FNM/FRE to discontinue jumbo-conforming

[PC]

The blame on the CRA is entirely misplaced, as Barry articulates much better than I ever could have:

http://bigpicture.typepad.com/comments/2008/10/misunderstandin.html

I also believe there’s greater culpability in deregulation (than the misplaced blame on the CRA), including: (1) the lifting of the prohibition of Credit Default Swaps via the Commodity Futures Modernization Act; and (2) Greenspan’s malfeasance in ignoring the numerous warnings from his own Fed governors and treasury officials.

http://bigpicture.typepad.com/comments/2008/09/the-new-new-dea.html

[ralphfurley]

[quote=peterb]Looks like the govt may have a bailout for all that want it:

http://mrmortgage.ml-implode.com/2008/11/04/no-more-mortgage-payments-soon-get-ready-to-default/
[/quote]
Wow. Unreal. Let’s all kick the problem a couple years down the line.

[ralphfurley]

[quote=peterb]Looks like the govt may have a bailout for all that want it:

http://mrmortgage.ml-implode.com/2008/11/04/no-more-mortgage-payments-soon-get-ready-to-default/
[/quote]
Wow. Unreal. Let’s all kick the problem a couple years down the line.

[ralphfurley]

[quote=peterb]Looks like the govt may have a bailout for all that want it:

http://mrmortgage.ml-implode.com/2008/11/04/no-more-mortgage-payments-soon-get-ready-to-default/
[/quote]
Wow. Unreal. Let’s all kick the problem a couple years down the line.

[ralphfurley]

[quote=peterb]Looks like the govt may have a bailout for all that want it:

http://mrmortgage.ml-implode.com/2008/11/04/no-more-mortgage-payments-soon-get-ready-to-default/
[/quote]
Wow. Unreal. Let’s all kick the problem a couple years down the line.

[ralphfurley]

[quote=peterb]Looks like the govt may have a bailout for all that want it:

http://mrmortgage.ml-implode.com/2008/11/04/no-more-mortgage-payments-soon-get-ready-to-default/
[/quote]
Wow. Unreal. Let’s all kick the problem a couple years down the line.

[ucodegen]

If we go by 3x gross rule, a person with 50k income will live in a 150k house, a person with 200k income will live in a 600k house. The difference being, that the 600k house will be owned by the resident (it’s easy for him to save for the down payment), and the 150k house will be owned by an investor (it’s hard for the resident to save, so he’ll rent instead).

What’s your problem with this statement?

The part with the investor.. which is wrong because the unit has to cashflow for the investor. You are also taking the situation now after loose lending has blown up the prices on lower end houses.

@asianautica

So you’re saying in the 80s and 90s, when 20% and 3x income were the norm, the majority of cheaper area were bought by investors? I don’t buy that one bit.

I agree with this in part, but if you want the proper price comparison, look to a time before the Community Revitalization act (1977). 1990, we didn’t see 3x gross median income for median house. We were somewhere around 5x+.

[ucodegen]

If we go by 3x gross rule, a person with 50k income will live in a 150k house, a person with 200k income will live in a 600k house. The difference being, that the 600k house will be owned by the resident (it’s easy for him to save for the down payment), and the 150k house will be owned by an investor (it’s hard for the resident to save, so he’ll rent instead).

What’s your problem with this statement?

The part with the investor.. which is wrong because the unit has to cashflow for the investor. You are also taking the situation now after loose lending has blown up the prices on lower end houses.

@asianautica

So you’re saying in the 80s and 90s, when 20% and 3x income were the norm, the majority of cheaper area were bought by investors? I don’t buy that one bit.

I agree with this in part, but if you want the proper price comparison, look to a time before the Community Revitalization act (1977). 1990, we didn’t see 3x gross median income for median house. We were somewhere around 5x+.

[ucodegen]

If we go by 3x gross rule, a person with 50k income will live in a 150k house, a person with 200k income will live in a 600k house. The difference being, that the 600k house will be owned by the resident (it’s easy for him to save for the down payment), and the 150k house will be owned by an investor (it’s hard for the resident to save, so he’ll rent instead).

What’s your problem with this statement?

The part with the investor.. which is wrong because the unit has to cashflow for the investor. You are also taking the situation now after loose lending has blown up the prices on lower end houses.

@asianautica

So you’re saying in the 80s and 90s, when 20% and 3x income were the norm, the majority of cheaper area were bought by investors? I don’t buy that one bit.

I agree with this in part, but if you want the proper price comparison, look to a time before the Community Revitalization act (1977). 1990, we didn’t see 3x gross median income for median house. We were somewhere around 5x+.

[ucodegen]

If we go by 3x gross rule, a person with 50k income will live in a 150k house, a person with 200k income will live in a 600k house. The difference being, that the 600k house will be owned by the resident (it’s easy for him to save for the down payment), and the 150k house will be owned by an investor (it’s hard for the resident to save, so he’ll rent instead).

What’s your problem with this statement?

The part with the investor.. which is wrong because the unit has to cashflow for the investor. You are also taking the situation now after loose lending has blown up the prices on lower end houses.

@asianautica

So you’re saying in the 80s and 90s, when 20% and 3x income were the norm, the majority of cheaper area were bought by investors? I don’t buy that one bit.

I agree with this in part, but if you want the proper price comparison, look to a time before the Community Revitalization act (1977). 1990, we didn’t see 3x gross median income for median house. We were somewhere around 5x+.

[ucodegen]

If we go by 3x gross rule, a person with 50k income will live in a 150k house, a person with 200k income will live in a 600k house. The difference being, that the 600k house will be owned by the resident (it’s easy for him to save for the down payment), and the 150k house will be owned by an investor (it’s hard for the resident to save, so he’ll rent instead).

What’s your problem with this statement?

The part with the investor.. which is wrong because the unit has to cashflow for the investor. You are also taking the situation now after loose lending has blown up the prices on lower end houses.

@asianautica

So you’re saying in the 80s and 90s, when 20% and 3x income were the norm, the majority of cheaper area were bought by investors? I don’t buy that one bit.

I agree with this in part, but if you want the proper price comparison, look to a time before the Community Revitalization act (1977). 1990, we didn’t see 3x gross median income for median house. We were somewhere around 5x+.

[ucodegen]

@esmith
Mandatory 20% down payment for everyone would push disproportionate numbers of low-income families into rentals and disproportionate numbers of low-income houses into investors’ hands.

Investors have to come up with more than 20% because it is not owner occupied. At the same time it has to cash flow for the investor (including % relative to down). Getting a SFR to properly cashflow is hard, that is why very few REITS deal with them. On the other hand, MFR/apartments cashflow a lot easier. Investors will not really waste their time with SFRs unless they anticipate price increases in the properties.
NOTE: Remember, if people can use more than 80% financing, so can investors too… The more an ‘investor’ has to pony up on the purchase, the fewer units they can buy if they are able to cash flow.

What drives the prices up is something known as realizable demand. This demand is different than ‘wish’ or ‘dream’ demand. realizable demand means the desire to purchase and the ability to do so. If you cut realizable demand, prices will fall against constant supply (or in this case oversupply).

Another aspect of property is that if a person can’t save up for the 20% down, they are unlikely to handle emergencies with the home.. roof leak, water leak under the slab, etc.

High-income people can live frugal too. It’s one thing to make 3500/month after-tax and save 500/month, it’s another to make 7500/month and save 4500/month with the same standard of living.

Strawman argument and irrelevant.
1) if you are making $7500 a month, you have a greater percentage of income going to taxes. Therefore you will probably be saving much less than 4500 a month.
2) a person making 7500 a month will be saving for a much different house and will probably purchase a much different house than the person making 3500/month. They will have to come up with a larger down payment.

Yep.. because taxes are taking so much of the $7500/month

[ucodegen]

@esmith
Mandatory 20% down payment for everyone would push disproportionate numbers of low-income families into rentals and disproportionate numbers of low-income houses into investors’ hands.

Investors have to come up with more than 20% because it is not owner occupied. At the same time it has to cash flow for the investor (including % relative to down). Getting a SFR to properly cashflow is hard, that is why very few REITS deal with them. On the other hand, MFR/apartments cashflow a lot easier. Investors will not really waste their time with SFRs unless they anticipate price increases in the properties.
NOTE: Remember, if people can use more than 80% financing, so can investors too… The more an ‘investor’ has to pony up on the purchase, the fewer units they can buy if they are able to cash flow.

What drives the prices up is something known as realizable demand. This demand is different than ‘wish’ or ‘dream’ demand. realizable demand means the desire to purchase and the ability to do so. If you cut realizable demand, prices will fall against constant supply (or in this case oversupply).

Another aspect of property is that if a person can’t save up for the 20% down, they are unlikely to handle emergencies with the home.. roof leak, water leak under the slab, etc.

High-income people can live frugal too. It’s one thing to make 3500/month after-tax and save 500/month, it’s another to make 7500/month and save 4500/month with the same standard of living.

Strawman argument and irrelevant.
1) if you are making $7500 a month, you have a greater percentage of income going to taxes. Therefore you will probably be saving much less than 4500 a month.
2) a person making 7500 a month will be saving for a much different house and will probably purchase a much different house than the person making 3500/month. They will have to come up with a larger down payment.

Yep.. because taxes are taking so much of the $7500/month

[ucodegen]

@esmith
Mandatory 20% down payment for everyone would push disproportionate numbers of low-income families into rentals and disproportionate numbers of low-income houses into investors’ hands.

Investors have to come up with more than 20% because it is not owner occupied. At the same time it has to cash flow for the investor (including % relative to down). Getting a SFR to properly cashflow is hard, that is why very few REITS deal with them. On the other hand, MFR/apartments cashflow a lot easier. Investors will not really waste their time with SFRs unless they anticipate price increases in the properties.
NOTE: Remember, if people can use more than 80% financing, so can investors too… The more an ‘investor’ has to pony up on the purchase, the fewer units they can buy if they are able to cash flow.

What drives the prices up is something known as realizable demand. This demand is different than ‘wish’ or ‘dream’ demand. realizable demand means the desire to purchase and the ability to do so. If you cut realizable demand, prices will fall against constant supply (or in this case oversupply).

Another aspect of property is that if a person can’t save up for the 20% down, they are unlikely to handle emergencies with the home.. roof leak, water leak under the slab, etc.

High-income people can live frugal too. It’s one thing to make 3500/month after-tax and save 500/month, it’s another to make 7500/month and save 4500/month with the same standard of living.

Strawman argument and irrelevant.
1) if you are making $7500 a month, you have a greater percentage of income going to taxes. Therefore you will probably be saving much less than 4500 a month.
2) a person making 7500 a month will be saving for a much different house and will probably purchase a much different house than the person making 3500/month. They will have to come up with a larger down payment.

Yep.. because taxes are taking so much of the $7500/month

[ucodegen]

@esmith
Mandatory 20% down payment for everyone would push disproportionate numbers of low-income families into rentals and disproportionate numbers of low-income houses into investors’ hands.

Investors have to come up with more than 20% because it is not owner occupied. At the same time it has to cash flow for the investor (including % relative to down). Getting a SFR to properly cashflow is hard, that is why very few REITS deal with them. On the other hand, MFR/apartments cashflow a lot easier. Investors will not really waste their time with SFRs unless they anticipate price increases in the properties.
NOTE: Remember, if people can use more than 80% financing, so can investors too… The more an ‘investor’ has to pony up on the purchase, the fewer units they can buy if they are able to cash flow.

What drives the prices up is something known as realizable demand. This demand is different than ‘wish’ or ‘dream’ demand. realizable demand means the desire to purchase and the ability to do so. If you cut realizable demand, prices will fall against constant supply (or in this case oversupply).

Another aspect of property is that if a person can’t save up for the 20% down, they are unlikely to handle emergencies with the home.. roof leak, water leak under the slab, etc.

High-income people can live frugal too. It’s one thing to make 3500/month after-tax and save 500/month, it’s another to make 7500/month and save 4500/month with the same standard of living.

Strawman argument and irrelevant.
1) if you are making $7500 a month, you have a greater percentage of income going to taxes. Therefore you will probably be saving much less than 4500 a month.
2) a person making 7500 a month will be saving for a much different house and will probably purchase a much different house than the person making 3500/month. They will have to come up with a larger down payment.

Yep.. because taxes are taking so much of the $7500/month

[Author]

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