May 22, 2006 at 9:28 AM #6629hipmattParticipant
I propose something like the following to create a more stable, less
volatile, and more consistent housing market that will still
appreciate in value over time.
1. Eliminate the interest only loan program completely. This loan is
not necessary and is financially insane. Buying a home in a manner
that you don’t pay off ANY of the loan balance for the first 5-10
years is just insane. Newsflash: If you are considering this loan,
then you CAN’T afford to buy a home! This loan is probably the #1
reason that the market is in the shape it is today… the
concept…pay a little now so that when it does go up in value, I
refi!!!(but they don’t tell you your payment is likely to go up) or I
sell and make a killing. This has speculation and free ride written
P.S. They didn’t have these loans when our parents were buying their
2. Institute at least a 20% CASH down payment for those who are
buying a second home/investment home.Uhhh….everyone has done this in
the past, it wasn’t until recently that you could be broke and still
buy a home. This will slow the speculators WAY down, almost making it
impossible unless they truly are in a position to buy an additional
home in which case I have no problems with people buying second or
third homes. Personally I feel that even first time buyers should
have at least a 10% down payment to buy a home, which I do feel is the
American dream and that every HARD working American should have a fair
shot at, however, I don’t think that it is unreasonable to show that
you have at least managed some sort of financial responsibility in
SAVING or earning at least a decent amount to put down towards your
home. Once again, this is how ALL of our parents had to do it!
3. Keep the home loans at terms at or under 30 years. It should not
take more than that to pay off a home. Sure, you can say homes cost
more now, but also, incomes should rise at the same rate. If everyone
had to abide by the same loan requirements, homes WOULD NOT cost as
much as they do now. These 40/50 year loans are more of the same BS
that helps out speculators or broke people buy a home and cause
volatility in the market. The real estate industry and lenders are
gonna pitch this crap to us like..”these new loans really allow
everyone a great opportunity to own a home, the one that they
deserve”…sounds great, but why do we have these loans now and not
50, 25, or even 5 years ago. We didn’t need them then and we don’t
now. This is a last minute tactic designed by the lenders and banks
to talk you into buying something that you can’t afford, that is
overvalued, and that will put money into THEIR pockets, not yours.
This was done after the prices escalated to these ridiculous levels
and its a shame that this industry will make people AFRAID of getting
“priced out of the market” by lying to them through the media(where
they spend LOTS of advertising $$) and such.May 22, 2006 at 9:32 AM #25781
Eliminate stated income loans.
Qualify borrower of an ARM based on the what the payment will be if interest rates go to 10%.
Raise minimum FICO score requirements.
You know who’s to blame for all this: the investors who buy these products from the lenders. If investors demanded a proper risk premium for loaning $500K to a 630 FICO borrower with stated income, then that person wouldn’t qualify.
The Q is: why are global investos gobbling up these products? As long as there is demand for these loans, they will be made. (Like pornography, drug trade, and illegal immigration – demand fuels the trade, not legislation.)May 22, 2006 at 9:44 AM #257844plexownerParticipant
Perhaps there is so much liquidity sloshing around the globe today that a large percentage of is HAS to flow into mortgage related securities.
The US isn’t the only country with the printing presses running 24/7.
Global liquidity is increasing at about a 10% per year rate.
This tremendous pumping of liquidity is starting to show up in the inflation numbers.
Last week’s inflation numbers show about a 7% yearly rate.May 23, 2006 at 6:57 AM #25810sdduuuudeParticipant
More rules about what I can and can’t do with my money are not what the market needs.May 23, 2006 at 8:07 AM #25814
You can say the same thing about drugs: more rules about which drugs I can or cannot take is not anyone’s business. Why shouldn’t heroin be legal? Why should vicodin be available only by prescription?
Sometimes, laws are made to protect society, even if they quell an individual’s choice.May 23, 2006 at 8:47 AM #25818AnonymousGuest
Stated income loans serve a purpose for self-employed borrowers. They should, however, be more difficult for W-2 employees to obtain.May 23, 2006 at 8:53 AM #25819
My understanding is that traditionally stated income loans were only for the self-employed. Their loan approval however depended on their assets. Today’s no-doc loan doesn’t require proof of assets, right?
The source of the problem is the global liquidity and that investors were seeking higher returns when global interest rates were so low. The Fed often puzzled about the low risk premia demanded by investors. If investors had demanded a proper risk premium, shouldn’t they have demanded at least 3-5% above the market rate for anyone with 0% down and no documented income? The investors who took on these loans deserve what comes their way. I only feel sorry for the unsuspecting homeowners, many of whom still believe we have only a 20% drop.May 23, 2006 at 12:55 PM #25822BugsParticipant
The rules in question have nothing to do with how you handle your money. You’re welcome to do what you like with it.
They have to do with how the banks underwrite the loans that are ultimately insured by the taxpayers. When the taxpayers get involved it goes from being merely commerce and ventures into the public domain. These rules are in place to protect the public’s interest, which in the case of the mortgage markets is substantial.
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