Author Topic: You are going to bail-out sub-prime lenders. (Read 1770 times)

Hap · « **Reply #45 on:** September 01, 2007, 08:28:43 AM »

Quote

Originally posted by FrodeMk3
The real problem is that the average Joe can't afford an average house, anymore.

I'll use my own home as an example: It's a 3/2, 1450 sqf., built in '82, I bought it in '96, for $84,500.

Now, Due to the unrestricted market, this same house, on a 1/4 acre tract lot in a nice neighborhood, hit a High-point value of $312,000. In an area with a median income of $11-15 dollars an hour.

Figure the payments' on 312k, even with a 7% fixed, like my own. How the hell is someone gonna afford even an average house?

Plus, keep in mind that Rents' go up with mortgage payments. 2-bedroom apartments that at one time rented for $450 are now $1,000+ a month. So, there's alot of incentive to buy.

[/b]

True.

Eagler · « **Reply #46 on:** September 01, 2007, 08:58:19 AM »

Quote

Originally posted by Rolex
It better be a darn big war, because the little wars are killing us.
.... Unless you acquire assets from the outcome. Flags have always followed businesses to acquire assets.

I am afraid it would be and yes, no more freebies

john9001 · « **Reply #47 on:** September 01, 2007, 09:12:54 AM »

i wonder how many of the forclosers were "house flippers" that couldn't do the flip and got stuck with a house they could not sell?

lazs2 · « **Reply #48 on:** September 01, 2007, 09:16:41 AM »

I guess I am just callous but...

the way I figure it is that my property (2 units) is worth about $600k or was.. maybe a little more... The property I want to retire to was all selling for maybe 400K

If mine goes down to 300K and the property I want all go down to 200K I am fine with that. Or.. I can just stay where I am for free till the dust settles.

I don't know how you are gonna get housing down to 100k (affordable) again tho when fees that are driven by the EPA for water and sewer expansion of facilities can run 10-20K off the top.

Any good sized shop I would build for my hot rods and tinkering in would be 50-70K yet... I see homes for sale with those shops on em and I don't know how they even got built for what the house is selling for now.

The cities are taking a 10-20k hit on the developer for each unit before he even breaks ground.

200k may be the bottom of the barrel for a conventional home in the future.

lazs

Sixpence · « **Reply #49 on:** September 01, 2007, 09:51:03 AM »

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Originally posted by Chairboy
A very soviet solution. Simply take control of the private companies. It's one step away from nationalization.

Who would take control of the company? I am talking about the company doing it. If you know the borrower can't make the payments on a bad loan, why not make it a good loan and at least make 7%?

DREDIOCK · « **Reply #50 on:** September 01, 2007, 09:51:56 AM »

Quote

Originally posted by T0J0
Not good news because I live here but a report stated that Sarasota Florida was the actual anchor point for the housing market meltdown from a university think tank or whatever.
Not like it really matters either way.
I remember having a realtor tell me how wonderful the interest only mortgage
was and why not live in a better house for less money.. I looked at her and
thought she was nuts, even for someone that casually reads market news and guidlines could have seen this coming drunk...

It will work itself out over time, enjoy the short sales while they last, Im working on one now that is fantastic $150 4\2\2200sf with salt canal access built in 2006
in Fort Myers Fl. to sit on for a few years.

Wise advice given to be even before I started looking for a house

Rule #1 when buying a house.

NEVER listen to Realtors for mortgage advice.
They are out to increase THEIR bottom line.
The more expensive the house you buy. The larger their bottom line

Hence if given a choice between a $200,000 house and a $400,000 house.
Which house is it they will want you to buy?

Sixpence · « **Reply #51 on:** September 01, 2007, 10:00:03 AM »

Again, if you know the borrower cannot pay a bad loan, why not rewrite and make 7%? I am talking about the company, not the government.

FrodeMk3 · « **Reply #52 on:** September 01, 2007, 12:49:32 PM »

Quote

Originally posted by lazs2
I guess I am just callous but...

the way I figure it is that my property (2 units) is worth about $600k or was.. maybe a little more... The property I want to retire to was all selling for maybe 400K

If mine goes down to 300K and the property I want all go down to 200K I am fine with that. Or.. I can just stay where I am for free till the dust settles.

I don't know how you are gonna get housing down to 100k (affordable) again tho when fees that are driven by the EPA for water and sewer expansion of facilities can run 10-20K off the top.

Any good sized shop I would build for my hot rods and tinkering in would be 50-70K yet... I see homes for sale with those shops on em and I don't know how they even got built for what the house is selling for now.

The cities are taking a 10-20k hit on the developer for each unit before he even breaks ground.

200k may be the bottom of the barrel for a conventional home in the future.

lazs

Those fees' won't be the same everywhere, Lasz. I think what the real problem is, and what's kept prices from going right back down, is that no-one want's to sell for less than they bought. And that's what it's coming down to. Developers' will want to get homes selling again, so they will drop the prices on new construction first. Of course, the private seller will have to drop prices if they wish to sell they're homes. Which in turn will bring on the market decline.

Eagler · « **Reply #53 on:** September 01, 2007, 01:42:52 PM »

Quote

Originally posted by Sixpence
Again, if you know the borrower cannot pay a bad loan, why not rewrite and make 7%? I am talking about the company, not the government.

because they got the high interest in the first place due to their bad credit rating or bit off more of a house then they can now chew as greedy materialism flooded their tiny minds. Are you saying they should be given a break because they had/have poor credit and/or took a risky deal and lost? That would only be fair if mortages across the board were all offered lower interest rates relative to the break they give the high risk poor credit loans. I'd like to see my 6.6% fixed loan say drop to 4.5 or lower...or only the losers who got us into this mess given a break...

Sixpence · « **Reply #54 on:** September 01, 2007, 11:22:57 PM »

Quote

Originally posted by Eagler
because they got the high interest in the first place due to their bad credit rating or bit off more of a house then they can now chew as greedy materialism flooded their tiny minds. Are you saying they should be given a break because they had/have poor credit and/or took a risky deal and lost? That would only be fair if mortages across the board were all offered lower interest rates relative to the break they give the high risk poor credit loans. I'd like to see my 6.6% fixed loan say drop to 4.5 or lower...or only the losers who got us into this mess given a break...

What I am saying is that if I am a mortgage company, and people are defaulting on loans that have had a high interest kick in, why would I let the loan fail? I would be stuck with a house that I am going to get pennies on the dollar for at auction.

Would it not be in my best interest to rewrite the loan so the rate stays fixed that the borrower can afford and make my money back plus interest? Or do I want to be stuck with a house I don't want?

LePaul · « **Reply #55 on:** September 01, 2007, 11:32:10 PM »

Quote

Originally posted by Sixpence
Again, if you know the borrower cannot pay a bad loan, why not rewrite and make 7%? I am talking about the company, not the government.

At the bank I worked for (just left in June), that was the approach they and other lenders were taking. Rather than go thru the entire (expensive) foreclosure process, it was wiser to get said clients into a fixed rate mortgage. The key being that customers having such issues need to talk to their lenders before things get really out of hand. Its one thing to ask when you are up to date but hurting versus several payments behind.

And it really depends on the bank. Most community banks will go thru hoops to keep the customer solvent.

Sixpence · « **Reply #56 on:** September 01, 2007, 11:39:01 PM »

Quote

Originally posted by LePaul
At the bank I worked for (just left in June), that was the approach they and other lenders were taking. Rather than go thru the entire (expensive) foreclosure process, it was wiser to get said clients into a fixed rate mortgage. The key being that customers having such issues need to talk to their lenders before things get really out of hand. Its one thing to ask when you are up to date but hurting versus several payments behind.

And it really depends on the bank. Most community banks will go thru hoops to keep the customer solvent.

Well, I am just trying to use some common sense(forgive me).

Especially if I am a lawmaker and a company says to me, " I wrote loans that start at 7% and jump to 14% and now the borrower can't pay, you have to bail me out"

My answer would be, "well, then give them a fixed rate at 7% stupid"

LePaul · « **Reply #57 on:** September 02, 2007, 12:01:48 AM »

LOL Six...common sense? That is soo 80s

It just boils down to the points made by others. People who bought more than they could ever afford and people who really couldnt afford a home to begin with.

I think the President's plan is the best compromise, help those that have a good credit history. I think bailing out people who made bad decisions is a bad idea. That's akin to helping people who loose money at the Casinos.

Bad choices = consequences

There are options out there but buyers have to decide what to do. Sometimes loosing the house (sell, foreclose, etc) is in the best interest.

Much like common sense, people have to manage their credit and finaces carefully. Its a shame high schools dont teach such important financial values.

Sixpence · « **Reply #58 on:** September 02, 2007, 12:26:35 AM »

Quote

Originally posted by LePaul
LOL Six...common sense? That is soo 80s

It just boils down to the points made by others. People who bought more than they could ever afford and people who really couldnt afford a home to begin with.

I think the President's plan is the best compromise, help those that have a good credit history. I think bailing out people who made bad decisions is a bad idea. That's akin to helping people who loose money at the Casinos.

Bad choices = consequences

There are options out there but buyers have to decide what to do. Sometimes loosing the house (sell, foreclose, etc) is in the best interest.

Much like common sense, people have to manage their credit and finaces carefully. Its a shame high schools dont teach such important financial values.

Well, that's the misconception, you're not bailing out the people who bought the house, they can always walk away, build their credit back up, and buy again. The lenders are the ones in trouble, and it threatens the economy as a whole.

My view is that you tell the lenders it's their mess and they have to clean it up.

Rolex · « **Reply #59 on:** September 02, 2007, 12:51:39 AM »

Lenders have no incentive to re-write mortgages. The mortgages were sold to others, then others, then packaged with other sub-prime mortgages and sold again. The holders are many times non-lending subsidiaries created as investment companies. The people being bailed out are the big lenders holding them in subsidiaries because they are still part of consolidated balance sheets and P&Ls.

The mortgages would have to be bought by lenders. Who is going to do that? A new mortgage, paying off the old and starting new, would only be done for credit-worthy borrowers. The lender, once again, has no interest in the old mortgage, so no incentive.

The Fed and government only care about the big lenders with exposure. The property or borrower is not even considered, except for political media consumption.

The incentive will come when loans default. Large packages of loans will be sold off with deep discounts and the deep-pocketed buyers can then re-sell the property or refinance with some new mechanism devised by their government brethren that will insure the lender. Even if the property drops 25% in value, the new lenders will make a killing.

Again, the borrower is insignificant. I don't get this preoccupation with the borrower getting some kind of bailout. The lenders will get bailed out. They are the ones who took the risks, not the borrower.