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gjcmlmp
6 Posts |
 Posted - 07/22/2007 : 10:13:58 AM
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MAYBE IT IS JUST ME. MAYBE IT IS JUST THE SOUTH FLORIDA MARKET. MAYBE THE LENDERS DON'T LIKE MY COLOGNE. IS THERE ANYONE WHO IS LOSING DEALS LEFT AND RIGHT DUE TO LENDERS EITHER GIVE YOU UNREASONABLE STIPS OR LENDERS BUTT-RAPING CONSERVATIVE APPRAISALS WITH 5-6 COMPS? I HAVE HAD 16 LOANS KILLED IN THE PAST 3 MONTHS FOR ONE REASON OR ANOTHER. I DON'T KNOW WHAT ELSE TO DO. I WILL TELL YOU THE LENDERS I HAVE BEEN DEALING WITH:
IMPAC
EQUIFIRST
CHASE
FIRST FRANKLIN
FIRST MAGNUS
BAYROCK
DECISION 1 |
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PCook
429 Posts |
Posted - 07/22/2007 : 10:20:16 AM
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Maybe this article could shed some light. It is about the riskiest housing markets in the US. Hope the link works, if not try to copy & paste it.
http://realestate.msn.com/Buying/Article2.aspx?cp-documentid=5124615& |
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SHABONE
511 Posts |
Posted - 07/22/2007 : 10:22:14 AM
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| Sorry to say, it will only get worse in Florida |
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peter
6401 Posts |
Posted - 07/22/2007 : 10:58:59 AM
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PCook, I read the link and according to it California is
following Florida. We are seeing some signs of the time here
already, as several of my customers who bought high priced homes
with zero down in 2005-2006 are now going kaput.
"Ten little homeowners, and then there were few ... "
Peter
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FraudFighter
537 Posts |
Posted - 07/22/2007 : 11:43:31 AM
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All of Florida, but especially South Florida, is so overloaded with fraud, over-supplied with vacant properties and nobody else wanting to move there, it is collapsing. It has by far the largest number of reports of suspicious activities at the www.MortgageFraudWatchList.org, many of those being sales that were $50,000 to over $1,000,000 above what they were listed and didn't sell for. Appraisers that attempt to use those sales will be nailed and it's now more important than ever to be very careful about which appraiser you use. Too many Realtors are also using those fraudulent cash back deals to price other properties and they have populated the AVMs. But, with so very many of them now reported and found to be frauds, the lenders are backing away big time.
Another example of what is happening in Florida:
Vacant building lots that went from $8-10K in 2000 to $80K+/- in 2005 are now well under $20K and still dropping. As the land goes, so do the houses. |
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millapps
113 Posts |
Posted - 07/22/2007 : 11:56:48 AM
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The appraisers have to be very careful, now more than ever. The appraisers must verify each sale to find out if there were seller contributions to the sale price, or even cash back. I do far too many field reviews where the appraiser used sales that sold above the listing price and was just lazy to call the listing agent to inquire about concessions. In these situations, I have no choice but to lower the values on reviews because I actually confirm these sales.
For example, the MLS report says "seller will contribute $8,000 toward closing costs." The property sold $8,000 above the listing price. The appraiser used the sale price and did not adjust for the sale concessions. I called the listing agent ande he confirmed the concessions. A simple phone call by the original appraiser to the listing agent could have prevented me from the lowering the value on the review. |
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macdenny
905 Posts |
Posted - 07/22/2007 : 11:57:08 AM
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| I recently had a tough time with a Florida purchase deal. Two banks killed the loan. One flat out said that they "didn't like it" and another slashed the value by $75,000. I forgot who finally closed it. It was a PITA. |
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gregvflores
649 Posts |
Posted - 07/22/2007 : 5:36:27 PM
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Hello,
Are you quite sure you understand what a "conservative appraisal" means? The number of comps itself does not make an appraisal good. Also, your deals may have had other issues, and you are not the only one this seems to be happening to.
You may be unfairly scrutinized because of the Florida Fraud issue, but unless you can demonstrate that you have a lot of knowledge on Appraisal Reviews, you can not assert that they are unreasonable in cullting value.
You may want to ask the AE from the bank that cut the appraisal to get a copy of the comp check the bank did, or explain the cut. Did you call the appraiser for his comments, and to ask if he wants to rebut the cut? Did you use the same appraiser?
As an AE, I always wanted to let my LO's know why a cut was made, and understood the mechanis of appraisal review. I fought back and won a couple of times, but this is not easy to do and I needed a pretty darn good case, which once ment driving to the property myself, seeing a comp that wes a model match in the appraisal and supported value, and having the courage to argue.
Unfortunately, we don't have the money to lend, so we don't get to decide who gets it. Believe me, as an AE, I don't want my appraisals cut either, but many should have been cut in the past several years, so we wouldn't have such a big problem!
quote:
Originally posted by gjcmlmp
MAYBE IT IS JUST ME. MAYBE IT IS JUST THE SOUTH FLORIDA MARKET. MAYBE THE LENDERS DON'T LIKE MY COLOGNE. IS THERE ANYONE WHO IS LOSING DEALS LEFT AND RIGHT DUE TO LENDERS EITHER GIVE YOU UNREASONABLE STIPS OR LENDERS BUTT-RAPING CONSERVATIVE APPRAISALS WITH 5-6 COMPS?
IMPAC
EQUIFIRST
CHASE
FIRST FRANKLIN
FIRST MAGNUS
BAYROCK
DECISION 1
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Quicksilver
5908 Posts |
Posted - 07/22/2007 : 6:08:43 PM
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| Welcome to South FL...I know the owners of Moyna Properties (office is next to mine), the foreclosure market is going nucking futz right now and is only going to get worse here, Moyna is doing an insane amount of biz. We're at a worse time then other places, not only going through the crash right now but also hurricane season, hopefully we don't get hit bad this summer *knocks on wood* . |
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Henry_Sun
1448 Posts |
Posted - 07/22/2007 : 6:29:40 PM
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quote:
Originally posted by gjcmlmp
MAYBE IT IS JUST ME. MAYBE IT IS JUST THE SOUTH FLORIDA MARKET. MAYBE THE LENDERS DON'T LIKE MY COLOGNE. IS THERE ANYONE WHO IS LOSING DEALS LEFT AND RIGHT DUE TO LENDERS EITHER GIVE YOU UNREASONABLE STIPS OR LENDERS BUTT-RAPING CONSERVATIVE APPRAISALS WITH 5-6 COMPS? I HAVE HAD 16 LOANS KILLED IN THE PAST 3 MONTHS FOR ONE REASON OR ANOTHER. I DON'T KNOW WHAT ELSE TO DO. I WILL TELL YOU THE LENDERS I HAVE BEEN DEALING WITH:
IMPAC
EQUIFIRST
CHASE
FIRST FRANKLIN
FIRST MAGNUS
BAYROCK
DECISION 1
In this situation, with multiple lenders having problems, I would figure it isn't a lender-specific issue but the location (south FLA) that is the problem.
If I were you, I'd get set up with Core Logic or Hanson Fidelity and run an AVM or EDR on all appraisals in your area before you submit your files. If the value is really there and the AVM/EDR supports it, you might have a better chance of getting the appraisal through review.
Still, if lenders are taking the conservative approach and reviewing ALL appraisals, then you may be mostly out of luck.
Henry_Sun |
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geo21208
3278 Posts |
Posted - 07/22/2007 : 6:33:01 PM
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| If you've seen the adjusted values of homes and condos in the Keys, you'd be running to buy right now. Prices are down anywhere from 20-30%. It's not just fraud. The market is adjusting like everywhere else, only more strongly. |
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jasonkels
696 Posts |
Posted - 07/22/2007 : 8:39:13 PM
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| welcome to 2007!!! cant get any worse...can only get better... |
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Quicksilver
5908 Posts |
Posted - 07/22/2007 : 9:05:26 PM
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quote:
Originally posted by jasonkels
welcome to 2007!!! cant get any worse...can only get better...
Not really, Florida and other places haven't even seen the worse yet, watch the rise in forclosures with now 3 and 5 year arms that haven't hit their 1st adjustment yet along with option arms comming do now from their rampant increase 3-5 years ago, what were seeing mainly now are the 2/28's. Problem is can't even bail these guys out from forclosure, ltv isn't there, or they can't sustain the full am'd payment and now with neg am what are you going to do when you now owe 600K on a house appraising for 450K and can't afford the adjustment.... |
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gjcmlmp
6 Posts |
Posted - 07/22/2007 : 9:29:56 PM
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| It's unforunate because non of my borrowers are refinancing to pull any cash-out nor have they treated their homes like an atm since acquiring their homes. All they simply want to do is rate-term to avoid the horrors of a reset. 6 months ago any broker could've burried these borrowers in to more debt but when it comes to actually doing something that benefits the borrowers, the banks seem to believe this is not viable for them. Furthermore, it is forcing myself in to a horrible financial situation and leaving my borrowers with the burden of paying higher and higher mortgage payments. It is a shame. These folks pay their bills, their taxes, and respect their credit. Where is the fiduciary duty of the banks to the public? Truth-be-told I believe these banks knew this was coming and never had any intention on allowing people to refi into fixed mortgages at a later time. It has been a nerve-wrecking past 6 months. :( |
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mortgagemessiah
8003 Posts |
Posted - 07/22/2007 : 9:46:54 PM
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| I moved here to South Florida in February. I left Michigan because it has been in decline for 5.5 years. I think it kind of gives me an edge over my competition down here because in Michigan I learned how to advertise and market on the cheap. It also taught me how argue my deal through underwriting especially at First Franklin. Their Detroit office is a pain in the rear end. To avoid appraisal issues ask your appraiser if he can use comps under 6 months old. You can survive a declining market but you have offer diversified products, know your products well and project a aura of authority with your clients. |
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hherrm
1418 Posts |
Posted - 07/22/2007 : 9:47:24 PM
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I hear you loud and clear. I have some sitting on my desk..2 years ago we had to go with a 2/28 ..80/20 to get them into a home. They have done everything I've told them to do, cleaned up their credit, clean payment on Mortgage and now I can't find anybody to help them into a fixed rate. They are S.E. and have bank statement to show income. The rates I'm getting are just as high or higher as their reset rate will be.
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Quicksilver
5908 Posts |
Posted - 07/22/2007 : 9:52:38 PM
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quote:
Originally posted by mortgagemessiah
I moved here to South Florida in February. I left Michigan because it has been in decline for 5.5 years. I think it kind of gives me an edge over my competition down here because in Michigan I learned how to advertise and market on the cheap. It also taught me how argue my deal through underwriting especially at First Franklin. Their Detroit office is a pain in the rear end. To avoid appraisal issues ask your appraiser if he can use comps under 6 months old. You can survive a declining market but you have offer diversified products, know your products well and project a aura of authority with your clients.
Steve hired secret goombas that run around for him :) |
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gwagner
3825 Posts |
Posted - 07/22/2007 : 10:27:33 PM
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| When in danger....When in doubt...Run in Circles. SCREAM and shout? |
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servicefirst
3421 Posts |
Posted - 07/22/2007 : 11:00:38 PM
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quote:
Originally posted by hherrm
I hear you loud and clear. I have some sitting on my desk..2 years ago we had to go with a 2/28 ..80/20 to get them into a home. They have done everything I've told them to do, cleaned up their credit, clean payment on Mortgage and now I can't find anybody to help them into a fixed rate. They are S.E. and have bank statement to show income. The rates I'm getting are just as high or higher as their reset rate will be.
That situation is frequent and frustrating. I see it all the time. |
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forsociald
2140 Posts |
Posted - 07/23/2007 : 01:18:51 AM
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| Keep your chin up. I think things will pick up. |
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mitchell50
30 Posts |
Posted - 09/14/2007 : 7:02:56 PM
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I'm collecting colloquialisms. So far my two favorites are:
1. "Butt-raping" by gjcmlmp
2. "Going tits-up" by (can't remember)
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peter
6401 Posts |
Posted - 09/14/2007 : 10:02:10 PM
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Wayne, thanks for sharing your experience on Interfirst with us.
Indeed, I was about to place a file with them but now that I read
your post I will send it to another lender. Besides, Interfirst
has a peculiar rule that after funding you're supposed to send
them a copy of your file to their corporate. The last loan we
funded with them and my processor forgot to mail in the file after
funding, we got a bill as a penalty from Interfirst and we had
to negotiated our way out of it. Their rates are good but their
procedures and now appraisal cuts will make then an undesired
lender in current environment.
Peter |
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schwa16h
29 Posts |
Posted - 09/14/2007 : 10:16:10 PM
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Have you not been watching the news ? The market*****! The economy is hanging by a thread. Now is the time to learn how to do it right. Instead of going to the page with the value, really learn how to read anappraisal,title ndcerts. Your lender most likely has a guide line library online , use it! Find Lenders that portfolio. For anyone who wants to stay in this line of work, this time to prove your value, to who ever you want to work with. If your broker is not teaching you this, then find another shop. L.O.'s pay a lot in most shop's to getundertrained. By people who were undertrained them self's. Everyone who is an old timer will tell you this. Learn, Listen, Watch, and learn some more.Pay less learn more treat your customers better
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jscorbett
4602 Posts |
Posted - 09/14/2007 : 10:16:13 PM
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| oh how fun it was when we had appraisers roaming the boards and I wonder what ever came of Pam/Fraud Fighters suit |
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peter
6401 Posts |
Posted - 09/14/2007 : 10:33:27 PM
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Michaek, I agree with you 100% and now it is time to prove
your worth. A little suffering will make one stronger. As values
go down with increasing massive foreclosures into 2008, one has
to work with highly seasoned appraisers whose reports are solid
with comps and explanations and one has to drop dealing with
lenders who are notorious for cutting values unreasonably, i.e.
World Savings, ING Bank, and probably a few others. Portfolio
lenders who keep their loans tend to be more lenient as they
are not under heat from the flaky and shaky secondary market
right now. Broker shops are folding left and right and yes
L/Os are not trained properly as the owners just operate by
the seasts of their pants.
The coming 2008 will be the torture test for many who want
to stay in this business and are willing to go thru some suffering.
Peter |
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FraudFighter
537 Posts |
Posted - 09/15/2007 : 03:27:12 AM
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quote:
Originally posted by jscorbett
oh how fun it was when we had appraisers roaming the boards and I wonder what ever came of Pam/Fraud Fighters suit
It's going well and into discovery. Looking forward to bringout out the evidence on eAppraiseIt along with many others. |
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darkstar
25951 Posts |
Posted - 09/15/2007 : 06:03:42 AM
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quote:
I HAVE HAD 16 LOANS KILLED IN THE PAST 3 MONTHS FOR ONE REASON OR ANOTHER. I DON'T KNOW WHAT ELSE TO DO. I WILL TELL YOU THE LENDERS I HAVE BEEN DEALING WITH:
I bet if you think outside of the box, you have deals there, if not, still opportunity to make big money on some of them...Unless they were all "wish/want" deals... |
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christyr
200 Posts |
Posted - 09/15/2007 : 06:25:04 AM
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We're all in the same boat here in S.Florida, I have 8 deals on my desk that have the same issue. They are all 20 to 50K upside down. The borrowers dont have the necessary funds to bring them to at least 100%, and they cant afford the resets on their current mortgages either. It's brutal out there! We just have to keep going at it and keep our chins up. It's Florida, everyone wants live here, the weather is great, taxes are up, homeowners insurance is up too, wages are down, whats not to love??....right?
Sorry my frustration is beginning to set in. My shop is making us pay for our own credit reports and bill us monthly for any DU's we run. So now these borrowers are not only costing me sleepless nights theyre hurting my pocket too.
Just keep telling myself: this too shall pass! We will weather the storm! I wish us Florida brokers all the best of luck! |
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keckpas
1176 Posts |
Posted - 09/15/2007 : 06:33:23 AM
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Christy,
Have you looked into short refi's? It sounds like you are in prime territory to make those happen. I've never done one, so I am not a good person to ask about them but I have heard they can help some of these people who are upside down. |
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darkstar
25951 Posts |
Posted - 09/15/2007 : 06:33:33 AM
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| Christy, they are serious no brainer money makers!...Think outside the loan!...I'm still amazed people let good deals die so easy...Send em to me if you can't get em worked out!... |
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lweigel
268 Posts |
Posted - 09/15/2007 : 07:14:06 AM
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I am in South Florida as well. The market really *****. I am sure that it will turn around so we need to be patient. Yes, everyone wants to live in paradise....LOL LOL LOL. You would have to live here awhile to get the joke I guess.
Does anyone have a link or info on a short refi?
Thank You,
Linda |
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gregvflores
649 Posts |
Posted - 09/15/2007 : 4:47:45 PM
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Yes, Ventura County is also on my declining markets list, along with many other counties in California. The 5% LTV reduction is the minimum required by the investor in these counties--and I hope this does not go to 10%!
As an AE, this is no more fun for me than it is for you, I wish this was not a new guideline, and it has caused me to turn away no less than 10 deals last week.
But you are saying that the falling values Ventura county are obvious, but at the same time it is BS that you were cut 5% LTV--can you explain this contradiction?
Would you prefer the bank waits until three new sales in your area close to prove current market value? Have you looked at the listing prices in the area by your property, how long they were on the market, and how the listing price compared to your property? How old were the comps on your appraisal?
A full understanding of value is required before labeling the guideline as "BS".
So you know, I am sincerely sorry this happened to you, it was bad luck that this restriction came down when it did, and it was effective immediately, so you got burned by the timimg. We all need the commissions, and have to deal with much frustration for now.
quote:
Originally posted by Waybets
I just had 2 deals fall out with Interfirst because TODAY they informed me that Ventura County here in California has been determined as a county that has declining home values (no sh1t Sherlock, which counties in this Country don't have declining home values!!). Because of this from now on all appraisals that are done they will cut value by 5%. Such BS !!!
Ohhh and Countrywide blows. :)
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peter
6401 Posts |
Posted - 09/15/2007 : 8:43:38 PM
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Yes, tough times are here in Southern California and Ventura
County has joined Riverside and San Bernadino counties in falling
home prices. I think the situation will worsen into next year
and this is the point I am trying to drive home that no matter
how many referrals or leads you have you really can't turn them
into successfully funded loans due to lack of value or deteriorated
credit profiles and high debt ratios. Only A/Es and L/Os who are
doing loans on a daily basis understand this while many service
providers who are really not in the core business on a day-to-day
basis seem to think getting leads and referrals are the solution.
Not always!
Peter
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jscorbett
4602 Posts |
Posted - 09/15/2007 : 9:32:58 PM
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| I hate to say it, but it must be your appraisers, I am in Tampa, but 90% of my loans are in Broward and Dade county and I have not really had any appraisal issues ( knock on wood ) |
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cjnohl@federated
559 Posts |
Posted - 09/15/2007 : 10:26:38 PM
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| It is kind-of-funny and not in a smiling way that anyone thinks removing money from a County via LTV contraction will ever turn around or halt the decline. The effect will obviously be the opposite. |
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FraudFighter
537 Posts |
Posted - 09/16/2007 : 03:10:11 AM
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quote:
Originally posted by jscorbett
I hate to say it, but it must be your appraisers, I am in Tampa, but 90% of my loans are in Broward and Dade county and I have not really had any appraisal issues ( knock on wood )
That's poison bait. |
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paultaylor
361 Posts |
Posted - 09/16/2007 : 05:25:46 AM
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It seems like all of last week was spent on the phone disputing appraisals with underwriters.
I just had one get declined because it was too close to the freeway.
I guess the street, appartment complex, second street, and 50+ foot sound wall between the property and freeway just didn't suffice. |
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Spocko
296 Posts |
Posted - 09/16/2007 : 07:16:58 AM
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| Wow nice article. According to it, where I live in Carmel, IN we are safe and isolated. Good to know. I like how it lists probabilities next to the cities. Good article. |
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jenalpha
644 Posts |
Posted - 09/16/2007 : 07:56:29 AM
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| I had a stip just recently that said social security taxes and medicare taxes are inaccurate, employer to provide a letter as to why they are inaccurate. I knew that was a sign NOBODY is playing anymore. |
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mitchell50
30 Posts |
Posted - 09/16/2007 : 11:49:34 AM
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I think it's sad that this took so many of us by surprise. It's been coming for years. Many folks have warned us of the housing bubble. Many insiders have warned us that people wouldn't be able to afford the upcoming adjustments.
Here's a test for everyone. From your state website, get the median household income for the counties where you do business. From the appropriate MLS (you may have to have a REALTOR-friend), get the median home price. Calculate the PITI on 80% (20% equity) of the median value. Add to that a minimum of $16,000 in credit card debt at 18% interest, another $15,000 in installment debt at 12% (amortized over 36 months), then prepare a BUDGET (no, not a debt ratio, a BUDGET). Don't forget things like auto insurance, groceries, gasoline, health insurance, home repairs, car repairs, personal care, entertainment, clothing, utilities, education, child care, minor medical expenses, etc. Then take a minimum of 30% off the top of the income for taxes. Let's see if you have anything left. Don't forget, the American Dream now includes luxury automobiles, RV's, high-def big screens, European vacations, and masters degrees.
I have done this in my market areas and we have been living beyond our means for years. This explains spiraling credit card debt, serious refinancing, and dramatically increased bankruptcies. When I was an underwriter, I would try to make debt ratio exceptions by calculating a budget. Except where the borrowers were making well above the median income, such a budget nearly always forced me to decline the d/r exception.
We have been living in a house of cards for some time. This is just the first little breeze that's blowing in advance of the storm. Credit card companies are going to start feeling the pinch as many people realize their home is more important than their credit cards. Layoffs in the mortgage and consumer credit sectors will increase unemployment and drain further demand from the housing market, automobile market, and many other consumer luxuries. This will eventually initiate further layoffs and the market will finally adjust. Back to the defensive sectors: beer, wheat, and pork bellies.
The single biggest source of this problem has been loose financing. This was fueled by foreign investment. Now that foreign investors are running scared, the house starts to collapse. It will be some time before we have their trust again.
Doomsday? Absolutely not!!! We have gone through this before and survived. (Anybody remember the GPARM's and ARM producst of the 1980's?) It is a test of our maturity as a people (mine too). We will need to buckle down and take personal responsibility. If we hand the responsibility over to the government, we will end up with eternal regulations and more bureauracracy than we can stand. As an industry and as Americans we need to stop throwing blame around and start working on solutions that don't cause more problems.
[RANT]I am blown away by the fact that we still have option ARMs out there. WTF?!! I have rarely met a situation that was best served by an option ARM. (That covers 28 years in the mortgage business.) I have only written one in my career and that was for one of my loan officers that insisted it was the best thing. Yes, I have looked at World Savings' arguments and a number of others' as well. They really don't hold water. I don't care what index you use, it is not immune from devastating increases. If they're really that stable, why not put a 4% life cap on them? Whattareya worried about? Huh? C'mon. The index rate will never go up that high. [END RANT]
Anyway, there are plenty of solutions that can help stabilize the market. Servicers should enlist the help of mortgage companies (the trustworthy ones) to help negotiate modifications or moves over to new products. Homeowners need to stop looking at their home as a financial instrument; it's a home! So you're upside down right now. Values always come back. You'll be sorry if you give< |
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mitchell50
30 Posts |
Posted - 09/16/2007 : 11:58:13 AM
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quote:
Originally posted by jenalpha
I had a stip just recently that said social security taxes and medicare taxes are inaccurate, employer to provide a letter as to why they are inaccurate. I knew that was a sign NOBODY is playing anymore.
This is the underwriter's way of saying the paycheck stubs look fraudulent. Because so many brokers have used software to produce fake stubs, the mortgage industry calculates rule-of-thumb withholdings. If they aren't within a certain tolerance, they should be justified.
I have also noticed many underwriters (especially new underwriters) throw this condition in based on a miscalculation. My approach is:
1. Make sure the pay stubs aren't fraudulent
2. Calculate the required withholdings based on IRS manuals
3. Address any discrepancy
In most cases, I have either found the pay stubs to be fraudulent or the underwriter's calculation to be inaccurate.
Other reasons a pay stub can have seemingly inaccurate withholdings are:
A. Borrower received an unusually large paycheck in one pay period
B. The YTD pay is inaccurate because they changed their payroll software or service
C. Borrower has elected exempt on the W-9
D. The borrower receives paychecks from different divisions of the same company
E. The payroll department simply screwed up
I wouldn't give up on the deal just because of the condition. We will all start to see this condition more often. |
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gregvflores
649 Posts |
Posted - 09/16/2007 : 5:52:01 PM
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I don't think anyone is saying that the LTV reduction will halt the decline. While it makes sense that banks don't want values to fall, they have to have guidelines that cause the portfolio of loans they have or sell to perform well, or they won't be able to sell them anymore and get more money to loan, which is what happened here recently.
Halting the decline is not the purpose of loan conditions and guidelines--managing risk is the purpose. A lot of the banks still in business have always been more conservative about value than many who have closed. Banks that are still in business have to tighten guidelines, even if they were the ones who were too loose in the past.
quote:
Originally posted by cjnohl@federatedrmc.com
It is kind-of-funny and not in a smiling way that anyone thinks removing money from a County via LTV contraction will ever turn around or halt the decline. The effect will obviously be the opposite.
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MARKJOLLIFF
479 Posts |
Posted - 09/16/2007 : 7:43:00 PM
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quote:
Originally posted by mitchell50
I think it's sad that this took so many of us by surprise. It's been coming for years. Many folks have warned us of the housing bubble. Many insiders have warned us that people wouldn't be able to afford the upcoming adjustments.
Here's a test for everyone. From your state website, get the median household income for the counties where you do business. From the appropriate MLS (you may have to have a REALTOR-friend), get the median home price. Calculate the PITI on 80% (20% equity) of the median value. Add to that a minimum of $16,000 in credit card debt at 18% interest, another $15,000 in installment debt at 12% (amortized over 36 months), then prepare a BUDGET (no, not a debt ratio, a BUDGET). Don't forget things like auto insurance, groceries, gasoline, health insurance, home repairs, car repairs, personal care, entertainment, clothing, utilities, education, child care, minor medical expenses, etc. Then take a minimum of 30% off the top of the income for taxes. Let's see if you have anything left. Don't forget, the American Dream now includes luxury automobiles, RV's, high-def big screens, European vacations, and masters degrees.
I have done this in my market areas and we have been living beyond our means for years. This explains spiraling credit card debt, serious refinancing, and dramatically increased bankruptcies. When I was an underwriter, I would try to make debt ratio exceptions by calculating a budget. Except where the borrowers were making well above the median income, such a budget nearly always forced me to decline the d/r exception.
We have been living in a house of cards for some time. This is just the first little breeze that's blowing in advance of the storm. Credit card companies are going to start feeling the pinch as many people realize their home is more important than their credit cards. Layoffs in the mortgage and consumer credit sectors will increase unemployment and drain further demand from the housing market, automobile market, and many other consumer luxuries. This will eventually initiate further layoffs and the market will finally adjust. Back to the defensive sectors: beer, wheat, and pork bellies.
The single biggest source of this problem has been loose financing. This was fueled by foreign investment. Now that foreign investors are running scared, the house starts to collapse. It will be some time before we have their trust again.
Doomsday? Absolutely not!!! We have gone through this before and survived. (Anybody remember the GPARM's and ARM producst of the 1980's?) It is a test of our maturity as a people (mine too). We will need to buckle down and take personal responsibility. If we hand the responsibility over to the government, we will end up with eternal regulations and more bureauracracy than we can stand. As an industry and as Americans we need to stop throwing blame around and start working on solutions that don't cause more problems.
[RANT]I am blown away by the fact that we still have option ARMs out there. WTF?!! I have rarely met a situation that was best served by an option ARM. (That covers 28 years in the mortgage business.) I have only written one in my career and that was for one of my loan officers that insisted it was the best thing. Yes, I have looked at World Savings' arguments and a number of others' as well. They really don't hold water. I don't care what index you use, it is not immune from devastating increases. If they're really that stable, why not put a 4% life cap on them? Whattareya worried about? Huh? C'mon. The index rate will never go up that high. [END RANT]
Anyway, there are plenty of solutions that can help stabilize the market. Servicers should enlist the help of mortgage companies (the trustworthy ones) to help negotiate modifications or moves over to new products. Home |
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peter
6401 Posts |
Posted - 09/16/2007 : 9:14:40 PM
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In Southern California, there are quite a few homeowners
who had pulled out 100% equity from their homes when lenders for
2nds were still doing 100% cltv loans. Some even did 125% 2nds
when they could go full doc. Appraisers were also ultra
aggressives in appraising for the highest values. I had a homeowner
who bought a $600,000 with zero down in 2003 and pulled out
100% equity when the house went up to $750,000 in 2005. He got
$150,000 cashout before closing costs, and now this house is only
worth $500,000. So, he changed his home phones, his cell phones,
and put the house for rent. He got a renter at $2,000 a month
and granted the deed to a chain of several relatives and manged to
keep the house and still collecting the monthly rent for well over
1 year and 2 months! He retained an attorney and must have done
something to be able to retain the house which is giving a good
rental income until today. You talk about earning $24,000 in
rental income on top of the equity bubble that he converted into
cash for at least $150,000 -- making $174,000 in gross profit
in just less than 3 years. Even if his credit is ruined with
eventual foreclosure, he could set up his wife or his son
who were not on the foreclosed home to buy new properties when
the right time comes.
There are many such homeowners -- as there were in the last
housing recession of 1990's -- who are not the least disturbed
by being foreclosed upon as they've already made the money on
top of the housing bubble. Indeed, they came back to the market
in 2000 and play the same game with banks and lenders again with
the old refrain!
Of course, these people don't want any help except some legal
help in prolonging the foreclosures so that they can pocket the
rent as long as possible so that they can make more money from
the monthly rent.
Peter
Peter
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mitchell50
30 Posts |
Posted - 09/17/2007 : 1:01:31 PM
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quote:
Originally posted by peter
In Southern California, there are quite a few homeowners
who had pulled out 100% equity from their homes when lenders for
2nds were still doing 100% cltv loans. Some even did 125% 2nds
when they could go full doc. Appraisers were also ultra
aggressives in appraising for the highest values. I had a homeowner
who bought a $600,000 with zero down in 2003 and pulled out
100% equity when the house went up to $750,000 in 2005. He got
$150,000 cashout before closing costs, and now this house is only
worth $500,000. So, he changed his home phones, his cell phones,
and put the house for rent. He got a renter at $2,000 a month
and granted the deed to a chain of several relatives and manged to
keep the house and still collecting the monthly rent for well over
1 year and 2 months! He retained an attorney and must have done
something to be able to retain the house which is giving a good
rental income until today. You talk about earning $24,000 in
rental income on top of the equity bubble that he converted into
cash for at least $150,000 -- making $174,000 in gross profit
in just less than 3 years. Even if his credit is ruined with
eventual foreclosure, he could set up his wife or his son
who were not on the foreclosed home to buy new properties when
the right time comes.
There are many such homeowners -- as there were in the last
housing recession of 1990's -- who are not the least disturbed
by being foreclosed upon as they've already made the money on
top of the housing bubble. Indeed, they came back to the market
in 2000 and play the same game with banks and lenders again with
the old refrain!
Of course, these people don't want any help except some legal
help in prolonging the foreclosures so that they can pocket the
rent as long as possible so that they can make more money from
the monthly rent.
Peter
Peter
Peter, THAT is exactly the type of problem that is hurting everyone else in the market. I my book, that's mortgage fraud and this borrower should be prosecuted. This type of activity that should be pursued into a deficiency judgment that can't be dismissed in a bankruptcy. If not criminal fraud, I think a case for civil fraud could be made.
When the borrower's children buy him a new house, they better do it as an investment property. Straw buyers are being prosecuted now (along with the brokers that help them).
If you have some first-hand knowledge of this transaction, you should contact the FBI to see if they could prosecute a mortgage fraud case. Pulling $150,000 out as a primary residence then converting it to a rental would most likely fall into that category.
I would also hope that the rest of the brokers that read these posts will help in stopping this type of activity. As everyone can see, it KILLS our business. As much as brokers are advocates for the borrower, they also have a duty to help protect the lenders' interests or they won't have a job in a few years! (or maybe sooner)
Thanks for your post. |
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peter
6401 Posts |
Posted - 09/17/2007 : 4:47:35 PM
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Indeed, some real estate agents are the originators of such frauds in that
take on buyers indiscriminately without questioning the motivation of the buyers
if they buy for "flipping" or for true price of homeownership. You will never
a realtor rejecting a customer even if he declared that he would move in and fix it
in order to rent it out later on. There should be a government-mandated realtor
disclosure form for the realtor to comment on the buyer's purpose of purchase just
like the third page of our 1002 under X. Information for Government Monitoring
Purposes and the realtor who arranged the purchase would be liable for criminal
prosecution. This type of frauds is called "equity stripping" and it is prevalent
during the boom years and hurt lenders during the bubble burst.
Another sad thing is that almost all homeowners faced with subprime resets
cannot really afford the newly increased payment and with the loss of equity or
the deterioration of credit due to overloaded debts, they cannot qualify for
any program at all. And, they can't sell their houses at the prices that would
cover their loans plus the subprime prepayment penalties either. So, there is
no way out but to slide into foreclosures or to become victims of scam artists
who prey upon them.
Peter
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