[DaCounselor]

PR,

I was in SD from ’85-87 and then ’91-present so I was here for the majority of that cycle. I actually worked in the finance industry at that time. The banks, regulatory agencies and interest groups were not mobilizing as they are now.

In the early ’90’s, SD lost about 60K jobs in a very short span of time. Unemployment was screaming upward toward 8%. The S&L crisis was in full effect. Things were pretty bad here. It wasn’t a matter of a homeowner not being able to afford a re-cast payment – alot of people couldn’t afford any payment at all because they were out of work.

I think what we are seeing now from almost all camps is just more reinforcement of the lending universe’s well-established position on owning homes – aka – they don’t want your house. They don’t want to foreclose. Particularly if you are upside down. They want to keep you in that house and keep those payments rolling in.

I believe there is an immense difference between someone who cannot pay their mortgage because they are unemployed and someone who is employed but cannot afford a higher re-cast payment. In the latter case, there is something there to work with. Re-casts can be postponed. Mods into a fixed rate can be made. There are options. As long as there is employment and income and some level of capability, there are going to be options.

[DaCounselor]

here is the MBA position paper:

http://www.mortgagebankers.org/files/News/InternalResource/55315_MBAPositionPaperonFAS140Restructurtings.pdf

[DaCounselor]

here is the MBA position paper:

http://www.mortgagebankers.org/files/News/InternalResource/55315_MBAPositionPaperonFAS140Restructurtings.pdf

[DaCounselor]

PR – both the ASF and the MBA have produced position papers in strong support of loan modifications (and the requisite favorable interpretation of the existing language of FAS 140). The ASF’s position paper can be found here:

http://www.americansecuritization.com/uploadedFiles/ASF%20Subprime%20Loan%20Modification%20Principles_060107.pdf

I also have the MBA’s paper saved somewhere, I can post a link when I get a minute to look for it.

My industry source advises me that a forum was held several weeks ago by the FASB and it was well attended by regulators, mortgage servicers, attorneys, etc., and that the MBA paper was discussed at length. No objections were raised to the MBA’s analysis, including no objections by the FASB and the SEC reps in attendance. All indications are that the analysis is sound.

The ultimate result may well go beyond a favorable reading of FAS 140 in support of modifications and end up with the FASB modifying FAS 140 to clarify the accounting and regulatory issues surrounding loan modifications. I would not be surprised to see this happen and if the SEC is on board then it’s a done deal.

Reading FAS 140 and the ASF and MBA position papers is a good start to understanding what is going on out there and the magnitude of the players involved in opening the gates for loan modifications.

[DaCounselor]

PR – both the ASF and the MBA have produced position papers in strong support of loan modifications (and the requisite favorable interpretation of the existing language of FAS 140). The ASF’s position paper can be found here:

http://www.americansecuritization.com/uploadedFiles/ASF%20Subprime%20Loan%20Modification%20Principles_060107.pdf

I also have the MBA’s paper saved somewhere, I can post a link when I get a minute to look for it.

My industry source advises me that a forum was held several weeks ago by the FASB and it was well attended by regulators, mortgage servicers, attorneys, etc., and that the MBA paper was discussed at length. No objections were raised to the MBA’s analysis, including no objections by the FASB and the SEC reps in attendance. All indications are that the analysis is sound.

The ultimate result may well go beyond a favorable reading of FAS 140 in support of modifications and end up with the FASB modifying FAS 140 to clarify the accounting and regulatory issues surrounding loan modifications. I would not be surprised to see this happen and if the SEC is on board then it’s a done deal.

Reading FAS 140 and the ASF and MBA position papers is a good start to understanding what is going on out there and the magnitude of the players involved in opening the gates for loan modifications.

[DaCounselor]

“To whom should we give credit for the nationwide housing put?”
__________________________

Hard to say exactly – probably a combination of folks. There has been alot of input so far above and beyond Barney Frank & Co., including the ASF and MBA. The SEC and the FASB are obviously major players in this thing. There is alot of interest in keeping homes off the institutional books and keeping the revenue streams coming in. About the only entities I can think of off the top of my head that would truly benefit from mass defaults are the hedgies that have bet against borrowers by purchasing derivatives.

MBS investors have and will always face risks, some more than others depending upon which tranche they have bought into. The hope is that the money will keep rolling in. If the investor isn’t happy with the tranche performance, they can sell.

The extent of loan modification impact in SD, assuming the doors are open for them to be made on a grand scale, will depend upon the scope of the modifications offered. It’s just too early to tell. It’s definitely going to be interesting to see how this plays out. There is alot going on that is not widely reported.

[DaCounselor]

“To whom should we give credit for the nationwide housing put?”
__________________________

Hard to say exactly – probably a combination of folks. There has been alot of input so far above and beyond Barney Frank & Co., including the ASF and MBA. The SEC and the FASB are obviously major players in this thing. There is alot of interest in keeping homes off the institutional books and keeping the revenue streams coming in. About the only entities I can think of off the top of my head that would truly benefit from mass defaults are the hedgies that have bet against borrowers by purchasing derivatives.

MBS investors have and will always face risks, some more than others depending upon which tranche they have bought into. The hope is that the money will keep rolling in. If the investor isn’t happy with the tranche performance, they can sell.

The extent of loan modification impact in SD, assuming the doors are open for them to be made on a grand scale, will depend upon the scope of the modifications offered. It’s just too early to tell. It’s definitely going to be interesting to see how this plays out. There is alot going on that is not widely reported.

[DaCounselor]

We’re probably not going to see any new law, per se, regarding mortgages this year, but lawmakers and government agencies are certainly all over the emerging re-cast crisis. Barney Frank and his crew are aggressively pursuing clarification of FAS 140, for instance, which may very well result in an interpretation very favorable to borrowers and servicers. If loan servicers can modify loans without any negative impact on their in-house accounting, the rise in modifications may dwarf the rise in NODs/foreclosures. Moody’s latest analysis of pooling/servicing agreements indicates that 95% of subprime paper can be modified by the servicer, so now it’s just a matter of impact on servicer accounting that is standing in the way of mass modifications.

Technically, no new laws/reform are really needed. Borrower/servicer-friendly interpretations of existing standards will probably be enough to ease the crisis. And I said ease, not eradicate.

[DaCounselor]

We’re probably not going to see any new law, per se, regarding mortgages this year, but lawmakers and government agencies are certainly all over the emerging re-cast crisis. Barney Frank and his crew are aggressively pursuing clarification of FAS 140, for instance, which may very well result in an interpretation very favorable to borrowers and servicers. If loan servicers can modify loans without any negative impact on their in-house accounting, the rise in modifications may dwarf the rise in NODs/foreclosures. Moody’s latest analysis of pooling/servicing agreements indicates that 95% of subprime paper can be modified by the servicer, so now it’s just a matter of impact on servicer accounting that is standing in the way of mass modifications.

Technically, no new laws/reform are really needed. Borrower/servicer-friendly interpretations of existing standards will probably be enough to ease the crisis. And I said ease, not eradicate.

[DaCounselor]

In my own financial universe I do not categorize gains as paper or something else. The value of my assets are what they are on any given day. Just because I have decided to hold onto certain stocks and real estate does not mean to me that my gains aren’t real – they are very real to me. I’m just holding the gain in an asset as opposed to cash. That’s just my perspective. There’s no right or wrong as far as I’m concerned.

Regarding 11053 Doverhill – it closed on 6/18 for $690.5K. That’s down $57.5K (7.6%) from the prior sales price in ’05.

[DaCounselor]

In my own financial universe I do not categorize gains as paper or something else. The value of my assets are what they are on any given day. Just because I have decided to hold onto certain stocks and real estate does not mean to me that my gains aren’t real – they are very real to me. I’m just holding the gain in an asset as opposed to cash. That’s just my perspective. There’s no right or wrong as far as I’m concerned.

Regarding 11053 Doverhill – it closed on 6/18 for $690.5K. That’s down $57.5K (7.6%) from the prior sales price in ’05.

[DaCounselor]

an – I think are scenarios are vastly different. I didn’t pick the buyer/seller or create my scenario and I didn’t choose the parameters – the facts just are what they are, and the homeowner cashed in what they cashed in. I’m talking facts, not theoretics. I too could come up with countless possible stock market moves where a hypothetical investor could turn dollars into millions if they bought and sold the right stock at the right time, but that doesn’t mean everyone (or anyone) is pulling off such moves. I think the example of the people who you know that cashed out and retired is by far the exception, not the rule. I would guess that the guy who bought the house in 92131 and just sat there has made more “paper” money than the guy who tried to navigate the terrain of tech stock investing. And the real point being that virtually everyone who bought a house back then is way up, and I just don’t think you can say the same thing for most tech stock investors over that span. Sorry, I just have to maintain that your scenario is far-fetched and mine is – well, it’s not really “mine” – it’s just the facts. It is what it is.

And I don’t think real estate investments are better than stocks, despite of real estate’s tremendous performance this century. I like both investments. As far as which will fare better in 10 years, or 15 years, or 20 years – I suppose we’ll see.

[DaCounselor]

an – I think are scenarios are vastly different. I didn’t pick the buyer/seller or create my scenario and I didn’t choose the parameters – the facts just are what they are, and the homeowner cashed in what they cashed in. I’m talking facts, not theoretics. I too could come up with countless possible stock market moves where a hypothetical investor could turn dollars into millions if they bought and sold the right stock at the right time, but that doesn’t mean everyone (or anyone) is pulling off such moves. I think the example of the people who you know that cashed out and retired is by far the exception, not the rule. I would guess that the guy who bought the house in 92131 and just sat there has made more “paper” money than the guy who tried to navigate the terrain of tech stock investing. And the real point being that virtually everyone who bought a house back then is way up, and I just don’t think you can say the same thing for most tech stock investors over that span. Sorry, I just have to maintain that your scenario is far-fetched and mine is – well, it’s not really “mine” – it’s just the facts. It is what it is.

And I don’t think real estate investments are better than stocks, despite of real estate’s tremendous performance this century. I like both investments. As far as which will fare better in 10 years, or 15 years, or 20 years – I suppose we’ll see.

[DaCounselor]

an – Nice Devil’s Advocate scenario! Like I said earlier, the coulda woulda shoulda what iffa game can be played all day long. I usually just stick to what I think are the most realistic scenarios. In my opinion, your example of someone first identifying and then pouring $28K into QCOM, holding every share, then calling the top and bailing before the catastrophic plunge, then identifying and pouring every dime of the QCOM profit into MTH, holding every share and selling it 5 years later for a $14.1 mil profit….well, it just sounds awfully far-fetched to me. I doubt many (if any) folks pulled that one off, or anything even remotely similar. On the other hand, virtually anyone who bought a home in ’99 has made a huge profit. I think the homeowner who made a killing on his ’99 purchase scenario is more realistic than your scenario. No offense, just my opinion on what I think is reality.

w-a-d – sure does seem like 11294 is going for a loss. We’ll see what the final numbers are soon and whether it’s minus $115K or some other amount. As to the reference in your original post regarding the poor delusional folks down the street, I think we have seen from the prior two sales discussed that things have actually worked out quite well for them. We also await the final tally on 11224 to see how they did.

[DaCounselor]

an – Nice Devil’s Advocate scenario! Like I said earlier, the coulda woulda shoulda what iffa game can be played all day long. I usually just stick to what I think are the most realistic scenarios. In my opinion, your example of someone first identifying and then pouring $28K into QCOM, holding every share, then calling the top and bailing before the catastrophic plunge, then identifying and pouring every dime of the QCOM profit into MTH, holding every share and selling it 5 years later for a $14.1 mil profit….well, it just sounds awfully far-fetched to me. I doubt many (if any) folks pulled that one off, or anything even remotely similar. On the other hand, virtually anyone who bought a home in ’99 has made a huge profit. I think the homeowner who made a killing on his ’99 purchase scenario is more realistic than your scenario. No offense, just my opinion on what I think is reality.

w-a-d – sure does seem like 11294 is going for a loss. We’ll see what the final numbers are soon and whether it’s minus $115K or some other amount. As to the reference in your original post regarding the poor delusional folks down the street, I think we have seen from the prior two sales discussed that things have actually worked out quite well for them. We also await the final tally on 11224 to see how they did.

[Author]

Posts