What ARE the fundamentals?

[DWCAP]

esmith,

I dont know what to say, if it is a screaming deal, jump on it.
The thing I kinda see is the last part of what you said. “why would they pay that?” I thought, well, maybe schools? The problem is that there are a number of rentals in the area that are 2/2 for 1500-1800. So any young family is sure to not want to over pay by 500-700/month. Add in the whole of MM, with its 2/2’s at 1300-1600 and it looks even worse.
If I had to guess, this guy is sucker fishing. Maybe he has SS appliances and berber carpet and is trying to get a luxery premium. Maybe he wasnt able to maximize his investment like you described and is trying to cover himself.
The whole scripps ranch rents seem kinda distorted to me. The few craigslist listings I saw were all over the place. 3/2 condos for less than your condo. Some “creative” financing rent to own kinda stuff where they rip you off in rent, but if you are willing to buy, they put part of it toward the cost. Even a house for the same cost as your condo (PostingID: 537346452). I am no expert, maybe someone smarter than I can figure it out. But I suspect this is a sign of real stress in the market when LL’s who overpayed are trying to inflate the market to a point that they can survive. Why would I rent a 2/2 condo right next to the freeway when I could rent a 3/2 house on some quiet land a mile away for the same price, in the same zip code and everything? But hey, a sucker is born every day and this guy just needs one.

[(former)FormerSanDiegan]

80% adjustable! 47% interest only, which isnt really even reseting yet! And how many of those 20% fixed rate loans are really backed by an adjustable second? Include that 2005, 2006, and the first half of 2007 had generally lower standards of loan quality, and I get a picture of a problem that is ALOT bigger than the general public understands. Imagine if 80% of the buyers in 2004-2006 walked because of no equity and reseting payments!

Consider the ALT-A loans made in 2003-2005. COnsider Joe ALt-A borrower who ill-advisedly took out a 5-year ARM in 2003 or a 3-year ARM in 2005. These reset in 2008. Suppose his initial rate was 5.75%. These loans are/were typically tied to LIBOR + 2.25% or 1-year treasury + 2.75%. Guess what happens if his loan resets based on current index rates.
The reset rate would be …. Drumroll please …

somewhere between 5.625% and 6.25%.

Not that it helps the guy who bought in 2005 in terms of lack of or negative equity, or those in sub-prime categories who have much worse loan terms (higher margins) but the payment shock is either small or non-existent for the alt-A and prime loan segments at current rates. The level of interest rates over the next 3 years is an important consideration in terms of assessing the impact of these re-setting loans.

[(former)FormerSanDiegan]

80% adjustable! 47% interest only, which isnt really even reseting yet! And how many of those 20% fixed rate loans are really backed by an adjustable second? Include that 2005, 2006, and the first half of 2007 had generally lower standards of loan quality, and I get a picture of a problem that is ALOT bigger than the general public understands. Imagine if 80% of the buyers in 2004-2006 walked because of no equity and reseting payments!

Consider the ALT-A loans made in 2003-2005. COnsider Joe ALt-A borrower who ill-advisedly took out a 5-year ARM in 2003 or a 3-year ARM in 2005. These reset in 2008. Suppose his initial rate was 5.75%. These loans are/were typically tied to LIBOR + 2.25% or 1-year treasury + 2.75%. Guess what happens if his loan resets based on current index rates.
The reset rate would be …. Drumroll please …

somewhere between 5.625% and 6.25%.

Not that it helps the guy who bought in 2005 in terms of lack of or negative equity, or those in sub-prime categories who have much worse loan terms (higher margins) but the payment shock is either small or non-existent for the alt-A and prime loan segments at current rates. The level of interest rates over the next 3 years is an important consideration in terms of assessing the impact of these re-setting loans.

[(former)FormerSanDiegan]

80% adjustable! 47% interest only, which isnt really even reseting yet! And how many of those 20% fixed rate loans are really backed by an adjustable second? Include that 2005, 2006, and the first half of 2007 had generally lower standards of loan quality, and I get a picture of a problem that is ALOT bigger than the general public understands. Imagine if 80% of the buyers in 2004-2006 walked because of no equity and reseting payments!

Consider the ALT-A loans made in 2003-2005. COnsider Joe ALt-A borrower who ill-advisedly took out a 5-year ARM in 2003 or a 3-year ARM in 2005. These reset in 2008. Suppose his initial rate was 5.75%. These loans are/were typically tied to LIBOR + 2.25% or 1-year treasury + 2.75%. Guess what happens if his loan resets based on current index rates.
The reset rate would be …. Drumroll please …

somewhere between 5.625% and 6.25%.

Not that it helps the guy who bought in 2005 in terms of lack of or negative equity, or those in sub-prime categories who have much worse loan terms (higher margins) but the payment shock is either small or non-existent for the alt-A and prime loan segments at current rates. The level of interest rates over the next 3 years is an important consideration in terms of assessing the impact of these re-setting loans.

[(former)FormerSanDiegan]

80% adjustable! 47% interest only, which isnt really even reseting yet! And how many of those 20% fixed rate loans are really backed by an adjustable second? Include that 2005, 2006, and the first half of 2007 had generally lower standards of loan quality, and I get a picture of a problem that is ALOT bigger than the general public understands. Imagine if 80% of the buyers in 2004-2006 walked because of no equity and reseting payments!

Consider the ALT-A loans made in 2003-2005. COnsider Joe ALt-A borrower who ill-advisedly took out a 5-year ARM in 2003 or a 3-year ARM in 2005. These reset in 2008. Suppose his initial rate was 5.75%. These loans are/were typically tied to LIBOR + 2.25% or 1-year treasury + 2.75%. Guess what happens if his loan resets based on current index rates.
The reset rate would be …. Drumroll please …

somewhere between 5.625% and 6.25%.

Not that it helps the guy who bought in 2005 in terms of lack of or negative equity, or those in sub-prime categories who have much worse loan terms (higher margins) but the payment shock is either small or non-existent for the alt-A and prime loan segments at current rates. The level of interest rates over the next 3 years is an important consideration in terms of assessing the impact of these re-setting loans.

[(former)FormerSanDiegan]

80% adjustable! 47% interest only, which isnt really even reseting yet! And how many of those 20% fixed rate loans are really backed by an adjustable second? Include that 2005, 2006, and the first half of 2007 had generally lower standards of loan quality, and I get a picture of a problem that is ALOT bigger than the general public understands. Imagine if 80% of the buyers in 2004-2006 walked because of no equity and reseting payments!

Consider the ALT-A loans made in 2003-2005. COnsider Joe ALt-A borrower who ill-advisedly took out a 5-year ARM in 2003 or a 3-year ARM in 2005. These reset in 2008. Suppose his initial rate was 5.75%. These loans are/were typically tied to LIBOR + 2.25% or 1-year treasury + 2.75%. Guess what happens if his loan resets based on current index rates.
The reset rate would be …. Drumroll please …

somewhere between 5.625% and 6.25%.

Not that it helps the guy who bought in 2005 in terms of lack of or negative equity, or those in sub-prime categories who have much worse loan terms (higher margins) but the payment shock is either small or non-existent for the alt-A and prime loan segments at current rates. The level of interest rates over the next 3 years is an important consideration in terms of assessing the impact of these re-setting loans.

[DWCAP]

I hadnt considered that FSD, thanks. So basically these morgages are going to reset but the reset, thanks to the FED dumping rates and pushing money like a coke dealer, arnt really that bad. Hadn’t considered that in my OH S%$t! moment.

I wasn’t totally off base though, the option arms in there are still waiting to have their day in the sun. And those have a built in significant jump no matter what the rate, its called principal. (i know i know, you found like 2 people in BFE that are paying like they should be, but most arent.) Plus all the subprime fun.

I guess the other question that needs to be asked then is rate changes in the future. Were the LIBOR to go up again like it was before the pushing began, we would have increasing defaults as it rises. Not saying that would happen, just that the REALLY low rates sitting around right now will go away eventually. Maybe 5-8 years, maybe more. Maybe incomes will go up enough to cover the increases and it is a moot point. Home lending has never really been done like this, so their is no historical president to copy.
I still remain suprised how many people exposed themselves in a period of historically low rates to this.

[DWCAP]

I hadnt considered that FSD, thanks. So basically these morgages are going to reset but the reset, thanks to the FED dumping rates and pushing money like a coke dealer, arnt really that bad. Hadn’t considered that in my OH S%$t! moment.

I wasn’t totally off base though, the option arms in there are still waiting to have their day in the sun. And those have a built in significant jump no matter what the rate, its called principal. (i know i know, you found like 2 people in BFE that are paying like they should be, but most arent.) Plus all the subprime fun.

I guess the other question that needs to be asked then is rate changes in the future. Were the LIBOR to go up again like it was before the pushing began, we would have increasing defaults as it rises. Not saying that would happen, just that the REALLY low rates sitting around right now will go away eventually. Maybe 5-8 years, maybe more. Maybe incomes will go up enough to cover the increases and it is a moot point. Home lending has never really been done like this, so their is no historical president to copy.
I still remain suprised how many people exposed themselves in a period of historically low rates to this.

[DWCAP]

I hadnt considered that FSD, thanks. So basically these morgages are going to reset but the reset, thanks to the FED dumping rates and pushing money like a coke dealer, arnt really that bad. Hadn’t considered that in my OH S%$t! moment.

I wasn’t totally off base though, the option arms in there are still waiting to have their day in the sun. And those have a built in significant jump no matter what the rate, its called principal. (i know i know, you found like 2 people in BFE that are paying like they should be, but most arent.) Plus all the subprime fun.

I guess the other question that needs to be asked then is rate changes in the future. Were the LIBOR to go up again like it was before the pushing began, we would have increasing defaults as it rises. Not saying that would happen, just that the REALLY low rates sitting around right now will go away eventually. Maybe 5-8 years, maybe more. Maybe incomes will go up enough to cover the increases and it is a moot point. Home lending has never really been done like this, so their is no historical president to copy.
I still remain suprised how many people exposed themselves in a period of historically low rates to this.

[DWCAP]

I hadnt considered that FSD, thanks. So basically these morgages are going to reset but the reset, thanks to the FED dumping rates and pushing money like a coke dealer, arnt really that bad. Hadn’t considered that in my OH S%$t! moment.

I wasn’t totally off base though, the option arms in there are still waiting to have their day in the sun. And those have a built in significant jump no matter what the rate, its called principal. (i know i know, you found like 2 people in BFE that are paying like they should be, but most arent.) Plus all the subprime fun.

I guess the other question that needs to be asked then is rate changes in the future. Were the LIBOR to go up again like it was before the pushing began, we would have increasing defaults as it rises. Not saying that would happen, just that the REALLY low rates sitting around right now will go away eventually. Maybe 5-8 years, maybe more. Maybe incomes will go up enough to cover the increases and it is a moot point. Home lending has never really been done like this, so their is no historical president to copy.
I still remain suprised how many people exposed themselves in a period of historically low rates to this.

[DWCAP]

I hadnt considered that FSD, thanks. So basically these morgages are going to reset but the reset, thanks to the FED dumping rates and pushing money like a coke dealer, arnt really that bad. Hadn’t considered that in my OH S%$t! moment.

I wasn’t totally off base though, the option arms in there are still waiting to have their day in the sun. And those have a built in significant jump no matter what the rate, its called principal. (i know i know, you found like 2 people in BFE that are paying like they should be, but most arent.) Plus all the subprime fun.

I guess the other question that needs to be asked then is rate changes in the future. Were the LIBOR to go up again like it was before the pushing began, we would have increasing defaults as it rises. Not saying that would happen, just that the REALLY low rates sitting around right now will go away eventually. Maybe 5-8 years, maybe more. Maybe incomes will go up enough to cover the increases and it is a moot point. Home lending has never really been done like this, so their is no historical president to copy.
I still remain suprised how many people exposed themselves in a period of historically low rates to this.

[DWCAP]

One more question FSD (or anyone in the know),

How many of those adjustable rate morgages had a low teaser rate? I know that was the first thing blamed when subprime hit. So I then ask, did this same low teaser rate also happen in Joe Alt-A’s loan? Did his interest rate go from 2% to 6%? Plugging that into a payment calculator, a 400’000 loan goes from 1190 to 1920. That is a big reset, even if the new rate is actually a good rate overall. To someone who is overextended and without any real savings at all (average american savings rate is negative) $700 a month can be a killer.

[DWCAP]

One more question FSD (or anyone in the know),

How many of those adjustable rate morgages had a low teaser rate? I know that was the first thing blamed when subprime hit. So I then ask, did this same low teaser rate also happen in Joe Alt-A’s loan? Did his interest rate go from 2% to 6%? Plugging that into a payment calculator, a 400’000 loan goes from 1190 to 1920. That is a big reset, even if the new rate is actually a good rate overall. To someone who is overextended and without any real savings at all (average american savings rate is negative) $700 a month can be a killer.

[DWCAP]

One more question FSD (or anyone in the know),

How many of those adjustable rate morgages had a low teaser rate? I know that was the first thing blamed when subprime hit. So I then ask, did this same low teaser rate also happen in Joe Alt-A’s loan? Did his interest rate go from 2% to 6%? Plugging that into a payment calculator, a 400’000 loan goes from 1190 to 1920. That is a big reset, even if the new rate is actually a good rate overall. To someone who is overextended and without any real savings at all (average american savings rate is negative) $700 a month can be a killer.

[DWCAP]

One more question FSD (or anyone in the know),

How many of those adjustable rate morgages had a low teaser rate? I know that was the first thing blamed when subprime hit. So I then ask, did this same low teaser rate also happen in Joe Alt-A’s loan? Did his interest rate go from 2% to 6%? Plugging that into a payment calculator, a 400’000 loan goes from 1190 to 1920. That is a big reset, even if the new rate is actually a good rate overall. To someone who is overextended and without any real savings at all (average american savings rate is negative) $700 a month can be a killer.

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