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(Marketwatch)   Because it was so successful last time, No-money-down mortgages are back   (marketwatch.com) divider line 90
    More: Fail, investment portfolio, subprime mortgage crisis, arbitrages, medical doctors, mortgages, student debt  
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7839 clicks; posted to Main » on 01 Feb 2013 at 3:41 PM (1 year ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2013-02-01 03:34:05 PM  
Looks like the government is forcing the banks to give out risky loans again.
 
2013-02-01 03:35:11 PM  

Rapmaster2000: Looks like the government is forcing the banks to give out risky loans again.


heh
 
2013-02-01 03:37:36 PM  
And this time they come with a choice of toppings.
 
2013-02-01 03:43:06 PM  

UberDave: And this time they come with a choice of toppings.


That's good!
 
2013-02-01 03:44:37 PM  
Yeah, these require substantial secondary collateral, kinda different this time
 
2013-02-01 03:45:07 PM  
Only fail I'm seeing here is a subby that didn't read the first 2 sentences of the article:

"Banks say these loans are safer: They're almost exclusively being offered to clients with sizable assets, and they often require two forms of collateral-the house and a portion of the client's investment portfolio in lieu of a traditional cash down payment."

Because highly collateralized loans are what ruined our economy.....
 
2013-02-01 03:46:29 PM  
Hopefully those "and when rates drop further, you can refi again!" commercials come back. Those were great.
 
2013-02-01 03:47:51 PM  
My investment portfolio is nothing more than a soiled PapaJohn's menu.
 
2013-02-01 03:47:55 PM  
works on contingency no money down
 
2013-02-01 03:50:48 PM  
I blame McRib.
 
2013-02-01 03:51:25 PM  

redundantman: works on contingency?


No!  Money down!

/eats bar association logo
 
2013-02-01 03:51:36 PM  
FTA:

It's 100% financing-the same strategy that pushed many homeowners into foreclosure during the housing bust. Banks say these loans are safer: They're almost exclusively being offered to clients with sizable assets, and they often require two forms of collateral-the house and a portion of the client's investment portfolio in lieu of a traditional cash down payment.

...Depending on the lender and the borrower, roughly 60% to 80% of the loan can be pegged to the home's value while the remaining 20% to 40% can be secured by investments.


It's not really a no money down loan. It requires secured collateral. Basically if you foreclose now they can take your securitized collateral in addition to the house.

Sure they fund 100% of the cost of the house, but you are putting money down in the form of collateral. Not exactly a great deal. It's actually great for the banks from a risk management perspective, because if the market turns and you can't pay for the house they probably know exactly what you have investment wise and can arbitrage the losses in a down market using the securitized collateral, even if the value of that collateral is going down with the value of the house.
 
2013-02-01 03:52:17 PM  
These seem just a tad less dodgy than the last time. The loan is fully covered by the collateral, which isn't just the house.
It allows the buyer to retain his portfolio rather than have to convert it to cash. I see that they've also factored in the variable risk depending on the contents.
Seems OK.
 
2013-02-01 03:52:29 PM  

Reading is FUNdamental

It's 100% financing-the same strategy that pushed many homeowners into foreclosure during the housing bust. Banks say these loans are safer: They're almost exclusively being offered to clients with sizable assets, and they often require two forms of collateral-the house and a portion of the client's investment portfolio in lieu of a traditional cash down payment.


 
2013-02-01 03:52:48 PM  

Necronic: a portion of the client's investment portfolio in lieu of a traditional cash down payment.


What a good idea. Instead of a cash down payment, you're taking a lien on semi-liquid investments that are highly vulnerable to negative economic swings-- the very same swings that, when they occur, might prevent the buyer from making the mortgage payments.
 
2013-02-01 03:52:55 PM  

Hector Remarkable: My investment portfolio is nothing more than a soiled PapaJohn's menu.


That's the first time ever that "soiled" and "Papa John's" were used in a sentence together, as God intended.
 
2013-02-01 03:53:47 PM  
They're almost exclusively being offered to clients with sizable assets, and they often require two forms of collateral-the house and a portion of the client's investment portfolio in lieu of a traditional cash down payment.

I'm not really seeing the problem here.  I'll bet the contract allows the financial institution to recover any shortfall from the secondary collateral, too.  The article says liquidation of the collateral is restricted so it should be pretty secure.  Seems like this is less risky than an 80% loan with 20% down where the only collateral is the home itself.
 
2013-02-01 03:55:01 PM  
100% financing wasn't the problem.
Risky loans and adjustable rates weren't even the problem.

*Systemic fraud* was the problem.

As long as these loans are marked as what they are, are actually underwritten (and not fraudulently rubber-stamped even when they're trivially fraudulent) and ratings agencies don't use known-bad risk models to declare dog-shiat as solid gold, there's no problem.

And one could sleep better knowing that was the case, if anyone who was actually busted for that systemic fraud was treated half as harshly as the poor shlubs who tried to blow the whistle on it.
 
2013-02-01 03:55:28 PM  
Until it is deemed 'unfair' and then the banks will have to provide them to the 'non-wealthy'. Same thing that happened before.
 
2013-02-01 03:55:29 PM  
This is the house the banks built
 
2013-02-01 03:56:15 PM  

Champion of the Sun: Yeah, these require substantial secondary collateral, kinda different this time


This is not new, they have been giving out several 100% home loans with no collateral for the past two years.

/girl in the office just bought a home 100% with nothing but student loan debt.
 
2013-02-01 03:57:12 PM  

Champion of the Sun: Yeah, these require substantial secondary collateral, kinda different this time


It's starting out looking responsible like it did last time, with "most" mortgages requiring assets, etc. They'll do that until people stop looking so closely. No regulation was changed though, so there is no promise they won't start giving them to fast food employees making just over minimum wage 2-3 years from now.  We don't need regulation though, I'm sure they learned their lesson the last time we had to bail them out.
 
2013-02-01 03:57:49 PM  
A)  There is nothing wrong with 100% financing to people who actually will and have the capability to pay it back.
B)  These mortgages are actually backed by collateral
C)  It's already not uncommon for people to take out two mortgages that combine to the 100% anyway
 
2013-02-01 03:58:27 PM  
It's not so much the no money down that failed last time; it was the type of loans given. APR loans, and interest only loans, crap like that. People bought too much house, or never were in the position of owning a house in the first place.
 
2013-02-01 03:58:29 PM  

pxlboy: UberDave: And this time they come with a choice of toppings.

That's good!


The toppings contain potassium benzoate.


...


(That's bad)
 
2013-02-01 03:58:30 PM  
This looks a little different then the 80/20 loans that were going out (i.e. you get a "mortgage" that consists of 80% of the buying price, then the same bank gives you a seprate loan to cover the 20% downpayment). Seems more like a loophole to allow people with a large chunk of money in investment assets to use their investment as collateral without actually withdrawing cash for a downpayment...
 
2013-02-01 04:01:36 PM  
At one point I was offered a 120% mortgage.

/run, run like hell...
 
2013-02-01 04:02:49 PM  

Necronic: Only fail I'm seeing here is a subby that didn't read the first 2 sentences of the article:

"Banks say these loans are safer: They're almost exclusively being offered to clients with sizable assets, and they often require two forms of collateral-the house and a portion of the client's investment portfolio in lieu of a traditional cash down payment."

Because highly collateralized loans are what ruined our economy.....


So they're starting out doing it the same way they did originally, but since there is no new regulation, their is nothing to stop them from giving them out to just anyone. I'm sure they learned their lesson, though. You can always trust the banks to look out for their customers before their profits. It's not like their losses are insured or anything.
 
2013-02-01 04:04:28 PM  

bdub77: Not exactly a great deal


If I have a low-basis investment that's averaged 5.5% over time and I use it to secure a 3.5% loan...why isn't it a good deal?
 
2013-02-01 04:05:33 PM  

emersonbiggins: Reading is FUNdamental

It's 100% financing-the same strategy that pushed many homeowners into foreclosure during the housing bust. Banks say these loans are safer: They're almost exclusively being offered to clients with sizable assets, and they often require two forms of collateral-the house and a portion of the client's investment portfolio in lieu of a traditional cash down payment.


Ha-ha, my investment portfolio is composed of banks that tend to enter into risky mortgage loans.
 
2013-02-01 04:06:35 PM  

squirrelflavoredyogurt: their is nothing to stop them from giving them out to just anyone


Anyone with 20-30% of the value of their house in liquid investments. Yep, that's just anyone.

/Fer chrissake, learn how to write. You sound like an idiot.
 
2013-02-01 04:08:24 PM  
Why not? I mean nobody went to jail. No restrictive regulation of the banking industry occurred. Most bankers still got their regular bonus. So, what is the downside to doing it all again?
 
2013-02-01 04:09:03 PM  
www.freeexistence.org

Look dear. It's the American economy...again.

.
..
....
Yeah, I can be smug about it. I'm Canadian (that outta start an all war).
 
2013-02-01 04:09:35 PM  
www.totalmortgage.com
 
2013-02-01 04:11:04 PM  

Theaetetus: [www.totalmortgage.com image 500x380]


Glad I refreshed first. Was about to go on a "why I gotta do everything/people are slipping/leaving disappointed" jag.
 
2013-02-01 04:12:18 PM  
Abe Vigoda's Ghost: "People bought too much house, or never were in the position of owning a house in the first place. "

The problem was higher up the food chain: it was the CDOs masking the risk of the underlying loans that created a market for those shiatty loans in the first place.
If the investors knew those securities were toxic, they wouldn't have touched them.  So it wouldn't have been profitable buying and bundling super high risk loans.
So there'd have been no market for super high risk loans.  So no-one would have offered them, let alone offered so many.
 
2013-02-01 04:14:02 PM  
Oh noes! Banks are preying upon teh stupid people again!
 
2013-02-01 04:14:13 PM  
This is actually an excellent idea- IF the person had the money to back it up.

For instance- you may have the money for a down payment in something you don't want to liquidate, like a 401k . If you run into trouble, you can tap into that account, but if you're able to make your payments you'll never need to touch it.

This isn't even remotely the same, Subby
 
2013-02-01 04:17:29 PM  
Money is not a product. The sooner we learn that and force the ratfarking silver spooners to actually produce something, the better.

Or burn them in the streets.

I could go either way.
 
2013-02-01 04:20:22 PM  
Those who don't learn from history are doomed to stupidly repeat it. WHY OH WHY would this possibly make sense. Remember the EPIC FAIL part from before? I'm so done wth this supposed government. Dysfunctional at the least, liars and dangerous at their worst. Oh, and they do love to play games with their recesses, filibusters, etc. while we twist in the wind. A scourge on alll their houses!
 
2013-02-01 04:23:41 PM  
Was it "no money down" that really screwed things up or was it "you'll barely be able to make these payments and they will go up in 3 years to where you can't afford to make these payments"?
 
2013-02-01 04:24:55 PM  

PsyLord: emersonbiggins: Reading is FUNdamental

It's 100% financing-the same strategy that pushed many homeowners into foreclosure during the housing bust. Banks say these loans are safer: They're almost exclusively being offered to clients with sizable assets, and they often require two forms of collateral-the house and a portion of the client's investment portfolio in lieu of a traditional cash down payment.

Ha-ha, my investment portfolio is composed of banks that tend to enter into risky mortgage loans.


you just divided by zero
 
2013-02-01 04:26:41 PM  
To people with "sizeable assets", vs the taco bell employees that used to buy the 300k house.
 
2013-02-01 04:28:05 PM  
There's lots of no money down as well as down payment assistance programs.

What I've run across (some have income limitations):

USDA Rural Development loans - no down payment, up to 102.5% LTV.  Property location restrictions, allow at least 60 days to close.
Virginia housing development VDA+ loans - 96.5% FHA loan + 3.5% "second mortgage" to cover down payment
Lee County Florida - up to $10K downpayment assistance forgiven after 10 years.  Houses with inground pools are ineligible (Florida without a pool?  Fark that noise)
Florida BOND + Florida assist - Up to $7500 assistance for down payment + closing costs, repayable in full after 30 years or upon selling the property. (This is what I'm going to use)

Plus similar programs in other states.
 
2013-02-01 04:30:10 PM  

ringersol: Abe Vigoda's Ghost: "People bought too much house, or never were in the position of owning a house in the first place. "

The problem was higher up the food chain: it was the CDOs masking the risk of the underlying loans that created a market for those shiatty loans in the first place.
If the investors knew those securities were toxic, they wouldn't have touched them.  So it wouldn't have been profitable buying and bundling super high risk loans.
So there'd have been no market for super high risk loans.  So no-one would have offered them, let alone offered so many.


Would there be a downside to legislation that prevents selling debt?

Not being able to mitigate risky loans in thaf way would seem to go a long way toward making banks sure their debtors could actually pay their mortgage (and credit cards). Plus, it would fark collection agencies, which should make everyone not a douchebag happy
 
2013-02-01 04:34:19 PM  
This could be the start of housing bubble 2.0. Just like the last one, it starts with underestimating your risk by thinking you have secured loans, but you don't Had these been in play with the last bubble, you would see that these portfolios as collateral would have dropped by large percentages before the bank was able to seize and liquidate them for cash. Throw in the factor that you have a lot of banks doing the same, and the crash is even harder. On a case by case basis, these loans are pretty secure. Someone defaults, they have assets to cover the losses. However, when you have a bubble, they're building these loans like a card house again. Once the default rate picks up, the whole thing comes crashing down.

This is just like the CDOs of the last bubble were "safe" from the standard default rate, they failed to estimate that once the default rate picked up that would increase the rate even faster into the crash we saw.
 
2013-02-01 04:34:27 PM  
Does this mean I can look forward to renewed massive environmental destruction just to build more cookie-cutter McMansion neighborhoods?  I miss those days.
"Oh my god, look at the progress our town is making with all this new construction!"
 
2013-02-01 04:34:46 PM  
The Politics Of Failure Have Failed. We Need To Make Them Work Again.
 
2013-02-01 04:36:51 PM  
"You see, we measure the strength of our economy largely by how many houses we build."

"It's easier just to say 'We are farking morons'."
 
2013-02-01 04:40:36 PM  

ringersol: 100% financing wasn't the problem.
Risky loans and adjustable rates weren't even the problem.

*Systemic fraud* was the problem.

As long as these loans are marked as what they are, are actually underwritten (and not fraudulently rubber-stamped even when they're trivially fraudulent) and ratings agencies don't use known-bad risk models to declare dog-shiat as solid gold, there's no problem.

And one could sleep better knowing that was the case, if anyone who was actually busted for that systemic fraud was treated half as harshly as the poor shlubs who tried to blow the whistle on it.


Absolutely. The amount of risky loans written would be relatively small and would harm only the few investors involved if they went badly if the loans are properly marked high risk.

And no down loans are not inherently risky if the buyer can afford the payments. There are plenty of decent houses for less than 150K in many areas of the country. Payments on that loan are well within most people's budgets.
 
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