• Welcome to AppraisersForum.com, the premier online community for the discussion of real estate appraisal. Register a free account to be able to post and unlock additional forums and features.

Housing Bubble Bursting?

Status
Not open for further replies.
Brad,
Please clear this one for me
Who cares if they lie? Of course they do- and guess what? They lie on prime loans, too. If they did not, who would need underwriters?
Click to expand...
If I am a hotel dishwasher manager or waiter making $10 per hour but have paid all of my bills and have 750 FICO and tell the LO that I heredited $500000 stocks in mutual fund but I just don't want to sell them now and I want to borrow money to buy $400000 home, what the LO and underwriter do? They are not going to ask for document from me and they cannot get anything from the mutual fund company because it is confidential. Do I get 90% first and 10% second loan for my house or not? That is what I am hearing about the recent Alt-A loan procedure. Is underwriter going to hire a PI to find out about my wealth?
Of course I am truly proud of our performance.
Click to expand...
What would you tell me if I had invested $100,000 in the stock of a lender last year at this time and it was worth $70,000 today but if I had invested the same amount in the stock of another lender for the same period, it was worth $112,000 today? Please compare the performance of these two lenders and I am not going to name names but the market reaction is the ultimate indicator not what I or you say
 
Last edited:
NAR: Existing-home sales plunge

http://www.marketwatch.com/news/story/existing-home-sales-plunge-84/story.aspx?guid=%7B5037AF34%2D6384%2D4BDB%2D9111%2D13710B2FC4AB%7D

WASHINGTON (MarketWatch) -- Sales of existing homes plunged 8.4% in March to a seasonally adjusted annual rate of 6.12 million, the lowest in nearly four years, the National Association of Realtors reported Tuesday.


It was the largest percentage decline in sales since January 1989. Economists were expecting sales to fall to 6.45 million.

Sales are down 11.3% in the past year.

The median price of an existing home fell 0.3% year-over-year to $217,000. Prices have been lower year-over-year for eight straight months.

The inventory of unsold homes on the market fell 1.6% to 3.75 million, representing a 7.3-month supply.
Click to expand...
 
Is underwriter going to hire a PI to find out about my wealth?
Click to expand...
No, but the prudent lender will charge you $50 for a credit report and the existance of that account will be confirmed..or not. And if what you say and what the credit bureau says don't match, there is every reason for the lender to verify it with bank statements, etc.

Meanwhile back at the Pollyanna ranch,

David Lereah, chief economist at the Realtors, attributed the big drop in part to bad weather in February
Click to expand...
idiot.
 
Last edited:
How the mutual fund stock that you heredited goes to your credit report? Mutual fund is not a bank account or credit card account. If you don't do transaction, nothing is going to go to your credit history.
 
moh malekpour said:
What would you tell me if I had invested $100000 in the stock of a lender last year at this time and it was worth $70000 today but if I had invested the same amount in the stock of another lender for the same period, it was worth $112000 today? Please compare the performance of these two lenders and I am not going to name names but the market reaction is the ultimate indicator not what I or you say
Click to expand...

Moh-

Brad needs no help and I am not defending him, but is your question a reasonable one? If I were going to evaluate an investment decision on companies within a sector, I'd do exactly what you did. If I were going to evaluate a lender's performance in terms of their lending policies, I'd look at such things as their default and foreclosure rate, and judge how they book revenue to make sure neg-am loans, if their missed payments are booked as revenue, are backed out of the equation so I can determine what their real exposure is.

But you know (probably better than I), that a stock's price is a result of many factors, one of which may not be (in our case, talking about lenders) their loan policies or portfolio solvency.

I'm not picking a fight, just making a point!:new_smile-l:
 
My banker requires me to provide documentation, including statements from my mutual funds, which they send quarterly.
 
Denis DeSaix said:
Moh-

Brad needs no help and I am not defending him, but is your question a reasonable one? If I were going to evaluate an investment decision on companies within a sector, I'd do exactly what you did. If I were going to evaluate a lender's performance in terms of their lending policies, I'd look at such things as their default and foreclosure rate, and judge how they book revenue to make sure neg-am loans, if their missed payments are booked as revenue, are backed out of the equation so I can determine what their real exposure is.

But you know (probably better than I), that a stock's price is a result of many factors, one of which may not be (in our case, talking about lenders) their loan policies or portfolio solvency.

I'm not picking a fight, just making a point!:new_smile-l:
Click to expand...
Denis,
Sorry, I am not getting your point. When you want to buy a stock of any company, what do you look at? The performance, the growth, the earning and the P/E. What is the end result of performance? The net revenue. How do they get the net revenue? Just do the spreadsheet. Deduct the expenses from the gross revenue. Defaults and foreclosures are expenses and liabilities and reduces the net revenue. The plociy is the CEO and the management decision makeing and that is what ends up to the performance and ultimately to net revenue.That is what the market either sees or predicts and is nothing secret. No body can change it. it is out there. When you see 100K investment turns to $70K, you don't call that investment outperformed, you call it downperformed investment. Can it turn around and improve? sue it can with changing policy and udoing what was done.
 
Last edited:
Moh,

Part 1- the UW is going to go as far as he/she has to go to figure out what they ought to do. If the FICO is 750 they are not just going to say OK- your FICO is high enough. They are going to verify employment and when they find out that the job is one of those paying $10-12 per hour then that will be the income projection they use to determine if they think you can repay or not.

If you want to borrow $400K they are going to say- NO. OR-

If you tell them that you inherited a mutual fund worth $500K AND it is not an IRA (tax consequences even if it is a generational IRA), then they may ask if you want to do a full doc loan. After all, the income from such a mutual fund- if it pays a reasonable return (and that is going to depend upon the type of fund), then you might earn as much as 6-7% per year which, in combination with your other income could be enough to qualify. but at that point it will switch from Alt-A to full doc.

Moh- in the end, the UW will make the decison based upon the perceived ability to repay. Our UWs know how to do that and so do many others. That is not to say that there is never a mistake made, but loan performance is the ultimate test and, so far, most Alt-A loan types perform very well.

Part 2-

Which is the better investment- one that goes down to $70 from $100 or up to $112? DEPENDS!!!!!!!!!!!

If you are a trader, than the second one is better since you are looking for the short term gain.

If you are an investor (what I am) then you look over the much longer term. What is worth 30% less today could easily be worth 50% more a year from now. So, if you spend $100K and in 18 months it is worth $150K while your short term deal went from $100K to only $124K over the same period, NOW where are you?

You pick good companies that exhibit sound business practices and then look at the potential returns. Returns are NOT limited to capital gains- they include dividends as well. So, let's say we have the same two stocks but the one that went up pays no dividend to speak of and the other pays 7%. If the one that increased does not go up anymore then your return is 12%. Hold it one year and it is great- 12%. Hold a second year and now the return is 6%.

If neither of them move at all from the levels you cited, then 6 years into this you are dead even. In the 7th year the one that went down in value becomes the better investment.

Finance 101.

Here's your final exam:

If you are unwilling to admit that Alt-A is not Sub-prime, then don't go away mad- just go away.

Brad
 
If you are unwilling to admit that Alt-A is not Sub-prime, then don't go away mad- just go away.
Click to expand...
Brad,
Just show me when and where I said Alt-A is Sub-Prime. I always said Sub-Prime and Alt-A meaning Alt-A is one step ahead of Sub-Prime. If I said You and I, does it mean that you and I are the same?

Regarding your finance 101. I look at the P/E (price to earning) ratio of the company and that is the best way to find out about any company's performance. If the ratio is lower than the industry standard, it means that company is under performing. Long-term investment is old fasion investment and no body is doing it any more with so much market volatility.
We still got to wait and see what kind of regulation the Fed is going to impose on mortgage bankers so it is foolish to go for long term investment when a Fed policy can change the whole performance of the industry. Besides the possible Fed regulatory reform, there are two other episodes that may come out. I-the ability to sell those Alt-A loan packages to the secondary bmarket. 2-the possiblity of buying back those already sold Alt- loan packages and stick with them.

Let me quote you a paragraph from Fitch rating that I am sure you are aware of
Although the company's production volume has been strong, NDE's Mortgage Banking Revenue (MBR) margin has dropped recently and consistently narrowed over the last five years. Fitch believes that a prolonged mortgage market weakness will make it difficult for NDE to grow production and replicate earnings performance enjoyed over the last three years. NDE does not possess the same risk profile or focus shared by companies participating in the lower end of the credit spectrum that have struggled or folded. Although subprime production was less than 3% in 2006, NDE is not immune to subprime contagion and secondary market risk aversion.
Click to expand...

Let me give another piece of information from an objective source
Selling Alt-A Mortgages
Most of the $400 billion in Alt-A loans originated in 2006 were sold into the secondary market. However, the recent subprime mortgage blowup has scared investors away from mortgages, including Alt-A mortgages. Banks, which have continued to originate loans, are faced with two choices. They can sell the mortgages for unattractive prices, taking an immediate loss on the loans, or they can write them down to fair market value and hold them in their loan portfolios.

If a bank chooses to sell the mortgages, we estimate, in a worst-case scenario, that the loans will sell for just 98.64% of their value. Add the cost of making the loan and selling it for a 1.36% discount, and a bank will take a real and immediate hit to its income statement. For instance, SunTrust (STI


Sponsored by:
STI) originated $10.1 billion of Alt-A mortgages in 2006. Selling at a 1.36% discount would cost the bank a whopping $137 million, or $0.38 per share. This might seem like a major problem, but we estimate that the loss would have lowered SunTrust's 2006 earnings by only 7%. The largest impact would be at Indymac (NDE

Sponsored by:
NDE), where writing Alt-A mortgages to sell into the secondary market is its primary business. We estimate that Indymac would lose almost 3 times what it made in 2006. Investors should note that this is just an exercise; in reality, Indymac would stop writing loans if all it could do is sell them at a loss.
Click to expand...
 
Last edited:
Status
Not open for further replies.
Find a Real Estate Appraiser - Enter Zip Code

Copyright © 2000-, AppraisersForum.com, All Rights Reserved
AppraisersForum.com is proudly hosted by the folks at AppraiserSites.com
Back
Top