INDYMAC wants more CONFORMING LOANS FULL DOC!

[contraman]

Dear Valued Customer, As you are all well aware, the secondary markets are currently very volatile, and, in fact, other than the GSEs and Ginnie Mae, there is virtually no secondary market liquidity at present.

While Indymac has very strong capital and liquidity, we need to adapt to current market conditions and be very careful with the loans we are funding.

As a result, we, along with most other major mortgage lenders, need to make additional product cutbacks and implement additional price widening in order to ensure we can sell the loans we are funding.

While we hope that this current difficult environment will be short-lived, we all need to be realistic and be prepared to work within this tough market for a protracted period. In that respect, we need to quickly move as many borrowers as possible to this more full doc, "conforming" loan environment so that a greater percentage of our loans can be sold to the GSEs.

I also want to reaffirm to you our commitment to the mortgage business and assure you we will stay focused on providing you a stable, reliable business partner you can count on to meet your needs, along with the needs of your customers. Indymac Bank?s financial strength combined with and the stability of our national savings and loan charter will ensure we will be one of the strong survivors from this difficult period. I want to thank you for your business and for your commitment to Indymac Bank. We look forward to building an even stronger relationship going forward.

Best Regards, Walter Tharp CEO, Wholesale Lending

Let me see here. They want FULL DOC conforming loans so the government will buy them. A conforming loan limit is 417,000 in the state of CA.  

With all due repsect, not many SFR's in CA under 417,000 Mr. Tharp but I am sure there will be soon……

Time for the hammer to drop…….

 

[LA_Renter]

I don’t think these guys are going to make it to the finish line.

[LA_Renter]

I don’t think these guys are going to make it to the finish line.

[bsrsharma]

This is a magical moment. See how fast home prices will “limbo dance” below that limit. Good news for many aspiring Piggingtonians! When one can’t get a mortgage above 417K, that market essentially dies for all except cash buyers.

[contraman]

Oh…..that is what my extremely wealthy mentor meant when he said, there comes a time when “CASH IS KING” and I am not talking about some guru who talks about his Poor and Rich Dad and co-markets books with some arrogant prick who lost his Father’s fortunes…..and get off on telling people they are fired…..what a joke that guy is….pure marketer….

Sincerely, Contraman

[DaCounselor]

Does FM’s guidelines for purchase take into account what is happening behind the loan they are purchasing (aka 2nd position)? I’m guessing that FM can buy a $417K first mtg. that is part of an 80/20 deal (to the extent that 80/20’s are going to be made) and that will be conforming even with a $104K second mtg. sitting behind it, for a total loan of $521K.

[contraman]

FM guidelines are you can’t go over 417,000 total for the combined loans. 100% LTV capped at 417,000

Sincerely, Contraman

[contraman]

FM guidelines are you can’t go over 417,000 total for the combined loans. 100% LTV capped at 417,000

Sincerely, Contraman

[rb_engineer]

Do you think its reasonable to raise the threshold for conforming loans in California? Maybe to somewhere between Alaska/Hawaii and the rest of the country. Why are Alaska and Hawaii getting this treatment anyway?

[contraman]

No. I do not think they should raise the threshold because the market needs to correct itself to where it should have been before the very “loose” lending programs entered the market in 2001 and 2002. It is not a Fannie Mae issue. It is an asset bubble issue. The market is out of whack and the psychology is slowly shifting to one of fear and panic.

Can’t wait until 2009 / 2010.

Sincerely, Contraman

[contraman]

No. I do not think they should raise the threshold because the market needs to correct itself to where it should have been before the very “loose” lending programs entered the market in 2001 and 2002. It is not a Fannie Mae issue. It is an asset bubble issue. The market is out of whack and the psychology is slowly shifting to one of fear and panic.

Can’t wait until 2009 / 2010.

Sincerely, Contraman

[bsrsharma]

The most humane way to shrink the monster bubble to a raisin is to take away the bottle of large cheap mortgages. When anyone who wants to buy a half mil $ property HAS to bring half mil $ cash, rationality will be quickly restored.

rb_engineer: What is the special treatment for Alaska/Hawaii and why?

[LA_Renter]

For what it’s worth this is K Denninger’s take at market-ticker;

“The market has not yet gotten its arms around the Moody’s announcement on the securitization credit rating process as I outlined in the ticker the other night. It will. When? I can’t tell you that, but what I can tell you with certainty is that the squeeze in the mortgage marketplace will get much worse, will implode more lenders and will materially impact all of them.

The warning on this was when S&P said they were re-jiggering their models for mortgage ABS issues. But – they didn’t put any hair on that dog. Moody’s did, however, and then turned it rabid and let it loose.

Ignore this at your peril if you are long the market.

As I have said repeatedly – 30% of the demand that exists now in the housing market is going to be flushed as the ALT-A and Subprime pipeline is either shut down entirely or repriced to near credit-card rates. This IS happening – right now – and it WILL drag the economy into a recession. This will not end until there is a serious price contraction in housing prices so that affordability returns to historical norms.

Now go back and read that again guys. And then again. And then again.”

http://market-ticker.denninger.net/

Yikes!

[ak1]

I just noticed that Wells Fargo just increased their rate for 30 year fixed jumbo loans to 8% from 6 7/8% last week! Here’s the link http://online.wsj.com/article/SB118609866621886776.html?mod=yahoo_hs&ru=yahoo

Quote from the article

“Lenders are tightening standards and “raising rates like crazy,” said Melissa Cohn, chief executive of Manhattan Mortgage, a New York mortgage broker. She said Wells Fargo & Co. is charging 8% for a prime jumbo 30-year fixed-rate loan that carried a 6 7/8% rate late last week.”

[rb_engineer]

Probably a typo. Wells Fargo website says 7%. None the less, its still very high.

[bsrsharma]

“its still very high.”

I happily paid 7.625% on a conforming loan for 7 years. For how many years in last 40 years was this cheaper than 7%? I think people have become addicted to low rates. Time to kick the habit. That will promote savings over consumption.

[rb_engineer]

Well. 7% is above my threshold of comfort. Yes, I’m spoiled…

Hawaii and Alaska’s conforming loan is 625K. I guess because houses are more expensive there.

[bsrsharma]

“Hawaii and Alaska’s conforming loan is 625K. I guess because houses are more expensive there.”

Interesting; for that number, households should be making 150K-200K p.a. What is the source of that kind of income? I haven’t been to either state.

[rb_engineer]

I would say Hawaii is purely supply and demand. Personally, I don’t really subscribe to the “median income x == median price x”. Just like anything, price goes up if demand goes up. I would say for Alaska, its set high to attract people. Just a guess.

[bsrsharma]

I can see Hawaii being a “trophy” market with small supply. But Alaska? It has infinite amount of land compared to people making it almost worthless and one has to catch a lot of fish (if not pumping oil or gas) to afford those numbers.

[(former)FormerSanDiegan]

The higher conforming loan limit also applies to Guam and the US Virgin Islands.

Guam ?
Can;t be expensive there.

Methinks it has something to do with political pull. Perhaps Sen Stevens and Sen Inoue had something to do with it. In Alaska’s case it falls in the same category as the bridge to nowhere.

[GoUSC]

To put it simply I will take high interest rates and low home prices versus the opposite. At least I get a bigger write-off and can always refinance when rates get lower. Buying an expensive house with a low interest rate leaves you no where to go.

[bsrsharma]

I peeked at Anchorage listings, the prices aren’t too high. Feels like San Diego pre-bubble or early-bubble days. Not a bad place for equity harvesters if you like long days (and nights) and ice. Juneau is a bit pricier, but still feels like a bargain for anyone from SD/OC areas.

[(former)FormerSanDiegan]

I received a solicitation in the mail yesterday from IndyMac bank advertising 5.55% CD rates. Seems they are eager (as indicated by high rates) to borrow some funds from consumers (still cheaper than floating bonds out there). Hmmm… Wonder why ?

[Anonymous]

The non conforming market is taking a beating. I quoted a rate of 6.625% 2 weeks ago and today that same loan is at 8.5%.

[Bugs]

I remember not so long ago making a comment about interest rates increasing above 8% and getting a couple comments saying I was being way too pessimistic.

Apparently I wasn’t being THAT pessimistic.

At this point I’d say the difference between what it takes to go from 6.5% to 8.5% on a jumbo is a lot larger than what it would take to go from 8.5% to 10%.

A $500,000 loan at 6.5% = $3143/month
A $500,000 loan at 8.5% = $3817/month
A $500,000 loan at 10.% = $4315/month.

It almost makes one wonder where the ceiling is? Could we be looking at an early 1980s credit scenario?

A $3,143/month loan payment services a $308,000 mortgage at 12%. Not counting taxes and insurance. Offset that some by the tax writeoff for the higher interest rate, but we’d still looking at a 35% haircut just because of interest rates, not counting whatever other damage to the economy would result from that type of credit contraction.

[Bugs]

I remember not so long ago making a comment about interest rates increasing above 8% and getting a couple comments saying I was being way too pessimistic.

Apparently I wasn’t being THAT pessimistic.

At this point I’d say the difference between what it takes to go from 6.5% to 8.5% on a jumbo is a lot larger than what it would take to go from 8.5% to 10%.

A $500,000 loan at 6.5% = $3143/month
A $500,000 loan at 8.5% = $3817/month
A $500,000 loan at 10.% = $4315/month.

It almost makes one wonder where the ceiling is? Could we be looking at an early 1980s credit scenario?

A $3,143/month loan payment services a $308,000 mortgage at 12%. Not counting taxes and insurance. Offset that some by the tax writeoff for the higher interest rate, but we’d still looking at a 35% haircut just because of interest rates, not counting whatever other damage to the economy would result from that type of credit contraction.

[Anonymous]

The non conforming market is taking a beating. I quoted a rate of 6.625% 2 weeks ago and today that same loan is at 8.5%.

[(former)FormerSanDiegan]

I received a solicitation in the mail yesterday from IndyMac bank advertising 5.55% CD rates. Seems they are eager (as indicated by high rates) to borrow some funds from consumers (still cheaper than floating bonds out there). Hmmm… Wonder why ?

[bsrsharma]

I peeked at Anchorage listings, the prices aren’t too high. Feels like San Diego pre-bubble or early-bubble days. Not a bad place for equity harvesters if you like long days (and nights) and ice. Juneau is a bit pricier, but still feels like a bargain for anyone from SD/OC areas.

[GoUSC]

To put it simply I will take high interest rates and low home prices versus the opposite. At least I get a bigger write-off and can always refinance when rates get lower. Buying an expensive house with a low interest rate leaves you no where to go.

[taz]

Actually, Guam would be more expensive, just like Hawaii and other islands – because of the cost to ship in all the raw materials needed for construction, combined with a finite supply of land…you get the picture. Also, in Hawaii much of the land is held in fee simple by a few families/plantations. Land is essentially “rented” via long-term leases.

[(former)FormerSanDiegan]

I don’t know, this house in Guam looks pretty cheap to me, relative to CA …

http://guamrealestate.net/main/?cat=listings&pg=display&propid=1235

[NotCranky]

The Guam house is on Nino Perdido street. That is spanish for “lost child”. What kind of implication could that have?

[NotCranky]

The Guam house is on Nino Perdido street. That is spanish for “lost child”. What kind of implication could that have?

[(former)FormerSanDiegan]

I don’t know, this house in Guam looks pretty cheap to me, relative to CA …

http://guamrealestate.net/main/?cat=listings&pg=display&propid=1235

[taz]

Actually, Guam would be more expensive, just like Hawaii and other islands – because of the cost to ship in all the raw materials needed for construction, combined with a finite supply of land…you get the picture. Also, in Hawaii much of the land is held in fee simple by a few families/plantations. Land is essentially “rented” via long-term leases.

[(former)FormerSanDiegan]

The higher conforming loan limit also applies to Guam and the US Virgin Islands.

Guam ?
Can;t be expensive there.

Methinks it has something to do with political pull. Perhaps Sen Stevens and Sen Inoue had something to do with it. In Alaska’s case it falls in the same category as the bridge to nowhere.

[bsrsharma]

I can see Hawaii being a “trophy” market with small supply. But Alaska? It has infinite amount of land compared to people making it almost worthless and one has to catch a lot of fish (if not pumping oil or gas) to afford those numbers.

[rb_engineer]

I would say Hawaii is purely supply and demand. Personally, I don’t really subscribe to the “median income x == median price x”. Just like anything, price goes up if demand goes up. I would say for Alaska, its set high to attract people. Just a guess.

[bsrsharma]

“Hawaii and Alaska’s conforming loan is 625K. I guess because houses are more expensive there.”

Interesting; for that number, households should be making 150K-200K p.a. What is the source of that kind of income? I haven’t been to either state.

[rb_engineer]

Well. 7% is above my threshold of comfort. Yes, I’m spoiled…

Hawaii and Alaska’s conforming loan is 625K. I guess because houses are more expensive there.

[bsrsharma]

“its still very high.”

I happily paid 7.625% on a conforming loan for 7 years. For how many years in last 40 years was this cheaper than 7%? I think people have become addicted to low rates. Time to kick the habit. That will promote savings over consumption.

[rb_engineer]

Probably a typo. Wells Fargo website says 7%. None the less, its still very high.

[ak1]

I just noticed that Wells Fargo just increased their rate for 30 year fixed jumbo loans to 8% from 6 7/8% last week! Here’s the link http://online.wsj.com/article/SB118609866621886776.html?mod=yahoo_hs&ru=yahoo

Quote from the article

“Lenders are tightening standards and “raising rates like crazy,” said Melissa Cohn, chief executive of Manhattan Mortgage, a New York mortgage broker. She said Wells Fargo & Co. is charging 8% for a prime jumbo 30-year fixed-rate loan that carried a 6 7/8% rate late last week.”

[LA_Renter]

For what it’s worth this is K Denninger’s take at market-ticker;

“The market has not yet gotten its arms around the Moody’s announcement on the securitization credit rating process as I outlined in the ticker the other night. It will. When? I can’t tell you that, but what I can tell you with certainty is that the squeeze in the mortgage marketplace will get much worse, will implode more lenders and will materially impact all of them.

The warning on this was when S&P said they were re-jiggering their models for mortgage ABS issues. But – they didn’t put any hair on that dog. Moody’s did, however, and then turned it rabid and let it loose.

Ignore this at your peril if you are long the market.

As I have said repeatedly – 30% of the demand that exists now in the housing market is going to be flushed as the ALT-A and Subprime pipeline is either shut down entirely or repriced to near credit-card rates. This IS happening – right now – and it WILL drag the economy into a recession. This will not end until there is a serious price contraction in housing prices so that affordability returns to historical norms.

Now go back and read that again guys. And then again. And then again.”

http://market-ticker.denninger.net/

Yikes!

[bsrsharma]

The most humane way to shrink the monster bubble to a raisin is to take away the bottle of large cheap mortgages. When anyone who wants to buy a half mil $ property HAS to bring half mil $ cash, rationality will be quickly restored.

rb_engineer: What is the special treatment for Alaska/Hawaii and why?

[rb_engineer]

Do you think its reasonable to raise the threshold for conforming loans in California? Maybe to somewhere between Alaska/Hawaii and the rest of the country. Why are Alaska and Hawaii getting this treatment anyway?

[DaCounselor]

Does FM’s guidelines for purchase take into account what is happening behind the loan they are purchasing (aka 2nd position)? I’m guessing that FM can buy a $417K first mtg. that is part of an 80/20 deal (to the extent that 80/20’s are going to be made) and that will be conforming even with a $104K second mtg. sitting behind it, for a total loan of $521K.

[contraman]

Oh…..that is what my extremely wealthy mentor meant when he said, there comes a time when “CASH IS KING” and I am not talking about some guru who talks about his Poor and Rich Dad and co-markets books with some arrogant prick who lost his Father’s fortunes…..and get off on telling people they are fired…..what a joke that guy is….pure marketer….

Sincerely, Contraman

[bsrsharma]

This is a magical moment. See how fast home prices will “limbo dance” below that limit. Good news for many aspiring Piggingtonians! When one can’t get a mortgage above 417K, that market essentially dies for all except cash buyers.

[gael]

Does anyone know of a lender who goes up to $700,000 no down, 100% finance, stated income and verified assets, 700 credit score?

[JWM in SD]

“Does anyone know of a lender who goes up to $700,000 no down, 100% finance, stated income and verified assets, 700 credit score?”

Oh man….buy now or be priced out forever Gael.

[JWM in SD]

“Does anyone know of a lender who goes up to $700,000 no down, 100% finance, stated income and verified assets, 700 credit score?”

Oh man….buy now or be priced out forever Gael.

[gael]

Does anyone know of a lender who goes up to $700,000 no down, 100% finance, stated income and verified assets, 700 credit score?

[Ex-SD]

When you can buy a nice, 2000 square foot home in the majority of the USA for $200k or less……….the entire state of CA is beginning to hear the rooster crowing as he announces the dawn of a brand new day in the housing market. If you can’t get financing, comps or qualified buyers……….values drop. Just plain old, basic economics.

[Ex-SD]

When you can buy a nice, 2000 square foot home in the majority of the USA for $200k or less……….the entire state of CA is beginning to hear the rooster crowing as he announces the dawn of a brand new day in the housing market. If you can’t get financing, comps or qualified buyers……….values drop. Just plain old, basic economics.

[Ex-SD]

When you can buy a nice, 2000 square foot home in the majority of the USA for $200k or less……….the entire state of CA is beginning to hear the rooster crowing as he announces the dawn of a brand new day in the housing market. If you can’t get financing, comps or qualified buyers……….values drop. Just plain old, basic economics.

[Author]

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