San Diego Housing Bubble News and Analysis

Yep, good news. I like the "qualified borrowers" even more.

Can you post a link on this?

If it's true then wow, nice to know that Fannie and Freddie are trying even harder to get more declining paper on their books at our eventual expense. Not that this will save the market at all but the fact that they are able to pull this crap in an obviously declining market is amazing.

Looks like I'm going to have to put a short on them and hold to zero to hedge against my tax increase that will be used to bail them out.

Yep, I'd also be very interested in knowing who is participating in this product at this rate now. Also, is this rate with no buydown on points? If so, I wonder if an additional 50 basis pts. would be sliced off if the buyer paid down a couple of points.

This may be the thing that pushes me over the edge to just by a reasonably priced property now.

roughtrader

Is that only for purchases or can you do re-fi's?

In the last couple days I've read comments from both Henry Paulsen and Warren Buffett saying the worst of the credit crunch is behind us. This may be further proof.

LOL.

When Fannie is nationalized, will the preferred stock holders be made whole?

Fannie Mae said they would take jumbo conforming at the same rate as the TBA pools, they said this on their conference call yesterday.

Looks like they were serious.

I expect the "happy talk" from Paulson, but not from Buffet..
I don't think that the credit crunch is anywhere near over.

It looks like you need at least 25% equity to do a NO CASH OUT "JC" refi at the lower rate but can still get the better rate with 20% down on a purchase. (An 80% refi is still pricing higher, same as yesterday about 6.125%)

It's just one more attempt to save a few people from doom.

It's not going to help anybody who is underwater or who cannot qualify full doc.
There has been a lower back end DTI ratio on JC loans, which I think is still in place.

If I get updated specific guidelines I will post them later.

This is going to reward people with good credit scores who could actually afford a higher rate & payment to have a lower one!

HLS,

Could I ask you a question regarding these JC loans? What type of people walk in your door asking for them? I'm sure you see all sort of cases, from underwater folks that you have to turn away, to those who have perfect credit and 50% down. I'm trying to get a feeling on how many there are in each category. So, what would you say? Mostly in distress, or mostly in good shape, or a little bit of both?

Thanks,
Daniel

Is there a short fuse on these jumbo conforming loans?

Are they scheduled to be available only through 2008?

I had heard this from a friend of mine....

Thanks!

Daniel,,
Until today, the JC loans have been a joke. I knew when they announced them that they wouldn't be useful to most.

Many people are in distress, many are not. Very few people have 50% to put down, but they are out there. It's a tiny % though.

Most people didn't qualify for JC's. There was a limit of 45% total debts to verified income, and most people who need help don't qualify based on income (or equity position) or both. (The $417K loans will allow up to 60% DTI)

They are still going to help a small % of people, but will make it a bit more affordable for some to buy...

MOST people who bought a house in CA the last 3-4 years have paid more than it's worth today. That's a lot of homes that are upside down.

As of today, there are some options for people with equity to get a better rate, but most people don't have any equity unless they had a large down.

There are a large number of people who bought before 2002 and do not have a mortgage problem at all, but it's still surprising that some people with equity have 7%+ fixed rates. They are paralyzed by fear..(ignorance in some cases)

The govt is scared and desperate. Any little thing that they do to avoid any foreclosures, is a tiny help. I still see this being a long downward slippery slope, with the average person clueless and in denial.

I see lots more foreclosures to come,, until the govt rolls out the red carpet to the irresponsible, and if they do that, I see riots coming from the responsible side.

(The $417K loans will allow up to 60% DTI)
---------------
This is the part that ticks me off, and tells me we are nowhere near a bottom in the housing market or the credit bubble deflation.

If this were my money, I would allow no more than a 33% back-end ratio on people earning $150K or less. A 60% DTI ratio virtually guarantees a future default. The "foreclosure crisis" will not be over until all of these irresponsible loans are eliminated.

Still holding out until we see 28/33 DTI ratios, at least. Then we can call it a "tight" (used to be called "normal") credit market.

Thank you, HLS. Your posts are most informative. I guess I'm one of the few who are cheering the new JC limits. Self-serving, I know. Cheap loans with tight underwriting standards suit me like a glove, so I'm not ashamed to admit that I welcome them.

And, a bit off-topic: are you serious about the 60% DTI? Is the "I" in DTI gross income? If so, let's see... a third goes to taxes, 60% goes to debt service, not much left there, isn't it?

And, way off-topic: I have a fun anecdote about the "D" in DTI. A few years back, I was filling out a mortgage application, and the broker asked: "Credit card debt?". "None", I said. "Car payments?". "No, don't have those, either". "Wow, you're in great shape!", she said. I was sitting there, thinking to myself "Should I mention that I have two kids in daycare, costing me over $2,000 a month? It's like paying for a couple of Ferraris". So, really, HLS, shouldn't the lenders care about that? Anybody who has kids will tell you they're way more expensive than any cars they've ever driven.

Is that only for new purchase or for refi?

"When Fannie is nationalized, will the preferred stock holders be made whole?"

A whole Zero. Gov't doesn't like to payout shareholders. If they did I would hope that the taxpayers would raise the pitchforks.

I'm still waiting on the OP to give information on which lenders are participating in this reduced-rate CJ product....

roughtrader

Daniel,

You're not supposed to mention that in polite company, or the $500/month in Mello Roos.

If these conforming rates are for real, I definitely see many here buying in CarmelV and maybe even rentals if allowed in Chula Vista or Temecula.

Daniel,

There is help for those who are underwater or "upside down" on their loans here. We are qualifying people today for principal reduction loans and wiping out seconds for pennies on the dollar....

Stay in your home and get a new loan at 90% LTV of the current market value....

Our business is exploding......

www.shortrefime.com

Sincerely, Contraman

Away with the spam!

Nice, extract more fees with a 90% LTV then when the value drops the now expected further 10% in the coming months will there be another principal forgiveness? Why do I feel my paycheck getting lighter at expense to this?

Nobody should be advocating home buying in this environment outside short of 30% down payment. We taxpayers will be paying for it!

Roughtrader,

FYI, I have been in this community for over a year. I have helped others here on several occasions as a mortgage broker wade through their options when on the brink of losing their home and not make a dime from it.....

There are a lot of people that need help that are upside down and I want to communicate to them that we can help them stay in their home, reduce the amount of foreclosure inventory, and help stabilize things here on the housing front.

A lot of people think this is a bailout but in reality it is putting it to the banks not the homeowners. If the property appreciates in value and the homeowner sells then the government gets a percentage of the profits.

I am not a proponent of bailouts but am one of helping people and this is a very good solution.

Sincerely, Contraman

Roughtrader,

FYI, I have been in this community for over a year. I have helped others here on several occasions as a mortgage broker wade through their options when on the brink of losing their home and not make a dime from it.....

There are a lot of people that need help that are upside down and I want to communicate to them that we can help them stay in their home, reduce the amount of foreclosure inventory, and help stabilize things here on the housing front.

A lot of people think this is a bailout but in reality it is putting it to the banks not the homeowners. If the property appreciates in value and the homeowner sells then the government gets a percentage of the profits.

I am not a proponent of bailouts but am one of helping people and this is a very good solution.

Sincerely, Contraman

If you are helping people with this endeavour then keep up the good work. Isn't this still a losing battle for homeowners in the end when chopping 10% off of principle only to have the cushion erode away and be in the same position a year or less out?

Capeman,

That is indeed a risk that will be taken by some borrower's, lenders, and the government. I am sure most people would feel a lot more comfortable with a home that is negative 10% in value in the short term vs. 60%.

Sincerely, Contraman

Someone mentioned that the DTI on conforming jumbos are capped at 45% and 417k are capped at 60%, it is my understanding that they only look at the back end ratio and dont look at front end. Is this true?

Contraman,

If you're working with lenders to restructure troubled loans, I don't think anybody here has a problem with you. As long as both borrower and lender end up being better off, then that's what they should do.

Speaking for myself, I'm not in the market for a mortgage, and likely won't be for awhile. But I'm really keen to know about the amount of distress in the higher-priced areas (and I think many others here feel the same). So far, NOD and NOT activity has been pretty subdued in these areas, but there are reasons to believe that there are some time bombs about to go off. I imagine that people like you and HLS would be the first to notice signs of distress, as folks would come to you to try to refinance before they go NOD.

Why do you feel the need to help these people? If you've been on this message board for a while, you would have noticed that the overwhelming sentiment here is a desire to see prices GO DOWN.

Keeping people in their homes by principal reductions / workouts doesn't help the market correct itself.

Anyway, it doesn't really matter. It just smelled like spam; I call it as I see it.

roughtrader

One comment though, Contraman: I just checked out your website, and, ummm... you know... the correct spelling is "homeowners", not "homeowner's". You might want to fix that.

30 yr Fixed or 5 yr ARM? This is a question I want to consult the mortgage experts and shrewd Piggs here.
Given 30 year fixed as 5.875% (no fee no cost) for a conforming jumbo loan and 5 year ARM as 5.375% (no fee no cost), what should people choose when they need to refinance?

Hi Contraman,

You need some really good references to backup your claims. If the banks are willing to reduce mortgage principals without sinking the borrower's credit score, it will encourage people to take on more risk than they can manage. This is the last thing lending agencies would like to see.

Nic,

What are YOU thinking ??

As a mortgage professional, I tell people that it's just gambling to get a 5 YR ARM, unless you are 90% sure that you won't have that loan in 6-7 years.

If you plan on keeping the property for more than 7 years, in my opinion it would be very foolish to get the ARM.

You cannot put a price on the stress that many people face because their ARM will be adjusting in 12-24 months. (Some are freaking out, as they don't qualify for a refi today)
The security of a 30YR fixed is cheap insurance.

You have no idea what any of the following will be in 5 YRS:
a) Interest Rates
b) Property Value
c) Your credit score
d) Your ability to qualify for a loan

Mortgage rates are historically low NOW. WHY GAMBLE ?
(For .005% for only 5 yrs ?)

If you plan on keeping the property, you think that rates will be lower in 5 years ? Even if you are right then you have the added expense of refinancing again.

If you can predict interest rates, who cares what your mortgage rate is. You can make a fortune trading bonds on Wall Street and pay cash for your house.

At today's rate, I don't think that anybody is offering you a "no fee no cost" loan at 5.375%/5.875%.
Please correct me if I am wrong.

Do you understand that if you plan on keeping the loan for more than 4-5 years, getting the "no cost" loan is a poor decision ? There are no FREE loans. You pay a higher rate for the life of the loan.

FNMA 5 YR JC ARM's are a HIGHER rate than 30 YR Fixed.
Yes it is dumb. (Cheaper 5 YR ARM's are only available below $417K)

I cannot believe the number of people who want to play games with the largest financing decision of their lives, and some make choices based on the words out of a hotties mouth on CNBC or a misleading commercial.