Housing Bubble Bursting?

[Randolph Kinney]

Randoph,
I don’t think there is any bank that was not involved in subprime or ALA loans in the past few years. Wells Fargo might not being #1 but was not totally out of it either. Even GSI t jumped on the wagon when the credit was available to everyone.

Here is an article about WF that said they no longer doing ALA. So, they were doing AltA but no longer are doing. isn’t it what Indymac and CW are saying now. They all saying that they are not doing them anymore but it doesn’t mean that they didn’t do it in the past

http://www.usatoday.com/money/economy/housing/2007-08-03-mortgage-lending_N.htm

Moh,

Some lenders had more than 50% of their total loans either subprime or ALT-A. Wells Fargo's nonprime wholesale lending last year represented 1.6% of its $397.6 billion of residential mortgage loan volume. They have exited the nonprime loan market in July 2007, totally. There is very little risk. Wells Fargo is a diversified bank offering other services besides mortgages. For 2Q 2007, Wells Fargo had $ 9.89 billion in revenue with $ 332 billion in loans on the books compared with $ 300 billion of loans on the book for 2Q 2006. Wells Fargo policy is not to understate loan problems. They reserve against delinquent loans.

Here is what counts: as of 2Q 2007, net interest margin was 4.89 %. The FED has cut the over night rate by 0.5% since then. What is the impact to Well Fargo? Just my bet, money is down on Wells Fargo.

 

[Terrel L. Shields]

Wells Fargo is a diversified bank

as well as a PITA....

 

[Greg Bell]

Heres a really goofy idea , freeze all the adjustable loans , never mind that after you do that no one on the planet will ever by Mortgage Backed securities , who knows what your return will be..

Real Estate
Mortgage Meltdown 2007 Archive

FDIC to mortgage servicers: Freeze ARM rates
Top bank regulator suggests industry cuts losses now to prevent foreclosures.
By Jeanne Sahadi, CNNMoney.com senior writer
October 5 2007: 5:03 PM EDT


NEW YORK (CNNMoney.com) -- The heat on U.S. mortgage lenders and servicers was turned up a few degrees this week when the country's chief bank regulator publicly proposed that they permanently freeze interest rates on subprime adjustable-rate mortgages (ARMs) for many homeowners.

"Keep it at the starter rate. Convert it into a fixed rate. Make it permanent. And get on with it," Federal Deposit Insurance Corp. Chairman Sheila Bair said in prepared remarks at an investor's conference.

Mortgage Meltdown 2007
Subprime: Big talk, little help
Mortgage lenders are having a hard time helping at-risk borrowers. (more)
Double-digit home price drops coming
The latest forecasts for top markets. (more)
ARMs often have a low introductory interest rate for two or three years and then reset to much higher levels.

Roughly 1.3 million subprime ARMs are due for a rate reset between now and the end of 2008, according to data from First American Loan Performance.

Bair proposed that servicers convert only those ARMs that haven't reset yet and only for borrowers who are current in their payments and occupy their homes. Loans taken out by speculators who don't live in the homes they bought would not qualify for the automatic conversion.

Consumer advocates have also been calling on lenders and servicers to modify subprime mortgages to make the payments affordable for homeowners who would struggle to keep the house once their rates reset. But rate reductions, while they do happen in some cases, are far from widespread, they say.

"We can't just sit here doing this kind of case-by-case, laborious restructuring process with all these millions of subprime hybrid ARMs," Bair said, citing a recent Moody's survey, which found that less than 1 percent of problem subprime ARMs were being restructured.

"[Bair's recommendation] is exactly what's needed," said Michael Shea, executive director of ACORN Housing, which has offices around the country where counselors have been working with troubled homeowners to renegotiate their subprime mortgages with servicers.

Mortgage servicers - those that administer and collect payments on the loans - may be restricted by the terms of their pool servicing agreements (PSAs), which are their contracts with the investors who own the loans being serviced. Those contracts may specify when and how many loans may be modified.

But the servicer typically does have discretion when a loan has become or is likely to become delinquent. And investors are unlikely to object if the servicer can make the case why a modification will lose less money than a foreclosure, said William Rinehart, vice president and chief risk officer of Ocwen, a loan servicer that administers 470,000 loans.

And in many instances, foreclosures can create bigger losses for investors. "[E]ffective restructuring can preserve credit support [and] reduce credit losses," Bair told the investor conference.

If servicers acted on Bair's suggestion verbatim, "you'd likely have a backlash, particularly from your senior investors," said Larry Litton, president of Litton Loan Servicing, which has been proactive about contacting borrowers before their rates reset and modifying their loans in instances where a rate reset would make the home unaffordable for them.

The message Litton thinks the industry will take away from Bair's proposal is "you have to do a better job of fixing loans that are fixable. And if you don't do it, someone else will do it for you," he said, noting, for instance, that a proposal on the Hill to let bankruptcy judges reduce the mortgages of borrowers filing for Chapter 13 would not go over big with the industry.

Subprime: Bailout backlash

 

[Randolph Kinney]

The message Litton thinks the industry will take away from Bair's proposal is "you have to do a better job of fixing loans that are fixable. And if you don't do it, someone else will do it for you," he said, noting, for instance, that a proposal on the Hill to let bankruptcy judges reduce the mortgages of borrowers filing for Chapter 13 would not go over big with the industry.

Subprime: Bailout backlash

Bankruptcy has always been an out for the borrower, except with this last revision of the bankruptcy code. What is the difference if the judge adjusts the terms and rates of a mortgage so the existing borrower can pay versus foreclosure where the investor is paid off pennies on the dollar and the home is sold to a new borrower? One way, the home prices are affected and you have to find a new borrower willing to buy or able to buy at a discounted price.

 

[Greg Bell]

Bankruptcy has always been an out for the borrower, except with this last revision of the bankruptcy code. What is the difference if the judge adjusts the terms and rates of a mortgage so the existing borrower can pay versus foreclosure where the investor is paid off pennies on the dollar and the home is sold to a new borrower? One way, the home prices are affected and you have to find a new borrower willing to buy or able to buy at a discounted price.

Yes but not that many will go the Bankruptcy route , usually it's a stall tactic.

 

[Randolph Kinney]

Yes but not that many will go the Bankruptcy route , usually it's a stall tactic.

True, but if doesn't go BK, then it will go to foreclosure. Either way, the investor takes a haircut. The BK way could enable the borrower to remain although the investor takes a haircut.

 

[newbie7]

Homebuilders Liquidate Assets as Threat to Survival Spurs Sales

Personally, I'm hopeful that this IS a bubble, because that means prices will come down and my family won't be locked out of the market anymore.

But after some research, I'm skeptical. For example, this article quotes construction company associations saying that their average COST on a 3300 sq ft home is $404,000. I don't know, but that sounds fantastical. These are major corporations giving highly sculpted information to a financial magazine through. I believe they're up to their waist in debt, but even if all new construction were to cease, that just helps raise prices of existing homes.

The article linked describes the recent Horton auction here in San Diego like if it were a firesale. But the reality is that it was a media blitz so intense, and so costly, with so many onsite herding & fleecing tricks and media banned from the event, that I really doubt their claims of being reluctant to hold the auction, nor that they lost much, if any, money. These were marginally crappy, small, crate-packed-and-stacked condos, in an iffy neighborhood. It's hard to believe the builders associations.

The number of loans in trouble, in this "credit crunch" is a low single-digit percentage of just the recent loans. Is that to cause an avalanche?

I remember the big subprime scandals of the early 90's (and how this was just a few years after the S&L bunkum), and how real estate was "terrible" after both. But historically, it just looks like a few years of flat, before another insane run-up starting around 1997.

It seems to me there are still plenty of people who are able to afford the massively-inflated homeprices of those forced to sell presently (again, a very small % generally). Many many renters still need to buy (housing is a basic NEED). It seems that unless the overall economy forces many more foreclosures by default, there's little reason for the bubble to collapse now. Indeed it seems that every portion of the industry has dramatically adjusted their costs upward, marching in lockstep, as to validate wildly inflated prices. Certainly millions of homeowners and many more behind them want to keep the insane prices.

There is so much hype surrounding the real estate bubble--and again, I'm hopeful that it's true. But methinks they protest too much. It seems to me like an Enron or Worldcom or Katrina--it affected millions of people in horrible ways, but didn't cause much overall market effect.

Somebody please tell me what I'm missing.

:new_newbie:7

 

[rcsone]

situation created to offset our spending on cheap imports and energy by lowering the $$$ and "selling" mortgage based "investment" paper to foreigners----in S & L crisis US government held losses through guarantees---------this time others......best to all......rs

 

[Austin]

http://finance.myway.com/jsp/nw/nwd...ap&src=601&news_id=ap-d8s4mddo0&date=20071007

[FONT=Verdana,Sans-Serif] Mortgage Slump Hits Home Decor Industry [/FONT]

[FONT=Verdana,Sans-Serif]Sunday October 7, 7:05 PM EDT[/FONT]

[FONT=Verdana,Sans-Serif] [/FONT] [FONT=Verdana,Sans-Serif] HIGH POINT, N.C. (AP) — Doug Schock shook his head in disbelief while gazing at the empty bank of elevators, typically full as they shuttle thousands of buyers between dozens of showrooms filled with the latest styles in sofas, bedroom sets, and dining room tables and chairs.[/FONT]
[FONT=Verdana,Sans-Serif]Not so this fall at the High Point Market — the twice-annual home decor and furnishings trade show that sets the table for what consumers will see in stores next season.[/FONT]
[FONT=Verdana,Sans-Serif]"Those used to be packed. You used to have to elbow your way into showrooms," said Schock, a territory manager for OneCoast Midwest Home. "I know the economy has been down since 9/11, but the housing slump combined with the weak economy, you have a double whammy."[/FONT]
[FONT=Verdana,Sans-Serif]More than 85,000 industry insiders typically descend on North Carolina for the market, at which thousands of vendors fill 188 buildings and 12 million square feet of showroom space with thousands of new products. While the High Point Market Authority wouldn't release attendance figures for this fall's gathering, it was clear from a walk through the market's winding corridors that the industry is the latest casualty of the ongoing housing and mortgage lending bust.[/FONT]

 

[Greg Bell]

The slow down you have seen so far is nothing.Only a few home have been
put in jeopardy as most loans and prices have yet to adjust to the coming tsunami.Lack of credit and a depreciating asset , just like car , homes are just starting to adjust and it will take YEARS to play out , barring a stock market crash which may happen anyway.There is also the second tier of foreclosures that will show up a few years down the line.This is the investor group who purchased that "Bargain" at a really super saver auction and didn't give thought that the market would actually plummet lower than the auction price.This is called 'Auction Fever" and I have seen this plenty of times.When the second wave hits the recession will be in full swing or maybe even a good old fashioned granny was there depression , yikes , buy some beans and bullets..