[Bugs]

Not only silly, but dangerous for society as a whole. It’s to everyone’s benefit to limit the losses only to those people who cannot pay their mortgages. Encouraging otherwise viable borrowers to walk away just so they can keep their toys and SUVs is sending the wrong message. That is the opposite of accepting responsibility for your personal decisions.

The prices will correct on their own just based on the unqualified borrowers. There’s no good reason to encourage everyone who’s even moderately distressed to walk away.

There is such a thing as right vs. wrong.

[Bugs]

The only thing that could happen that would make this auction newsworthy would be if one of the lenders announced their offerings would not be subject to minimum reserves.

Now THAT is an auction I’d like to see.

[Bugs]

The only thing that could happen that would make this auction newsworthy would be if one of the lenders announced their offerings would not be subject to minimum reserves.

Now THAT is an auction I’d like to see.

[Bugs]

The only thing that could happen that would make this auction newsworthy would be if one of the lenders announced their offerings would not be subject to minimum reserves.

Now THAT is an auction I’d like to see.

[Bugs]

The actual number on the rate isn’t what people should find scary – it’s the trend toward increases. The rest of the secondary market is just now coming around to the message the Fed started sending out 18 months ago. Interest rates have been way underpriced based on the risks involved.

[Bugs]

The actual number on the rate isn’t what people should find scary – it’s the trend toward increases. The rest of the secondary market is just now coming around to the message the Fed started sending out 18 months ago. Interest rates have been way underpriced based on the risks involved.

[Bugs]

The actual number on the rate isn’t what people should find scary – it’s the trend toward increases. The rest of the secondary market is just now coming around to the message the Fed started sending out 18 months ago. Interest rates have been way underpriced based on the risks involved.

[Bugs]

Your housing costs will not go down as a result of renting. The cost of financing probably will go up if the pricing structure declines enough to cause you to “lose” your current equity. “Moving up” may not turn out to be an option in the long run.

You’ve already held this property for 6 years, which puts you that much closer to paying it off.

It’s a tough call. A lot of it depends on how risk averse you are and how comfortable you are with your long term employment situation. The possibility of a job relocation between now and the time the market rebounds could easily justify a decision to get your equity out now while you have access to it.

[Bugs]

Your housing costs will not go down as a result of renting. The cost of financing probably will go up if the pricing structure declines enough to cause you to “lose” your current equity. “Moving up” may not turn out to be an option in the long run.

You’ve already held this property for 6 years, which puts you that much closer to paying it off.

It’s a tough call. A lot of it depends on how risk averse you are and how comfortable you are with your long term employment situation. The possibility of a job relocation between now and the time the market rebounds could easily justify a decision to get your equity out now while you have access to it.

[Bugs]

Your housing costs will not go down as a result of renting. The cost of financing probably will go up if the pricing structure declines enough to cause you to “lose” your current equity. “Moving up” may not turn out to be an option in the long run.

You’ve already held this property for 6 years, which puts you that much closer to paying it off.

It’s a tough call. A lot of it depends on how risk averse you are and how comfortable you are with your long term employment situation. The possibility of a job relocation between now and the time the market rebounds could easily justify a decision to get your equity out now while you have access to it.

[Bugs]

I agree that there is some fear of the unknown in play right now and we may be looking at a bit of a temporary spike. However, that which is currently unknown will eventually become known, and at that point the pricing on financing will reflect the perceived risks. I think it’s possible that the fear of the known may eventually prove itself worse than the fear of the unknown.

Foreclosures lag the Notice of Defaults (3-4 months minimum), which in turn lag the time period in which borrowers stop making payments (3 months minimum), which in turn lag the ARM resets as some borrowers attempt to make a go of it or unload their albatross. In other words, it takes at least 6 months before an ARM reset turns into a foreclosure and 4 more months before the total loss from that foreclosure can be tallied in the form of the REO sale.

The foreclosures we’re seeing at this moment are the results of ARMs that reset at the beginning of the year. These lenders won’t even see what their real rate of losses from this wave are until this time next year at the earliest. Up until then it’s all projections and guesswork. In other words, it will continue to be unknowable – and hence deniable – for another year yet, after which it will be knowable and undeniable.

The first wave of resets fluctuates a bit on the back end but it mostly doesn’t recede below it’s current level until July 2008, which means the numbers of foreclosures: a) will go up tremendously in the next 9 months, and b) will not drop below the current rate until mid-2009.

No matter how agressive the lenders get on their REOs they CANNOT clear all these properties out before the end of 2009, which overlaps the beginning of the second wave by about 6 months. The second wave is smaller than the first wave but it has a higher percentage of the most toxic loans, which I would assume would result in an even higher rate of loss (more of those borrowers defaulting) than that of the first wave.

At the same time the pricing structure is under pressure as a result of these distressed sellers, the buyers will also be making decisions of their own. People are slow but eventually they do tend to figure it out. More buyers will hang back further reducing the demand in the market – this will register on the demand side.

Increased seller motivation + decreased buyer motivation can only turn out the one way, which is declining prices on the transactions that do go off. It almost won’t matter how many people can pay, because those distressed transactions that do go off will be the ones that drive the bus.

Here’s my soundbite for the day:

Market value is not determined by the owners who can hold, it’s determined by the owners who sell and the buyers who buy.

The investors have to take that into account when pricing the financing. A constantly declining market increases their risk for losses no matter how good those borrowers look at the moment.

To sum it up, because of the damage to investor psychology resulting from their losses in the first wave, they’re going to see the damage that will ensue from the second wave coming before it hits and that “foresight” will subsequently be reinforced. I don’t think a lot of these investors will be back any time soon; at any rate, not with out requiring some significant returns to justify their risks. That’s going to cost.

[Bugs]

I agree that there is some fear of the unknown in play right now and we may be looking at a bit of a temporary spike. However, that which is currently unknown will eventually become known, and at that point the pricing on financing will reflect the perceived risks. I think it’s possible that the fear of the known may eventually prove itself worse than the fear of the unknown.

Foreclosures lag the Notice of Defaults (3-4 months minimum), which in turn lag the time period in which borrowers stop making payments (3 months minimum), which in turn lag the ARM resets as some borrowers attempt to make a go of it or unload their albatross. In other words, it takes at least 6 months before an ARM reset turns into a foreclosure and 4 more months before the total loss from that foreclosure can be tallied in the form of the REO sale.

The foreclosures we’re seeing at this moment are the results of ARMs that reset at the beginning of the year. These lenders won’t even see what their real rate of losses from this wave are until this time next year at the earliest. Up until then it’s all projections and guesswork. In other words, it will continue to be unknowable – and hence deniable – for another year yet, after which it will be knowable and undeniable.

The first wave of resets fluctuates a bit on the back end but it mostly doesn’t recede below it’s current level until July 2008, which means the numbers of foreclosures: a) will go up tremendously in the next 9 months, and b) will not drop below the current rate until mid-2009.

No matter how agressive the lenders get on their REOs they CANNOT clear all these properties out before the end of 2009, which overlaps the beginning of the second wave by about 6 months. The second wave is smaller than the first wave but it has a higher percentage of the most toxic loans, which I would assume would result in an even higher rate of loss (more of those borrowers defaulting) than that of the first wave.

At the same time the pricing structure is under pressure as a result of these distressed sellers, the buyers will also be making decisions of their own. People are slow but eventually they do tend to figure it out. More buyers will hang back further reducing the demand in the market – this will register on the demand side.

Increased seller motivation + decreased buyer motivation can only turn out the one way, which is declining prices on the transactions that do go off. It almost won’t matter how many people can pay, because those distressed transactions that do go off will be the ones that drive the bus.

Here’s my soundbite for the day:

Market value is not determined by the owners who can hold, it’s determined by the owners who sell and the buyers who buy.

The investors have to take that into account when pricing the financing. A constantly declining market increases their risk for losses no matter how good those borrowers look at the moment.

To sum it up, because of the damage to investor psychology resulting from their losses in the first wave, they’re going to see the damage that will ensue from the second wave coming before it hits and that “foresight” will subsequently be reinforced. I don’t think a lot of these investors will be back any time soon; at any rate, not with out requiring some significant returns to justify their risks. That’s going to cost.

[Bugs]

I agree that there is some fear of the unknown in play right now and we may be looking at a bit of a temporary spike. However, that which is currently unknown will eventually become known, and at that point the pricing on financing will reflect the perceived risks. I think it’s possible that the fear of the known may eventually prove itself worse than the fear of the unknown.

Foreclosures lag the Notice of Defaults (3-4 months minimum), which in turn lag the time period in which borrowers stop making payments (3 months minimum), which in turn lag the ARM resets as some borrowers attempt to make a go of it or unload their albatross. In other words, it takes at least 6 months before an ARM reset turns into a foreclosure and 4 more months before the total loss from that foreclosure can be tallied in the form of the REO sale.

The foreclosures we’re seeing at this moment are the results of ARMs that reset at the beginning of the year. These lenders won’t even see what their real rate of losses from this wave are until this time next year at the earliest. Up until then it’s all projections and guesswork. In other words, it will continue to be unknowable – and hence deniable – for another year yet, after which it will be knowable and undeniable.

The first wave of resets fluctuates a bit on the back end but it mostly doesn’t recede below it’s current level until July 2008, which means the numbers of foreclosures: a) will go up tremendously in the next 9 months, and b) will not drop below the current rate until mid-2009.

No matter how agressive the lenders get on their REOs they CANNOT clear all these properties out before the end of 2009, which overlaps the beginning of the second wave by about 6 months. The second wave is smaller than the first wave but it has a higher percentage of the most toxic loans, which I would assume would result in an even higher rate of loss (more of those borrowers defaulting) than that of the first wave.

At the same time the pricing structure is under pressure as a result of these distressed sellers, the buyers will also be making decisions of their own. People are slow but eventually they do tend to figure it out. More buyers will hang back further reducing the demand in the market – this will register on the demand side.

Increased seller motivation + decreased buyer motivation can only turn out the one way, which is declining prices on the transactions that do go off. It almost won’t matter how many people can pay, because those distressed transactions that do go off will be the ones that drive the bus.

Here’s my soundbite for the day:

Market value is not determined by the owners who can hold, it’s determined by the owners who sell and the buyers who buy.

The investors have to take that into account when pricing the financing. A constantly declining market increases their risk for losses no matter how good those borrowers look at the moment.

To sum it up, because of the damage to investor psychology resulting from their losses in the first wave, they’re going to see the damage that will ensue from the second wave coming before it hits and that “foresight” will subsequently be reinforced. I don’t think a lot of these investors will be back any time soon; at any rate, not with out requiring some significant returns to justify their risks. That’s going to cost.

[Bugs]

Right now we’re in the equivalent of Round 2 of 12 scheduled round of exciting ARM Reset action. The champ (interest rates) has already gotten a bloody nose in the first round (foreclosures doubled) and a nasty cut over the right eye in the second round (hedgies being revalued). We still have 10 more rounds to go and the interest rates cannot be saved by the bell.

Just based on what I think will happen with financing, I’m thinking the projections for the 50% correction off peak will eventually prove out to be overly conservative. I think this downcycle will overcorrect as has all its predecessors.

[Bugs]

Right now we’re in the equivalent of Round 2 of 12 scheduled round of exciting ARM Reset action. The champ (interest rates) has already gotten a bloody nose in the first round (foreclosures doubled) and a nasty cut over the right eye in the second round (hedgies being revalued). We still have 10 more rounds to go and the interest rates cannot be saved by the bell.

Just based on what I think will happen with financing, I’m thinking the projections for the 50% correction off peak will eventually prove out to be overly conservative. I think this downcycle will overcorrect as has all its predecessors.

[Author]

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