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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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7838 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.
 
2013-02-01 04:41:38 PM
When does Chris Dodd get his sweeeeeeeeeeeeeeeeeeeet deal?
 
2013-02-01 04:41:41 PM
We had some friends just upgrade houses and I was wondering how they would have done it being they took a hit selling their former house.  This could be why.

I would think about doing this if I could use my 401k.  The wife and I make enough to afford a nicer home but don't want to sell our current house.  We aren't in the red on it, but we wouldn't make back our original down payment + improvements.  The mortgage is low enough to easily cover with renters (as long as it's rented of course).

And based on how much prices have fallen we could get into a pretty nice place.

Probably just stay here though, it's nice enough for the time being.  Just old.
 
ZAZ [TotalFark]
2013-02-01 04:42:51 PM
Would there be a downside to legislation that prevents selling debt?

My understanding is new rules already limit the secondary market for loans with excess debt to value ratio or other risks. Fannie Mae won't take them. (That's my impression based on reading news, not on reading the actual rules.)

You could package these deals to comply: 20% down, 80% secured by a traditional mortgage. Separately, a personal loan secured by investments that just happens to be 20% of the house value.
 
2013-02-01 04:45:10 PM

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


So like, owning a car?
 
2013-02-01 04:47:29 PM
1.bp.blogspot.com
 
2013-02-01 04:48:09 PM
banking is an industry of risk.  being over-secured is a good idea 100% of the time.  and good ideas in banking should mean less risk, so you can see lower down payments, lower rates, etc.  down payments and interest rates are some of the many ways of reducing risk.  all a down payment does is increase the overall value of the collateral relative to the debt.  my 20% down payment means the bank only loans 80% of the collateral's valueto me as debt.  thus they are technically 20% over-secured.  attaching a whole lot of other stuff will serve the same purpose, and if the stuff is worth more than the 20%, it stands to reason that it is better than a down payment and it also could diversify the risk from that single asset.

/ the problem with the meltdown is that people expected values to increase, thus they thought they were better secured then they were, so they did not address the risks accurately.  oh yeah, and secondary market sales of improperly rated junk
// that's the reason why i have said, we should have let those foolish risk ignorant banks fail.  i worked for a conservative, risk adverse bank during the bubble, and they come out swimmingly through the meltdown... though, during the bubble, people avoided them for their higher than normal rates and more stringent requirements for loans.  all it took was one CEO who said, this is too good to be true, i'm pretty sure it's not going to work forever.  I also assume there were many smaller banks who thought this, and they were all punished when the big banks got saved.  so, in today's america, being the best at what you do is not nearly as important as being the biggest.  well, that may have been the case since time immemorial.  i put this rant in a slashy because it's about 5 years too late to be relevant.
 
2013-02-01 04:53:57 PM
The real concern for bubble loans is adjustable rate auto/boat/RV loans. Those get to play under the old rules.
 
2013-02-01 04:55:26 PM
Good.

This will create higher demand and stimulate the economy. We don't want these banks and fatcats to just sit on their money.
 
2013-02-01 04:58:20 PM
There will be another housing bubble. It's the nature of the beast. Is this the start of it? Could be.
 
2013-02-01 05:10:34 PM

Abe Vigoda's Ghost: 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.


About 8 or 9 years ago, the now-ex-husband and I tried to buy a house, and because of some credit issues the only way we could get a loan was to do it in my name only (this was actually before we got married). We visited a mortgage broker based on a recommendation, and at the time, little ol' naive me thought "wow this lady is awesome! She's doing everything to help me!" Well, she was doing everything to help herself. Approved me for way too much and it was an interest-only loan (I think that's what they're called?) where my payment would've gone up significantly in 3 years. THANK GOODNESS we couldn't afford anything decent and gave up after several months. The divorce would've been a nightmare and I'd still be crawling out from under that mess, financially.

Now I know better and when I bought a house 3 years ago, I used an awesome mortgage broker who told me the max amount I was approved for, and then recommended I actually spend much less than that. Which I did. He also did a bunch of math for me, for different loan terms, types of loan, etc., then gave me the numbers and let me decide for myself what I wanted to do. No pressure at all. Same with my real estate agent; he's a friend of my boyfriend and real estate is only a side job for him so he wasn't trying to get the largest commission possible out of me.

Those 8 or so years ago I almost became a statistic because like many Americans, I just didn't know any better and didn't have anyone around who knew any better either. When you're young and naive, and buying your first home, you tend to trust the "experts" to guide you through the process. Some of those experts are unscrupulous, like the first people I dealt with, and played a big role in creating the mess we're in now.

(Just want to point out that I'm not taking blame off the consumer entirely, personal responsibility certainly matters, but I place equal blame on greed and the lure of big commissions.)
 
2013-02-01 05:11:30 PM

pute kisses like a man: banking is an industry of risk.  being over-secured is a good idea 100% of the time.  and good ideas in banking should mean less risk, so you can see lower down payments, lower rates, etc.  down payments and interest rates are some of the many ways of reducing risk.  all a down payment does is increase the overall value of the collateral relative to the debt.  my 20% down payment means the bank only loans 80% of the collateral's valueto me as debt.  thus they are technically 20% over-secured.  attaching a whole lot of other stuff will serve the same purpose, and if the stuff is worth more than the 20%, it stands to reason that it is better than a down payment and it also could diversify the risk from that single asset.

/ the problem with the meltdown is that people expected values to increase, thus they thought they were better secured then they were, so they did not address the risks accurately.  oh yeah, and secondary market sales of improperly rated junk
// that's the reason why i have said, we should have let those foolish risk ignorant banks fail.  i worked for a conservative, risk adverse bank during the bubble, and they come out swimmingly through the meltdown... though, during the bubble, people avoided them for their higher than normal rates and more stringent requirements for loans.  all it took was one CEO who said, this is too good to be true, i'm pretty sure it's not going to work forever.  I also assume there were many smaller banks who thought this, and they were all punished when the big banks got saved.  so, in today's america, being the best at what you do is not nearly as important as being the biggest.  well, that may have been the case since time immemorial.  i put this rant in a slashy because it's about 5 years too late to be relevant.


"Style over substance" has certainly been the mantra of success for at least the last 40 years.
 
2013-02-01 05:16:08 PM
Good lord the ignorance in this thread is astounding.  All these people talking about how we didn't learn from history and are therefore doomed to repeat it, spouting nonsense that implies that they themselves learned nothing of history.

1) These aren't NINJA/Subprime loans
2) These ARE collateralized loans
3) These aren't the result of CRA or HUD strategy or reduced underwriting standards(or others of their ilk)
4) These are NOT so called 'Toxic Assets'

The way you people talk you make it sound like a 0% interest credit card will cause the next financial crisis.....
 
2013-02-01 05:24:09 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.....


No, it's cool - the "client's investment portfolio" is the other zero-down mortgages pooled from multiple banks.
 
2013-02-01 05:27:51 PM

Necronic: Good lord the ignorance in this thread is astounding.  All these people talking about how we didn't learn from history and are therefore doomed to repeat it, spouting nonsense that implies that they themselves learned nothing of history.

1) These aren't NINJA/Subprime loans
2) These ARE collateralized loans
3) These aren't the result of CRA or HUD strategy or reduced underwriting standards(or others of their ilk)
4) These are NOT so called 'Toxic Assets'

The way you people talk you make it sound like a 0% interest credit card will cause the next financial crisis.....


Interesting. My take on the thread was that most of us thought subby was full of shiat.

But that take wouldn't have fed your need for righteous indignation, would it?
 
2013-02-01 05:29:48 PM
Tomorrow I'm going down to the the local branch with my NASCAR(tm) collector plates. I'll be in that 6-bedroom in no time.
 
2013-02-01 05:31:23 PM
It must be nice to run a company where no one, not even your own people, know if your numbers are screwed up. Your accounting system (you know adding up numbers, sometimes subtracting and once in a while multiplying and dividing) is such a screwed up pile of crap the government can't even audit you. But, if you fail, you take a huge chunk of the economy down with you so no one can let you fail.

Yeah, that can only end well for everybody.
 
2013-02-01 05:35:07 PM

The Beatings Will Continue Until Morale Improves: [1.bp.blogspot.com image 300x225]


I miss that guy.

this guy seems to be the king now.

dailyscene.com
 
2013-02-01 05:35:44 PM

Necronic: "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 the circumstances under which that investment portfolio suddenly became worthless again would not be the same circumstances under which people are likely to default on the house payment, right.
 
2013-02-01 05:36:42 PM
opps.  Aparently Don Lapre is dead.
 
2013-02-01 05:53:01 PM
Plenty of help for those with substantial portfolios. No help for people like me who've worked the same job for almost a decade, have a good salary but were forced to relocate from a devastated housing market or lose my job. Me, they shove in a barrel and take turns at the hole.
 
2013-02-01 06:03:04 PM

stappawho: We had some friends just upgrade houses and I was wondering how they would have done it being they took a hit selling their former house.  This could be why.

I would think about doing this if I could use my 401k.  The wife and I make enough to afford a nicer home but don't want to sell our current house.  We aren't in the red on it, but we wouldn't make back our original down payment + improvements.  The mortgage is low enough to easily cover with renters (as long as it's rented of course).

And based on how much prices have fallen we could get into a pretty nice place.

Probably just stay here though, it's nice enough for the time being.  Just old.


You like the idea of putting both your retirement and your living quarters up for risk if the economy tanks again?  Have fun with that...  Not only will you have a margin call if your house value tanks, you'll get one if your 401k tanks.  None of those have EVER happened in the past, right?
 
2013-02-01 06:13:55 PM
Twist: The investment collateral is entirely tied up in mortgage-backed securities, so when the housing market implodes again it turns out it is worth the same as the house - jack shiat.
 
2013-02-01 06:18:21 PM

robbiex0r: Champion of the Sun: Yeah, these require substantial secondary collateral, kinda different this time

So like, owning a car?


TFA suggests 20-40% of the loan secured by other investment. So no, not like owning a car. Maybe if you're buying a burned out trailer.
 
2013-02-01 06:26:51 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.


You'll get absolutely nowhere being right.
 
2013-02-01 06:33:01 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.


This.

 There are still 0 down loans out there if you know where to look. They've been there this entire time.

 They need to stop blaming the homeowners for losing their jobs and going broke on a house loan they could previously afford just fine.

 They also need to stop blaming homeowners for believing the information given to them by the *professional* they *hired*. If the professional was selling snake oil, they need to be dealt with. Hopefully the person they took for a ride is a bit smarter now, but being taken advantage of is not exactly a criminal offense...most people try to avoid it actually.

/it would be like blaming the patient for taking medication prescribed by the doctor and finding out later it was the wrong one.
//some people would catch it before they took it, but not catching it doesn't make you responsible for the prescription the *doctor* gave you.
 
2013-02-01 06:47:37 PM
Fine, whatever. The more people competing to buy my house when i sell, the better. drives the price up. thanks!
 
2013-02-01 06:56:15 PM
This thread makes me sad.  There's a lot of people here who don't understand what happened last time, and why this isn't the same thing.
 
2013-02-01 07:14:18 PM
Bubbles are good.... now all the homeless people who abandoned their mortgages last time can just resign back up and do it all over again and use their families and friends collateral to do it instead.
 
2013-02-01 07:15:56 PM
Banks take HUGE risks .... riiiiight ...

Money is debt. Debt is money. Our economy is based on a fiat, or faith based currency. It is fiat because the government has decreed the dollar as legal tender, and faith based because it holds no intrinsic value. Fiat currency is only valuable because people believe it valuable enough to purchase goods and services like mortgages, food and water.

A privately owned conglomeration of banking institutions, aka The Federal Reserve, create and control our fiat currency through a Fractional Reserve Banking system. The fractional reserve system says that banks can loan out an agreed percentage above their actual holdings. That is to say, if a bank holds $100 with %20 reserve minimum, $400 can be created as commercial loans. That means for every $100 in holdings, $300 can be created on top of it. This is called inflation. Now add interest to the equation and shiat gets out of control. This is partly possible because fiat currency has no intrinsic value by which it may be audited. Therefore, if it is based on nothing, it is created with nothing, or "out of thin air". But this system promotes development. We are able to get loans beyond a bank's holdings to do more with our economy's money. Unfortunately it's also mathematically unsustainable and inevitably collapses over time, just like a giant ponzie scheme. It's based on nothing so it will unfailingly return to nothing.

So when a bank issues a mortgage to a debtor, they risk literally nothing while the debtor risks tangible assets. This isn't all bad as the bank gains interest on the loan and the debtor gains a house. Win-Win, right? Not really. See, banks dole out mortgages to thousands of people a day and the assumed income from interest is considered to be part of their holdings, which they can immediately sell as more commercial loans. This causes greater rates of inflation. If inflation is equally met with increased income it becomes easier to pay a fixed rate mortgage, even though commodities become more expensive. If income is not increased, then the debtor finds it increasingly difficult to make his payments. In the end the mortgage is foreclosed and the debtor looses his home. Even worse, he is still obligated to pay the debt he assumed.

Finally, there is no reason to be forced to make down payments. Down payments essentially buy you integrity with the bank, saying you're more inclined to "pay them back" as you've already paid a substantial amount. But the bank will make their money very quickly with assumed income from the interest on your mortgage being loaned out fractionally, earning more interest to again be loaned out fractionally earning more interest ... etc. Plus, they can chop up your debt with thousands of other people's debts, shuffle them up to reduce over all risk, create multiple piles, and sell the piles out to other financial institutions as what's called derivatives. Then they can sell insurance to those financial institutions for their derivatives as what's called Collateralized debt obligations or CDOs. This way the bank looses almost nothing if a few mortgages are foreclosed on.

Banks take HUGE risks .... riiiiight ...

The problem is not a lack of down payments, but the system itself exacerbated by adjustable rate loans, balloon payments, financial deregulation, and in-ownership of our own currency. I find it funny that most people think The Fed is a government agency, but cry when our government tries to regulate their practices. According to our constitution, we the people should regulate our government, and use our government to control our own currency. But we've been tricked by the media and those in power to side with The Fed against regulation.

Amschel Rothchild said, "Give me control of a nations money supply, and I care not who makes it's laws." Think about it ...
 
2013-02-01 07:35:48 PM

bedtundy: opps.  Aparently Don Lapre is dead.


Looks like he redecorated the inside of his skull.
 
2013-02-01 08:42:32 PM
It's about affordability. You can afford a house and put no money down. It's debatable as to how effective that strategy is, but to say that's the problem is wrong.
 
2013-02-01 11:20:31 PM
I really wouldnt compare these loans to the zero down loans being made back in 07 and earlier.  The earlier ones were being made to lure in people with no homes who really couldnt afford a home.  Now they are being used to enable folks with homes and a high interest rate, but no equity, to refi.  There is a huge difference.  Using a zero down loan to enable someone who really cant afford a house to buy one is a huge risk.  Allowing a homeowner to refinance, when they have continued to make payments despite being saddled with no equity and an interest rate higher than those currently offered, reduces the risk that the loan will fail later.

I am in more or less that situation.  I bought my home in 2003 for 425k (with a 180k downpayment) and it is currently worth about 15k less than what I owe.   Since my rate (adjustable, 7/1 ARM, past the initial 7 years) is tied to an index that is at historic lows (<3%) I am doing just dandy.  However, folks who are stuck with 6% or 7% loans purchased a while back, and who cant refi due to having no equity, are paying way more than they would if they were allowed to refi.  That increases the risk that they will default.  Many of them are no doubt like myself, with plenty of money in the bank and making all of their payments, just with a different loan.  It makes sense to find a way to enable them to refi, since it reduces risk of default in this case.  Yes, most such folks have the money to refi if they draw down their retirement and other savings but that is obviously not the wisest choice.
 
2013-02-01 11:50:35 PM

Tillmaster: 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.


As a fairly radical tattooed socialist with an MBA, experience as a licensed stockbroker and now as a real estate broker, who thinks we need to see a lot of the banking industry in prison for decades...

...I don't have the slightest problem with this type of zero-down loan.
 
2013-02-02 12:29:52 AM

bedtundy: opps.  Aparently Don Lapre is dead.


If only Wall Street and the investment bank CEOs would take the same way out the country would eb so much better off. JUMP farkERS!
 
2013-02-02 12:54:25 AM

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


Today's phrase: "Camel's nose under the tent".

Remember that once upon a time you had to have excellent credit, a huge down payment, lots of collateral and a handwritten letter from your personal lord and savior to qualify for a loan at decent rates, and just omit the letter to get a loan at all. Then... banks started getting greedier and greedier, and the bar came down further and further. Soon these asswipes were giving loans to household pets, potted plants, and dead people, because they could bundle and sell these loans to some other schmuck as investments.

The whole thing is happening again. Watch and see. Where I live, housing prices had just started to come down to where you didn't have to sell a kidney to buy one, and the morans who bought in 2006-2008 drowned like the rats they were... now they are jumping up 1-2% every couple of months, and will be out of the range of everyone but foreign rich people and people like the ones in the article by the end of the decade. The local fishwrap has run quite a few stories (though not on the front page) about older folks who are afraid they will never (or rarely) see their grown children or grandchildren again, because the house they were able to buy in 1980 on a high-school educated state workers meager salary has quintupled in price since, and their college educated kid will never be able to afford one in the same state, much less in the same town.

Nothing has changed... people are still greedy, short-sighted and stupid, and always will be.
 
2013-02-02 03:15:48 AM
"Never let a crisis go to waste" need not be the exclusive agenda of the Power Elite/ parasitic Aristocracy: it could be the agenda for the rest of us, i.e. the debt-serfs. If you are unfamiliar with the neofeudal/neocolonial financialization model, please read  3. GDP (rising modestly on the back of Federal Reserve money creation and monetization of Federal borrowing);4. financial profits per employed person in the U.S. (exponential rise, interrupted by that spot of bother in 2008 that the Fed fixed with QE1-4);5. output per person (i.e. productivity per worker, rising steadily)6. real (adjusted) household income (tanking, depsite trillions of dollars created and borrowed by the Central State and Bank)
Can you say "exponential" and "unsustainable"?
 www.oftwominds.com

Off a cliff, even as productivity has risen smartly:

www.oftwominds.com

Here is GDP, expanding on the back of Federal borrow-and-blow deficit spending:

www.oftwominds.com

Gee, the financial Aristocracy seems to be skimming all the productivity gains; they certainly aren't flowing to the wage earners:


www.oftwominds.com

Productivity per worker keeps increasing--where is the net going?

www.oftwominds.com

Not to the wage earner households:

www.oftwominds.com


As I have endeavored to explain this week, this financialization of the economy is the direct result of Federal Reserve and Federal government policies. The fact that gains in productivity are not flowing to wage earners is not some mysterious warp of space-time--it is the direct consequence of the Fed's financialization of the economy, supported by the political Elites of Federal government.
In the neofeudal, neocolonial model, speculation by the parasitic Aristocracy is backstopped by the taxpayers--the perfection of moral hazard.
Future taxpayers are burdened with crushing mountains of debt taken on to fund corrupt state fiefdoms and politically sacrosanct cartels and constituencies.
Debt (that profits the parasitic financial Aristocracy) is heavily incentivized while saving capital (cash) is punished with negative yields.
There are no financial limits on State borrowing and spending when the Federal Reserve is monetizing Treasury debt. The Federal government is thus free to borrow and squander trillions of dollars supporting cartels (sickcare, national security, war-on-drugs gulags, higher education, etc.) and pass the interest costs on to taxpayers, present and future.
There are also no limits on the skim of the financial Aristocracy when the Fed gives them unlimited 0% money, backstops their gambling and destroys the incentives to accumulate cash capital and invest it productively rather than speculatively.
This is the essence of the neocolonial model: make money cheap, reward consumption and speculation in asset bubbles and draw once-prudent citizens into debt-serfdom. Those not ready for big-mortgage serfdom are snared with the $100,000 student loan skim.
This is the same mechanism used to stripmine colonies with financialization: no coercion necessary. "They did it to themselves."
This neocolonial model leads to neofeudalism: Oops, the asset bubble burst, so your (phantom) wealth has vanished, but you still owe us the debt. Funny how that works.
 
2013-02-02 03:16:43 AM
In an economy based on debt, servicing that debt absorbs much of the income. So you need to borrow more to get by.
Since labor is in surplus, you need multiple university degrees to hope to get a high-paying job. (After taxes and debt service, the "high-paying" part is revealed as illusory--but by all means, please pursue the high-debt, high-consumption American Dream--you're enriching the parasitic Elites immensely.)
Each degree will rack up $100,000 in debt, and if you can't get a job, then the "solution" is another degree--oh, and of course, another hundred thou in debt.
There are no limits on Central State and financial Aristocracy exploitation, but there are limits on what debt-serfs can pay. Since we can't print money, there are limits for us debt-serfs. There are also limits on how much we can extract from a neocolonial/neofeudal system as wages (see above charts).
This neocolonial/neofeudal financialization model will implode under its own weight, and that will be the crisis. The opportunity will be to renounce all the unpayable debt and resolve to establish a radically lower-cost way of life that doesn't need "high incomes" for a fulfilling, prosperous life.
Such a way of life is based not on an extractive, expansive State or its partner, the exploitative parasitic Aristocracy, but on the forgotten third foundation of the economy, the community.
Submitted by Charles Hugh-Smith of OfTwoMinds blog
 
2013-02-02 03:44:00 AM

ferretman: Until it is deemed 'unfair' and then the banks will have to provide them to the 'non-wealthy'. Same thing that happened before.


Oh, Jebus.  You're one of THOSE.

Hint:  the CRA was upheld for decades by...Republicans.

Another hint:  CRA loans required MORE documentation than normal loans.

Last hint:  CRA loans defaulted at a LOWER rate than average.

Step away from the Fox "News", it's rotting your brain.
 
2013-02-02 03:54:11 AM

Necronic: Good lord the ignorance in this thread is astounding.  All these people talking about how we didn't learn from history and are therefore doomed to repeat it, spouting nonsense that implies that they themselves learned nothing of history.

1) These aren't NINJA/Subprime loans
2) These ARE collateralized loans
3) These aren't the result of CRA or HUD strategy or reduced underwriting standards(or others of their ilk)
4) These are NOT so called 'Toxic Assets'

The way you people talk you make it sound like a 0% interest credit card will cause the next financial crisis.....


True.

However, I wasted a solid week last year trying to help a client buy a property from a bank that was a prisoner of their own computer system.

They literally could only generate paperwork where the future performance dates had already gone by.

Think about that.

So I have no doubts about the ability of the average banker to screw up what should be a rock-solid investment.
 
2013-02-02 08:18:32 PM

PunGent: ferretman: Until it is deemed 'unfair' and then the banks will have to provide them to the 'non-wealthy'. Same thing that happened before.

Oh, Jebus.  You're one of THOSE.

Hint:  the CRA was upheld for decades by...Republicans.

Another hint:  CRA loans required MORE documentation than normal loans.

Last hint:  CRA loans defaulted at a LOWER rate than average.

Step away from the Fox "News", it's rotting your brain.


Furthermore, just 6% -- SIX PERCENT -- of the subprime loans made over the past 10 years were from banks subject to the CRA.

The great majority of bad loans were made by non-bank lenders like Ameriquest, Countrywide, and New Century. They collected points on the loans, and then bundled and sold them off to Goldman Sachs and other securities dealers, often misleadingly stating that they were AAA-rated investments.

Some Q&A for people who up until now thought the Fox News version was correct:

"But Fox News says that the government forced banks to make these bad sub-prime loans! Is that true?"

No. Again, the vast majority of these loans were made by non-bank lenders (NBLs), which were not subject to many of the regulations in place to prevent this sort of thing from happening. I know that in your Fox News world, bankers are good and true and righteous, but the simple fact is some of these NBLs were run by bad, dishonest people who committed fraud.

"But Fox News tells me that this is Jimmy Carter's fault. The CRA forced banks to write bad loans. Isn't that correct?"

No, as covered above by me and the quotee.

By the way, this is what the CRA did: it prevented banks from discriminating against applicants solely because of where they lived. Before the CRA, if a bank had two applications from people who had the very same financials, but one had a ZIP code that was in the 'hood and the other had a tonier ZIP code, the bank would often deny a loan to the first person -- again, the applications could have otherwise been identical. In other words, it effectively stopped the banks from discriminating based on race.

Now if you still think that the CRA was so TERRIBLY unfair by picking on those poor banks all because they wanted to use harsher criteria for people who lived in neighborhoods made up primarily of minorities, then perhaps you should think about how good of a human being you are.

But, again: the CRA had nothing to do with the sub-prime mortgage crisis.

If you still persist in thinking that there's a problem with encouraging minorities to own their own homes, then perhaps your ire should be directed at George W. Bush's American Dream Downpayment Assistant Act in 2003. It postdates the CRA by some 25 years.

"These non-bank lenders -- surely these were the creation of the evil Democrats, right?"

The advent of the NBL industry came about as the result of deregulation that began in the Gramm-Leach-Bliley (GLB) Act, signed in 1999.

"A-Ha! Bill Clinton! I knew it!"

The bills sponsors, Messrs. Gramm, Leach, and Bliley, were all republicans. Phil Gramm later went on to run UBS. While more Republicans voted for it than Democrats, it had wide acceptance on both sides of the aisle. For what it's worth, the vote count was such that Clinton could not have vetoed it had he wanted to.

"So you're saying that it's NOT true that the subprime mortgage crisis was caused by poor people, or by the government forcing banks to treat minorities fairly? You mean it was unscrupulous NBLs, and deregulation sponsored by Republicans? But if Fox News has been unfairly blaming poor people, then that would be class warfare, and Fox News tells me that it's only poor people who wage class warfare, by saying mean things about the banks!"

Yes, I think you've nailed it.
 
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