You cannot have it both ways

[ucodegen]

You are all missing the point; even if you kept your nose clean and only made loans to people with 800 credit scores with 20% down, the underlying value of the assets that you lent on have been severely affected by your competitors.

Not if you didn’t use inflated appraisals and used your own appraiser as a bank. Banks make money two ways on a loan. They make it on the carry spread (difference between the cost of the money they are lending out and the amount they charge) for the loans they keep and they make it on finance fees and securitization charges on the ones they sell.

A lender has every right to refuse to lend $400,000 on a $500,000 property because they feel the underlying value is really $350,000. They don’t have to follow the ‘crowd’. Let some other lender take the risk. Unfortunately they got greedy and picked up those loans; promptly securitizing them, labeling them AAA and selling them to get rid of the risk. The lenders (many, not all) forgot that by law, if they misstate the risk or fundimentals on the CDO/MBSs, the originating lender can be forced to repurchase the securitized loan package. The lenders that did not forget about the law formed wholly owned subsidiaries to funnel the money through, using the corporate shield to protect themselves from liability.

[barnaby33]

When things gets tough or when things don’t go our way, we get divorced. How is that any different than walking from a mortgage loan?

Its different in two ways:

• Walking from the mortgage is less painful
• You walk from the mortgage, run from the marriage

Josh

[barnaby33]

When things gets tough or when things don’t go our way, we get divorced. How is that any different than walking from a mortgage loan?

Its different in two ways:

• Walking from the mortgage is less painful
• You walk from the mortgage, run from the marriage

Josh

[barnaby33]

When things gets tough or when things don’t go our way, we get divorced. How is that any different than walking from a mortgage loan?

Its different in two ways:

• Walking from the mortgage is less painful
• You walk from the mortgage, run from the marriage

Josh

[barnaby33]

When things gets tough or when things don’t go our way, we get divorced. How is that any different than walking from a mortgage loan?

Its different in two ways:

• Walking from the mortgage is less painful
• You walk from the mortgage, run from the marriage

Josh

[barnaby33]

When things gets tough or when things don’t go our way, we get divorced. How is that any different than walking from a mortgage loan?

Its different in two ways:

• Walking from the mortgage is less painful
• You walk from the mortgage, run from the marriage

Josh

[sandiego]

“A lender has every right to refuse to lend $400,000 on a $500,000 property because they feel the underlying value is really $350,000. They don’t have to follow the ‘crowd’.”

You didn’t understand that example at all. Let’s say it is early 2004. A builder offers 12 homes for sale in Phase 5 of a 7 Phase tract. All of the homes in this phase sell for $495,000- $505,000. The GOOD CREDIT ONLY BANK makes a loan to a Borrower with an 800 credit score and a $100,000 down payment. Any appraiser would have no issue saying that these homes are worth $495,000 to $505,000 because they have 11 comparible sales on the same street.

In late 2005 Countrywide starts sending out their mailers stating that it is a great time to refinance at a lower rate and take out some some equity. 5 of the homeowners on the street take advantage of the offer. The appraisers are convinced to value these homes at a 15% increased value ($75,000).

Mid 2006, some NOD’s start appearing and by early 2007, there are 4 foreclosures. Countrywide (and other banks in the tract) now “battle” for any remaining buyers and dump prices.

Early 2008, some deals start happening in the high $300’s.

What is your $500,000 home (with your 800 credit score and 20% down payment) worth now? What is the value of the collateral for GOOD CREDIT ONLY BANK?

[sandiego]

“A lender has every right to refuse to lend $400,000 on a $500,000 property because they feel the underlying value is really $350,000. They don’t have to follow the ‘crowd’.”

You didn’t understand that example at all. Let’s say it is early 2004. A builder offers 12 homes for sale in Phase 5 of a 7 Phase tract. All of the homes in this phase sell for $495,000- $505,000. The GOOD CREDIT ONLY BANK makes a loan to a Borrower with an 800 credit score and a $100,000 down payment. Any appraiser would have no issue saying that these homes are worth $495,000 to $505,000 because they have 11 comparible sales on the same street.

In late 2005 Countrywide starts sending out their mailers stating that it is a great time to refinance at a lower rate and take out some some equity. 5 of the homeowners on the street take advantage of the offer. The appraisers are convinced to value these homes at a 15% increased value ($75,000).

Mid 2006, some NOD’s start appearing and by early 2007, there are 4 foreclosures. Countrywide (and other banks in the tract) now “battle” for any remaining buyers and dump prices.

Early 2008, some deals start happening in the high $300’s.

What is your $500,000 home (with your 800 credit score and 20% down payment) worth now? What is the value of the collateral for GOOD CREDIT ONLY BANK?

[sandiego]

“A lender has every right to refuse to lend $400,000 on a $500,000 property because they feel the underlying value is really $350,000. They don’t have to follow the ‘crowd’.”

You didn’t understand that example at all. Let’s say it is early 2004. A builder offers 12 homes for sale in Phase 5 of a 7 Phase tract. All of the homes in this phase sell for $495,000- $505,000. The GOOD CREDIT ONLY BANK makes a loan to a Borrower with an 800 credit score and a $100,000 down payment. Any appraiser would have no issue saying that these homes are worth $495,000 to $505,000 because they have 11 comparible sales on the same street.

In late 2005 Countrywide starts sending out their mailers stating that it is a great time to refinance at a lower rate and take out some some equity. 5 of the homeowners on the street take advantage of the offer. The appraisers are convinced to value these homes at a 15% increased value ($75,000).

Mid 2006, some NOD’s start appearing and by early 2007, there are 4 foreclosures. Countrywide (and other banks in the tract) now “battle” for any remaining buyers and dump prices.

Early 2008, some deals start happening in the high $300’s.

What is your $500,000 home (with your 800 credit score and 20% down payment) worth now? What is the value of the collateral for GOOD CREDIT ONLY BANK?

[sandiego]

“A lender has every right to refuse to lend $400,000 on a $500,000 property because they feel the underlying value is really $350,000. They don’t have to follow the ‘crowd’.”

You didn’t understand that example at all. Let’s say it is early 2004. A builder offers 12 homes for sale in Phase 5 of a 7 Phase tract. All of the homes in this phase sell for $495,000- $505,000. The GOOD CREDIT ONLY BANK makes a loan to a Borrower with an 800 credit score and a $100,000 down payment. Any appraiser would have no issue saying that these homes are worth $495,000 to $505,000 because they have 11 comparible sales on the same street.

In late 2005 Countrywide starts sending out their mailers stating that it is a great time to refinance at a lower rate and take out some some equity. 5 of the homeowners on the street take advantage of the offer. The appraisers are convinced to value these homes at a 15% increased value ($75,000).

Mid 2006, some NOD’s start appearing and by early 2007, there are 4 foreclosures. Countrywide (and other banks in the tract) now “battle” for any remaining buyers and dump prices.

Early 2008, some deals start happening in the high $300’s.

What is your $500,000 home (with your 800 credit score and 20% down payment) worth now? What is the value of the collateral for GOOD CREDIT ONLY BANK?

[sandiego]

“A lender has every right to refuse to lend $400,000 on a $500,000 property because they feel the underlying value is really $350,000. They don’t have to follow the ‘crowd’.”

You didn’t understand that example at all. Let’s say it is early 2004. A builder offers 12 homes for sale in Phase 5 of a 7 Phase tract. All of the homes in this phase sell for $495,000- $505,000. The GOOD CREDIT ONLY BANK makes a loan to a Borrower with an 800 credit score and a $100,000 down payment. Any appraiser would have no issue saying that these homes are worth $495,000 to $505,000 because they have 11 comparible sales on the same street.

In late 2005 Countrywide starts sending out their mailers stating that it is a great time to refinance at a lower rate and take out some some equity. 5 of the homeowners on the street take advantage of the offer. The appraisers are convinced to value these homes at a 15% increased value ($75,000).

Mid 2006, some NOD’s start appearing and by early 2007, there are 4 foreclosures. Countrywide (and other banks in the tract) now “battle” for any remaining buyers and dump prices.

Early 2008, some deals start happening in the high $300’s.

What is your $500,000 home (with your 800 credit score and 20% down payment) worth now? What is the value of the collateral for GOOD CREDIT ONLY BANK?

[TheBreeze]

sandiego,

Homes wouldn’t go up or down that much in value if 20% down was a requirement. If the buyer has to put 20% down, that is enough to wipe out any speculation right there.

[TheBreeze]

sandiego,

Homes wouldn’t go up or down that much in value if 20% down was a requirement. If the buyer has to put 20% down, that is enough to wipe out any speculation right there.

[TheBreeze]

sandiego,

Homes wouldn’t go up or down that much in value if 20% down was a requirement. If the buyer has to put 20% down, that is enough to wipe out any speculation right there.

[TheBreeze]

sandiego,

Homes wouldn’t go up or down that much in value if 20% down was a requirement. If the buyer has to put 20% down, that is enough to wipe out any speculation right there.

[Author]

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