New restrictions on financing

There are not only "predatory lenders:"


There are also "predatory borrowers"


Many who claim to be "victims" are victims only
of their own greed and stupidity.

Does everything have to be "stupid-proof?"

I started in the biz when subprime was a baby, 1985 and we were the first to do 2nd mortgage hard money loans. Subprime loans were initially supposed to be bandaid loans. Then programs changed and they soon became loans for those with sour credit. In the 90's subprime lenders were doing foreclosure bailout loans for goodness sakes. (Which was done away with and also forced some companies out of business....hint, hint about what future problems could occur..........not.)

Then along come the exotics, Alt-A, which was really A-, B paper which subprime lenders were grading anyway. But then they expanded Alt A to more exotic loans like NINA, SISAs whatever you want to call them with interest only features. Now all the Banks see green who've never even touched these types of loans before and one page rate sheets turn into 5, and they scramble to find knowledgeable underwriters to price to paper.
Then layered risks in a automated fashion, of which realistically should have been common sense underwriting.

9/11 happens and to keep the economy going Big Al decides to keep lowering the lending rate. All's good in the world while the only thing carrying our economy is the real estate service sector.

But not once did anyone in regulation look at these programs from a common sense approach. In essence we were dangling candy in front of child in a store front with a for free sign, but put your siggy here and gauarantee me your dental work in the future.

In the meantime, property values are soaring, Banks are inundated with loans requests, credit is so cheap so why not get another SUV? Go ahead, so we have more room for al lthat Home depot stuff for our renovations? :roll:

I never did a subprime loan in my shop ever. I let the monkeys who jumped in the business who didn't know an arm from a leg. If someone had credit issues that resulted from family illness or the like, if I couldn't get them in a traditional loan or something short term that I knew could get them out of without prepayment penalty, I didn't do the loan. I never had a default, and I can sleep at night because no one has ever called me and asked me what the he11 kind of loan did I put them in.

I can tell you that a friend of mine and old timer in the biz who wrote designed progranms for FNMA back in the 80's, we wrote letters to the agencies, requesting tighter controls and licensing of loan officers along with mandatory related business experience. We saw the writing on the wall a long time ago.

So why does everything have to be stoopid proof?
Because human nature and greed will never go away.
and because we can not expect common sense to rule when everything seems to appear to be working in everybodies favor.

Now the markets are seeking to try to get govt' intervention via asking a bailout of FNMA to secure jumbos again to try and bring back a sense of security to the markets.

Maybe if federal regulators stepped in a long time ago, and made it clear that it was not ok to give 100% financing to a 580 fico score or an interest only ARM to a borrower who had zilch for savings other than his 401K plan, we would not be in such the quandry.

Those who are crying wolf now would be crying about govt. intervention, but we might still have had a market.

I started in the biz when subprime was a baby, 1985 and we were the first to do 2nd mortgage hard money loans. Subprime loans were initially supposed to be bandaid loans. Then programs changed and they soon became loans for those with sour credit. In the 90's subprime lenders were doing foreclosure bailout loans for goodness sakes. (Which was done away with and also forced some companies out of business....hint, hint about what future problems could occur..........not.)

Then along come the exotics, Alt-A, which was really A-, B paper which subprime lenders were grading anyway. But then they expanded Alt A to more exotic loans like NINA, SISAs whatever you want to call them with interest only features. Now all the Banks see green who've never even touched these types of loans before and one page rate sheets turn into 5, and they scramble to find knowledgeable underwriters to price to paper.
Then layered risks in a automated fashion, of which realistically should have been common sense underwriting.

9/11 happens and to keep the economy going Big Al decides to keep lowering the lending rate. All's good in the world while the only thing carrying our economy is the real estate service sector.

But not once did anyone in regulation look at these programs from a common sense approach. In essence we were dangling candy in front of child in a store front with a for free sign, but put your siggy here and gauarantee me your dental work in the future.

In the meantime, property values are soaring, Banks are inundated with loans requests, credit is so cheap so why not get another SUV? Go ahead, so we have more room for al lthat Home depot stuff for our renovations? :roll:

I never did a subprime loan in my shop ever. I let the monkeys who jumped in the business who didn't know an arm from a leg. If someone had credit issues that resulted from family illness or the like, if I couldn't get them in a traditional loan or something short term that I knew could get them out of without prepayment penalty, I didn't do the loan. I never had a default, and I can sleep at night because no one has ever called me and asked me what the he11 kind of loan did I put them in.

I can tell you that a friend of mine and old timer in the biz who wrote designed progranms for FNMA back in the 80's, we wrote letters to the agencies, requesting tighter controls and licensing of loan officers along with mandatory related business experience. We saw the writing on the wall a long time ago.

So why does everything have to be stoopid proof?
Because human nature and greed will never go away.
and because we can not expect common sense to rule when everything seems to appear to be working in everybodies favor.

Now the markets are seeking to try to get govt' intervention via asking a bailout of FNMA to secure jumbos again to try and bring back a sense of security to the markets.

Maybe if federal regulators stepped in a long time ago, and made it clear that it was not ok to give 100% financing to a 580 fico score or an interest only ARM to a borrower who had zilch for savings other than his 401K plan, we would not be in such the quandry.

Those who are crying wolf now would be crying about govt. intervention, but we might still have had a market.

You had me until the last few paragraphs. The companies that lent 100% to the 580 fico should take their licks, lose money and learn a lesson rather than waiting on the government to bail them out or tell them how to run their business. Take away the safety net and those crossing the tightline won't do so skipping.

You had me until the last few paragraphs. The companies that lent 100% to the 580 fico should take their licks, lose money and learn a lesson rather than waiting on the government to bail them out or tell them how to run their business. Take away the safety net and those crossing the tightline won't do so skipping.

FNMA never has bought real subprime (hard money) so that will never happen. That industry will take it licks.

There have always been regulations against predatory lending, that's nothing new, and that's exactly what happened imho when you dangle loans in front of borrowers who can't even pay their own child support.

Prosecute the predatory lenders, let the stupid/greedy lenders flounder, and bail out those who DESERVE it!

What is the word I meant instead of flounder? My brain is mush today, and that word just says "fish" to me reading it right now.....

More good news:

http://tinyurl.com/267s4n

Maybe a little interest rate bump?

When it rains, it pours

I forgot all the folks SOL on the mortgage front were just following our governments example...........


At this rate, the beaches may be getting cleaned up by folks who NEED those tents!

More good news:

http://tinyurl.com/267s4n

Maybe a little interest rate bump?

When it rains, it pours

I don't think they have the leverage they think they have and it sounds like a lot of political posturing but,
I don't want to be around when Bob reads this though..:leaving:

No, people have been warning for years about how much of us foreign countries own and how we'll be up the creek w/ no paddle if they ever call them in!

"...I don't think they have the leverage they think they have and it sounds like a lot of political posturing ..."


Certainly entitled to your opinion.

I think they do have the leverage and here is why:

http://www.iht.com/articles/2006/01/29/business/ships.php

No, people have been warning for years about how much of us foreign countries own and how we'll be up the creek w/ no paddle if they ever call them in!

Buggy, I don't like it either, but you don't think China wouldn't be hurt at all if our economy came to a screeching halting and no one could afford plasma tv's or they can afford for our dollar to drop:scratch:

I think that if our economy came to a screeching halt China would welcome it as less competition for the raw resources they need to support their population.

I'm not saying that they will call in the markers, but they have one hell of a poker hand right now!

Time for a little conspiracy theory..

If I were wanting to be the world superpower, it seems that a good first step would be to make the current superpower highly dependant on me from a product standpoint. Then buy up a huge percent of their economy putting them in a precarious economic position. Attempt to secure management of existing entry points for importing into said superpower. Make trade deals with other countries to make sure I have enough oil to continue to develop as I see fit. And finally, do all these things while building a billion person military to defend my interests.

Has China done most of that, I think so...:shock:

Buggy, I don't like it either, but you don't think China wouldn't be hurt at all if our economy came to a screeching halting and no one could afford plasma tv's or they can afford for our dollar to drop:scratch:

People make irrational decisions every day; witness subprime borrowing/lending.

I do not presume to know if the leaders of China are rational.

What I do know is that we (U.S.A) have given them the option.

Buggy, I don't like it either, but you don't think China wouldn't be hurt at all if our economy came to a screeching halting and no one could afford plasma tv's or they can afford for our dollar to drop:scratch:

In the short term, I think you would still have the same people that are getting the loans you are talking about say, "it will turn around" and just use credit. Keep in mind, there aren't many people who are still alive that went through a depression and many like myself were born and raised on credit cards... Sad but true. Budgeting and financial planning are not stressed to young people as much as it should be in my opinion, and I think these loans fed that "I want it now" mentality.

Question...what if the USA called in all of our own loans?

Question...what if the USA called in all of our own loans?

I don't believe that we have any of real material significance.

I could be wrong

This has a rather ominous tone:

http://tinyurl.com/2wu23y

Question...what if the USA called in all of our own loans?

Being a country of immigrants and special interest groups, it would be funn to watch. Especially, the decision on which country to start with. Plus, we continue to dole out money to other countries that puts us further in debt to China. Interesting fiscal management policy if you ask me :roll:

I guess I won't be having chinese food tonight.

I guess I won't be having chinese food tonight.

Or watching TV?;-)

Or watching TV?;-)

ok, I found something else to do.

I guess I won't be having chinese food tonight.

You could go for Taiwanese-style food to stick it to the mainland.

This is like the "Never ending Story:"

http://tinyurl.com/2kwh4r

where does it end?



"...The U.S. Federal Reserve added $12 billion in temporary reserves to the banking system today when it arranged 14-day repurchase agreements, or repos, about the amount analysts predicted. Just two days ago, the Fed said ``tighter'' credit conditions aren't a threat to economic growth. ..."

This is like the "Never ending Story:"

http://tinyurl.com/2kwh4r

where does it end?



"...The U.S. Federal Reserve added $12 billion in temporary reserves to the banking system today when it arranged 14-day repurchase agreements, or repos, about the amount analysts predicted. Just two days ago, the Fed said ``tighter'' credit conditions aren't a threat to economic growth. ..."

Markets down 3-5% from all time record highs, no news from the FED just a couple days ago about any market worries... then all of a sudden the FED and the ECB see the need today to inject UNLIMITED cash...

Must be good news coming from the markets in the near future :roll: :shock:

Option One's "no condo financing" has finally hit the mainstream media (Miami Herald)....Fit meets Shan.

-------------------------------------------------------------

Option One stops writing Fla. condo loans
Option One Mortgage stops writing loans for Florida condominiums.

BY DAWN WOTAPKA
Dow Jones News Service
In a blow to an already weak housing market, Option One Mortgage will no longer provide mortgages to buy Florida condos, a decision industry watchers warn other lenders could copy.

Option One's move comes as the once-hot market for condominiums in Florida has become glutted with thousands of unsold units, threatening the prospects of developers like WCI Communities that are under pressure to round up scarce buyers. Compounding the problems for mortgage lenders, investors are refusing to fund loans they think look risky, producing a credit crunch that has roiled the housing market and forced dozens of lenders out of business.

Option One wouldn't discuss what led to the move in Florida, which in the first four months of the year was its second-largest source of mortgage originations. Mortgage brokers in the state say they expect other lenders to follow suit.

Warned Alex Barron, an analyst with Agency Trading Group: ''It's got a pretty broad implication.'' If other lenders follow, 'you're going to find a lot of very desperate buyers' who won't be able to close even if they wanted to.''

California-based Option One, a unit of H&R Block, is a mid-size mortgage player that originated $27 billion in mortgages for the year ended April 30. But Option One has been losing money, prompting H&R Block to sell it to a private equity firm.

The news comes at a dark time for the Sunshine State, which has found itself in a condo glut.

In Miami-Dade County, there's a 31-month supply of existing condos, and the pace of sales has dropped nearly 40 percent year over year, according to McCabe Research & Consulting in Deerfield Beach.

''I think the worst thing you want to do in this market is be a condo seller,'' said Jim Gillis, broker/manager of Palm Shores Realty in Miami. ``It's almost like a disease that is going to be very difficult to get rid of.''

Industry watchers also predict falling prices, meaning mortgage lenders could end up having made loans for much more than properties are worth.

Some observers wondered why Option One didn't just raise rates for condo borrowers or try to weed out the riskier areas, such as Miami. ''The condominium market in Florida should not be viewed as a monolith,'' said Joe Falk, legislative chairman of the National Association of Mortgage Brokers.

Optimists point out that buyers still have other options. But as more homeowners can't pay their mortgages and foreclosures spike, choices are either becoming harder to secure or drying up.

Lenders nationwide have either shuttered or put themselves up for sale. Like Option One, the remaining players are tightening standards, even for people with good credit. This comes as rates for jumbo loans of more than $417,000 are rising, making big loans more expensive.

Countrywide Financial, the largest U.S. home lender, highlighted the liquidity problems facing the mortgage industry when it drew down a credit line and said it would retreat almost entirely to making loans that comply with standards set by government-sponsored entities Fannie Mae and Freddie Mac. Those standards rule out jumbo loans and others with once-popular terms that made it easier for borrowers to buy homes but which now seem too risky.

In addition to the ban on mortgages to fund purchases of Florida condos, Option One nationwide has stopped underwriting loans that lack full income documentation and isn't making loans secured by a second home or an investment property.