Housing Bubble Bursting?

[Alison Swain]

New York defaults can take over a year from start to finish.Hard to foreclose in time for the market to reflect value . A lot can change in a year.

Like your new avatar, Greg.

 

[ZZGAMAZZ]

Throughout Socal & Metropolitan Phoenix Markets--every Property On Every Street In Every City In Every County--the Decline From April To July Of 2007 Is Approximately 10% Of The Already-deflated Value.

 

[Alison Swain]

Throughout Socal & Metropolitan Phoenix Markets--every Property On Every Street In Every City In Every County--the Decline From April To July Of 2007 Is Approximately 10% Of The Already-deflated Value.

100% decline --- every market? That's quite a statement.

 

[Karl]

IF I bought low & sold high this is the greatest economy ever. IF I bought high & sell low this is a changing economy, IF I bought high & can't sell this economy sucks.

 

[Randolph Kinney]

Why Fannie And Freddie Are Fidgety

The financial giants are loaded down with dicey loans as defaults increase

[FONT=arial,helvetica,univers] Driven by market competition and regulatory mandates, the two have become big buyers of adjustable-rate mortgages, or ARMs, and MBSS that include them. Those items accounted for 18% of Freddie's volume in 2006 and 22% for Fannie in 2005, the latest data available. That's up from virtually nothing in 2001. A large chunk comes in the most exotic flavors, such as payment-option ARMs and interest-only loans.

With home prices falling, ARMs, both prime and subprime, are especially scary. Some $300 billion in ARMs guaranteed by the agencies will automatically reset through 2011, according to Banc of America Securities. The unknown is just how many homeowners will default. By Fannie's own estimates, 18% of the subprime ARMs industrywide that reset in the first three months of 2007 have gone south.

The two have also moved more prominently into low-documentation loans, which require little or no proof of the borrower's income. That segment has proven to be rife with abuse in recent years. A study by the Mortgage Asset Research Institute found that 90% of borrowers with so-called stated income loans upped their annual incomes falsely to qualify for more money. In almost 60% of low-documentation loans, the borrower's income was inflated by more than 50%.[/FONT]

 

[Randolph Kinney]

Bad news - prime loans catch subprime contagion

Countrywide's shares fall 9% as quarterly earnings tumble

NEW YORK (MarketWatch) -- Shares of mortgage lender Countrywide Financial Corp. fell 9% ahead of Tuesday's opening bell, retreating as the company pointed to a soft real-estate market and rising problems for customers with the highest credit ratings.

"The company incurred increased credit-related costs in the quarter, primarily related to its investments in prime home-equity loans," CEO Anthony Mozillo said in a press release detailing Countrywide's second-quarter financial results.

Countrywide said payments were at least 30 days late at the end of second quarter on 4.56% of prime home-equity loans serviced by the company, up from 1.77% a year earlier.

Payments were late on 23.71% of subprime mortgage loans, up from 15.33% at the end of the same period in 2006.

Further dampening enthusiasm, Mozillo commented: "During the quarter, softening home prices continued to affect many areas of the country and delinquencies and defaults continued to rise across all mortgage product categories as a result."

Results were hurt by impairment charges totaling $417 million and a loan-loss provision of $292.9 million.

 

[Terrel L. Shields]

IF I bought low & sold high this is the greatest economy ever. IF I bought high & sell low this is a changing economy, IF I bought high & can't sell this economy sucks.

A good observation Karl.

Countrywide ... fell 9% ...as the company pointed to ...rising problems ... with the highest credit ratings.

To heck with subprime, it is obvious the very "best" borrowers with the highest FICO's have used their house as an ATM machine for a decade, sucking the cash out to live a lifestyle far in excess to what their income alone can support. Frugal borrowers who pay regularly and do not go back to the kitty too often usually have lower FICO scores that the ones who churn their accounts but pay without fail. Thus, the "best" borrowers, i.e.- highest FICO - are ones who have a lot of debt and cash flow by periodic refinancing, therefore, will crash and burn once the refi's fail to infuse their bank accounts with cash on a bi-annual basis. The true best borrowers are the ones who have a relatively low debt for their income, not the ones who borrow the most and pay dutifully with inflation captured cash.
And that goes back to my statement about real estate being liquid. The liquidity has come in spurts by refinancing. At this point a lot of people have little to really lose should they have to forfeit their homes as the least fall in the home price and they have no equity anyway.

I checked our foreclosures today and there are 8 pages. [BTW, the papers charge a bundle for legal notices. I paid $800 for one to run 3 weeks and it was a much smaller notice than these]. A lot of those were from Refi's in the 1990's. People paying on their homes for 10 years. Clearly, there is trouble on Main Street no matter that Wall Street is making money hand over fist.

 

[Greg Bell]

Please see avatar for todays Lending News...

 

[Greg Bell]

I was quoting the late Dr. Graaskamp. "As a fungible commodity, it has become a speculative commodity that permits the investor to go short or long in a specific market ...Purchase of a building on a land contract with a minimum downpayment has become virtually a perfect hedge or straddle..."

REITs are another example of fungilbe RE assets. I can buy a house on credit and if it goes up, sell for a profit, if it goes down I let the bank have it. That's about as fungible as it gets. Options trading is exactly the same thing. The Straddle is a two way bet. You are simultaneously buying a put and a call with 100% financing. Your upside is unlimited and your downside is limited to the closing costs that you pay.

The notion that you have to hold real estate for long periods is nonsense. If you want rid of your house, refi under some pretext to the max amount. Stick the cash in your pocket and let the bank have 'er. That's about as liquid as it gets.

It's not a question of HAVING to hold Real Estate for long periods.It's the fact that you can get stuck with no way to unload without drastic losses (See California) PS. You can't re fi when your upside down and interest rates spike to 10% , Coming soon...:Eyecrazy:

 

[Alison Swain]

You can't re fi when your upside down and interest rates spike to 10% , Coming soon...:Eyecrazy:

You are SOOOOOOOO a grim reaper!!!