by the Lenders and guess what? my shop even put paystubs in the file even when they were not needed. Imagine that! :roll:

my shop even put paystubs in the file even when they were not needed. Imagine that! :roll:

Good for you...that's one-in-a-row!! :clap_1:

Mango - Thanks for your insider insights. I agree with your tip-of-the-iceburg analysis ... and I fear that a titanic sized ship with the words "US Economy" painted on the side is headed right for it.

I am curious what, if any, lending tightening standards that you are seeing outside of the subprime arena. I read on another site that Neg ARMS and No Doc's are gone, regardless of credit score. That doesn't seem to be true, as I still see them advertised. What are you seeing?

I also read a prediction that by year end the only loans available will be 30 year fixed with 20% down to people with high credit scores. If true, that would certainly change the affordablity position of most folks (and may be what brings the "median home" price back within reach of the "median family"). Any thoughts?

(Implode-O-Meter update: 20, or about 2 per week since the first collapse in early DEC)

Shelly wrote" Why on earth would the Fed consider lowering rates when everything is going along just swell? If they do, they must know of some type of economic problem they haven't been telling us about."


What about the war and the machine to keep our country safe?

Shelly wrote" Why on earth would the Fed consider lowering rates when everything is going along just swell? If they do, they must know of some type of economic problem they haven't been telling us about."


What about the war and the machine to keep our country safe?

I suspect that Shelly was taking the other side of the arguement to make a point.


I really do wonder what the Fed's next move will be though. Like Shelly, I believe the logical move would be up ... that is if the Fed is interested in propping up the precarious dollar and keeping China interested in buying our debt. Yes, it will create difficult times that American's aren't used to, but to use Goofer44's words, maybe it's the bitter medicine we need. And, the Dem's have had control of congress long enough now that Bush should be able to figure out a way to blame it all on them .

But, the Fed has shown time and time again that the only number they care about is GDP (they pretend to care about inflation, but anyone that has been to the grocery store lately knows the reported number has no basis in reality). So, if GDP starts to show recession (I believe that it already has, based on the "import/export" component of the last GDP#, but that discussion is for another time), will the Fed cut, dollar be damned? And, if the dollar devalues, causing China to stop buying our debt, under the umbrella of a sliding GDP (ie. lower revenues), is America even capable of servicing its debt, let alone funding all the other crap?

I know that the Fed has shown great capacity to blow bubble after bubble in the past, but this time it would appear that the stakes are higher. I don't see how they could possibly lower rates -- and if they do, I'm taking every penny I have and putting it into Euro's and gold.

I would be very interested in hearing other views on this.

Mango - Thanks for your insider insights. I agree with your tip-of-the-iceburg analysis ... and I fear that a titanic sized ship with the words "US Economy" painted on the side is headed right for it.

I am curious what, if any, lending tightening standards that you are seeing outside of the subprime arena. I read on another site that Neg ARMS and No Doc's are gone, regardless of credit score. That doesn't seem to be true, as I still see them advertised. What are you seeing?

I also read a prediction that by year end the only loans available will be 30 year fixed with 20% down to people with high credit scores. If true, that would certainly change the affordablity position of most folks (and may be what brings the "median home" price back within reach of the "median family"). Any thoughts?

(Implode-O-Meter update: 20, or about 2 per week since the first collapse in early DEC)

and I heard a prediction that Aliens from the planet Rylos will descend upon the planet and reveal that they gave Nintendo the technology for the Wii so they could train and recruit young people to fight in their desperate interplanetary battle for freedom.

bdc, mortgage products will not disappear, and we won't revert to the depression era where folks had to put 50% down and only could get a 5 yr mortgage, there will just be more disclosures regarding an adjustable rate loans offered. Also, appraisals are being scrutinized more- some Banks in lieu of underwriters reviewing them are giving them to review appraisers.

What you're seeing is an over reaction to The Office of the Comptroller and other federal bank regulators issued new guidelines late last month directing banks to tighten underwriting and disclosure standards for nontraditional mortgages. The guidelines instruct banks to use the fully indexed rate when analyzing a borrower?s ability to repay interest-only mortgages and payment-option, negative-amortization loans.
Additionally, the Division of Banks also released proposed guidance on non-traditional mortgage product risks, intended to apply to licensed mortgage brokers and lenders paralleling recently issued federal guidance for banks and credit unions on the risks of non-traditional mortgage products, such as interest-only loans. The guide states that brokers who offer non-traditional mortgage products must clearly disclose the risks that borrowers may assume. Many borrowers of these non-traditional products have found themselves in trouble.

So from now on in addition to what we have already been doing, we will be giving out a disclosure something like this:
If you take an adjustable rate mortgage and rates go up, your rate will go up, if rates go down, your rate will go up. Please sign here 10 times. :rofl:
But you will always see an array of products available to consumers.

Mango - thanks for you insights and humor ... both are appreciated

When I look at Bernanke's resume, I am relatively calmed by his obvious intellectual background. When I consider the fiscal corner Ben is being backed into by the actions Of GW and Greenspan, and our inability to influence trickle down OPEC inflation, I see no good outcome. Bernanke may be subject to the same misplaced vitriol that Jimmy Carter suffered through, because he recommended we simultaneously be fiscally responsible and independent of foreign oil 30 years ago. This was just about the same time blue collar folks started to declare they were Republicans, and The Gipper showed us the miracle of deficit spending combined with unregulated banking. We been moving steadily toward a financial day of reckoning. All we need is 3 aircraft carriers in the Persian Gulf, a nice 'crisis' and the dominoes start falling.

When I look at Bernanke's resume, I am relatively calmed by his obvious intellectual background. When I consider the fiscal corner Ben is being backed into by the actions Of GW and Greenspan, and our inability to influence trickle down OPEC inflation, I see no good outcome. Bernanke may be subject to the same misplaced vitriol that Jimmy Carter suffered through, because he recommended we simultaneously be fiscally responsible and independent of foreign oil 30 years ago. This was just about the same time blue collar folks started to declare they were Republicans, and The Gipper showed us the miracle of deficit spending combined with unregulated banking. We been moving steadily toward a financial day of reckoning. All we need is 3 aircraft carriers in the Persian Gulf, a nice 'crisis' and the dominoes start falling.

Just like $100/oil and the deficit?...

Oh I forgot, what was that stock market message again?...

I love these imminent economic meltdowns!...

Just like $100/oil and the deficit?...

Yeah, T. Boone Pickens is an idiot too with his mutant son, Jim Cramer. They're calling for oil to be 100+ range.

Oh I forgot, what was that stock market message again?...

I love these imminent economic meltdowns!...

The lemmings ran from real estate to Wall street. What's next?

The lemmings ran from real estate to Wall street. What's next?

I think you've got that backwards.

My guess is Private Equity/Hedge Fund IPOs....these guys are itching to cash in some chips and the masses are just about ready to throw their money at the "next big thing."

SHELLY

Again I agree with you !! This is scary. I totally agree the masses will run after hedge fund and private equity ipo's. And the masses will lose their asses !!

the seepage out of just the subprime area is beginning, according to standard & poor's ........

(impode-o-meter update: 22)



NEW YORK, Feb 15 (Reuters) - Rising delinquencies on U.S. home loans are hitting higher-quality mortgages for the first time, Standard & Poor's said on Thursday, as it put some of the bonds backed by the largest U.S. mortgage lender's loans on review.
The rating company said that it placed a Countrywide Financial Corp. (CFC.N: Quote, Profile, Research) mortgage-backed bond issue under review for downgrade. It was the only so-called "Alt-A" loan from 2006 to be placed on such a review based on poor performance of underlying loans.
S&P on Wednesday also put 10 subprime issues on CreditWatch negative.

Representing one of the fastest growing segments of the $10 trillion U.S. mortgage market, Alt-A loans are typically given to borrowers with better credit than subprime but still fall short of the most stringent requirements, such as proof of income.
FICO credit scores below 620 in a range from 350 to 850 usually put borrowers in the subprime category.
A spokeswoman for Calabasas, Calif.-based Countrywide, the biggest U.S. mortgage lender, declined immediate comment.
The reviews follow others in the subprime sector where the riskiest home buyers have run into credit problems in the aftermath of the housing boom.
Before Wednesday's announcement, there were at least seven subprime issues already flirting with downgrades based on the rapid increase in loan delinquencies, including some in the first month of the loan's life. The top driver of delinquencies were second-lien "piggyback" loans taken by borrowers that are often used as a downpayment, S&P analyst Ernestine Warner said on a Thursday conference call.
The Countrywide loans backed its Asset-Backed Certificates Trust 2006-IM1 mortgage bond issue, S&P said. The other deals placed on CreditWatch were sold by units of companies including Goldman Sachs Group Inc. (GS.N: Quote, Profile, Research), Lehman Brothers Holdings Inc. (LEH.N: Quote, Profile, Research) and New Century Financial Corp. (NEW.N: Quote, Profile, Research).

The lemmings ran from real estate to Wall street. What's next?

Oh Bob, don't lament the rats... The market will snap back 10% or so by end of summer and you and Shelly will feel much better about yourselves...

BTW, thanks for votin' for W


Shelly, I'd like to know a little more about this theory of private equity ipo business for the masses

Shelly, I'd like to know a little more about this theory of private equity ipo business for the masses

In simple terms, for the past several years, Private Equity groups (largely unregulated groups of folks with cash) were buying up public companies, real estate, and other "stuff," fixing them up, and selling them back and reportedly making outstanding returns on their investments. Soon, more and more PE groups were jumping on the bandwagon and lately they find themselves all chasing after the same "stuff." As a result, Private Equity groups and Hedge Funds are looking for alternative ways to generate cash and juice returns (in order to buy even more and bigger stuff and, more importantly, fatten the wallets of the original members of the group)...so they have started selling shares of their groups to the public. Now "Joe 6-Pack" has the opportunity to run with the big boys, like when he was given the opportunity to be a Trump Mini-Me by buying up pre-sale condo contracts to flip for fun and profit.

Last week Fortress Investment Group went public with much fanfare under the watchful eyes of other PE & Hedge Fund Groups who are considering the same.

Oh Bob, don't lament the rats... The market will snap back 10% or so by end of summer and you and Shelly will feel much better about yourselves...

BTW, thanks for votin' for W


Shelly, I'd like to know a little more about this theory of private equity ipo business for the masses

Which market? Ameritrade or Remax?? Voted for W...Pavlovian vote when the flag wavin' commences. Winning strategy is, wave flag, cut taxes, start war, borrow like hell, repeat.

SHELLY very nice explanation for those not in the know. Thanks. I'll be calling my broker in the morning. ;-)

SHELLY

Again I agree with you !! This is scary. I totally agree the masses will run after hedge fund and private equity ipo's. And the masses will lose their asses !!

What I can't help but wonder is how many people will continue to chase the next big thing instead of getting smart and going back to basics. We've seen two historic boom/bust cycles in a little more than a decade. Who out there hasn't learned a little bit about irrational exuberance?

What I can't help but wonder is how many people will continue to chase the next big thing instead of getting smart and going back to basics. We've seen two historic boom/bust cycles in a little more than a decade. Who out there hasn't learned a little bit about irrational exuberance?

The masses will always chase the "next big thing" because there's a new sucker born every minute...to add to the population of born-again suckers.



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BDC, no docs are not gone. I just did one for a customer with 750+ credit score. Conforming lenders will do them to 90-95% on purchases depending on exactly where the score falls.

Option ARMS with neg am are very available as well. However, they are for customers who understand how they work and what purpose they serve. It's the broker's responsibility to help determine if the product is a good fit and is understood.

The main things we are seeing is the tighter scrutiny of appraisals everywhere and changes in the subprime market on credit score tiers. For example, a program that 6 months ago was available to a 580 score might require a 620 now.

BDC, no docs are not gone. I just did one for a customer with 750+ credit score. Conforming lenders will do them to 90-95% on purchases depending on exactly where the score falls.

Option ARMS with neg am are very available as well. However, they are for customers who understand how they work and what purpose they serve. It's the broker's responsibility to help determine if the product is a good fit and is understood.

The main things we are seeing is the tighter scrutiny of appraisals everywhere and changes in the subprime market on credit score tiers. For example, a program that 6 months ago was available to a 580 score might require a 620 now.

Do you believe 620 is a subprime score?

620 is right on the border, IMO. As I said, some subprime lenders are requiring 620 for some programs. There are other mid-level, alt-a type lenders that have 620 as a minimum for some programs and lend up to 680.

I also have had borrowers approved conforming with less than 620 with other factors - low ltv's, substantial reserves, very low dti's etc.

spinDrAtl

Thanks for your posts. Very interesting information. As you see other changes, I hope you'll post here in this thread and keep us all up-to-date.

Thanks again.

(Implode-o-Meter update: 23)

The masses will always chase the "next big thing" because there's a new sucker born every minute...to add to the population of born-again suckers.



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Your explanation is somewhat correct...Its an alternative and very cheap way to generate capital..I think its bad move on their part because they loose their autonomy and it completely changes the way they have to account and report...But once again why is it a sucker bet......Have you ever done PE?...The returns are quite good (typically 1.5-2.25 multiple invested)...You certainly seem to be anti-establishment...Why shouldn't you be able to participate in something you have been precluded from previously...

Oh Bob, that patriotism can be a real hindrance...I guess if you knew then what you know now, you wouldn't have voted for him...Sounds familiar...Anyway, thanks again for votin' W