From a lender, wiseguy:
We are starting to see plenty of people who’s ARMs are adjusting from a couple of years ago and cannot refi because of HELOCS and seconds that they took out. When there was huge appreciation it didn’t matter. Now appreciation has slowed and they are in a bad position.
SoCalMtgGuy writes:
“My biggest office that had over 100 loan officers just closed their doors last month. Most of these econoMISSEDs are tied to the industry, so they don’t have the integrity to tell the truth. Either that, or they are so far removed from the ‘ground level’ of what is really going on in most broker shops to see HOW people working fast food can buy 400k starter homes. Stated income loans have been abused to such an extent that the repurcussions will be felt for years.
If the banks had to hold these loans then this NEVER would have happened to this extent. When I was doing loans, our company would take a loan to the investor to see if they would buy the loan BEFORE we would approve it. This wasn’t done on all loans, just the ‘ugly’ ones. If the investor said OK, then the loan was made. Sometimes they would ask for other conditions, other times they flat turned it down.
I have had communication with several bond traders. What they told me is that there is so much money sloshing around out there, that people/funds/companies need a place to park it. They know there will be defaults, but the rate of return on the MBS is still way better than they can get in other places of the world.
I say yes…right now. but what happens if/when the massive defaults hit??? Same thing with the junk bonds is going to happen here.
Junk bonds became ‘hot’ items. Then the ‘junk’ that was backing the bond deteriorated to such a point that the whole thing crumbled. Same thing with mortgages. The quality of the borrower and loan deteriorated as the markets got ‘hotter’…and again, there will be hell to pay.
Just like people that were buying ‘bonds’ on crazy amusement parks in the middle of the desert…there are people buying mortgages on people who have little to no chance of ever being able to afford their mortgage when the paymnet adjusts.”
