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davelj
Participant[quote=sdrealtor]One of my friend’s father was a barber. Under your opinions you would have sent him to trade school. He went to community college, transferred to a state school, got into an Ivy League medical school, then residencies/fellowships at the top instuations in the country and to this day lives relatively modestly. He has had to buy into a partnership, pay off several hundred K in debt on his education and raise a young family. He’s about 40 now and under your model still would be unable to buy a home despite earning about $500K per year. He has none of the issues you listed and has busted his butt to get where he is which is at the top of his highly specialized medical specialty. He deserves a good quality of life, no make that a great quality of life and no one will convince me otherwise. [/quote]
I’d be careful with use of the word “deserve” in this context. If you take a look around the world and are honest with yourself about your abilities, it’s pretty clear that most people in the U.S. have it far better than they “deserve.” Now, this is all relative, of course. You could argue that these other folks (in developing countries) are getting less than they deserve. My point is that on a relative basis, almost everyone in our country (and arguably Western Europe) gets far more than they “deserve.” Consequently, it would be hard to convince me that anyone actually “deserves” this great quality of life that you’re talking about. It’s merely something that by the luck of the draw happens to be available to a very small minority of folks on the planet. But it is in no way “deserved.” I certainly don’t deserve the standard of living that I enjoy. I’m just one lucky bastard and damn glad that I wasn’t born in Bangladesh.
[quote=sdrealtor]
They dont refuse to retire the debt, it is just so MASSIVE that it takes years to do so. The debt is bigger than most peoples mortgages and these guys knock it out in 10 years or less rather than the 30 years for a mortgage. I’m not saying they shouldnt be fully underwritten but rather they should have the leeway not to put 20% down as you would require in every case. They are good credit risks, certainly much better than a worker be who is one or two missed payments away from poverty.
[/quote]I hear what you’re saying here, but to take the other side… these are also fairly financially savvy folks. Just the sort of folks who might buy a big house (taking on the large mortgage implied) and walk away from it if prices declined. I’m not suggesting that you approve of this sort of behavior. I’m merely saying that if the recent crisis has taught us one thing it’s that you better have a margin of safety on that collateral… because a helluva a lot of folks (along the entire economic spectrum) don’t give a rat’s ass about meeting a payment obligation if they can legally avoid it.
Participant[quote=sdrealtor]One of my friend’s father was a barber. Under your opinions you would have sent him to trade school. He went to community college, transferred to a state school, got into an Ivy League medical school, then residencies/fellowships at the top instuations in the country and to this day lives relatively modestly. He has had to buy into a partnership, pay off several hundred K in debt on his education and raise a young family. He’s about 40 now and under your model still would be unable to buy a home despite earning about $500K per year. He has none of the issues you listed and has busted his butt to get where he is which is at the top of his highly specialized medical specialty. He deserves a good quality of life, no make that a great quality of life and no one will convince me otherwise. [/quote]
I’d be careful with use of the word “deserve” in this context. If you take a look around the world and are honest with yourself about your abilities, it’s pretty clear that most people in the U.S. have it far better than they “deserve.” Now, this is all relative, of course. You could argue that these other folks (in developing countries) are getting less than they deserve. My point is that on a relative basis, almost everyone in our country (and arguably Western Europe) gets far more than they “deserve.” Consequently, it would be hard to convince me that anyone actually “deserves” this great quality of life that you’re talking about. It’s merely something that by the luck of the draw happens to be available to a very small minority of folks on the planet. But it is in no way “deserved.” I certainly don’t deserve the standard of living that I enjoy. I’m just one lucky bastard and damn glad that I wasn’t born in Bangladesh.
[quote=sdrealtor]
They dont refuse to retire the debt, it is just so MASSIVE that it takes years to do so. The debt is bigger than most peoples mortgages and these guys knock it out in 10 years or less rather than the 30 years for a mortgage. I’m not saying they shouldnt be fully underwritten but rather they should have the leeway not to put 20% down as you would require in every case. They are good credit risks, certainly much better than a worker be who is one or two missed payments away from poverty.
[/quote]I hear what you’re saying here, but to take the other side… these are also fairly financially savvy folks. Just the sort of folks who might buy a big house (taking on the large mortgage implied) and walk away from it if prices declined. I’m not suggesting that you approve of this sort of behavior. I’m merely saying that if the recent crisis has taught us one thing it’s that you better have a margin of safety on that collateral… because a helluva a lot of folks (along the entire economic spectrum) don’t give a rat’s ass about meeting a payment obligation if they can legally avoid it.
Participant[quote=sdrealtor]One of my friend’s father was a barber. Under your opinions you would have sent him to trade school. He went to community college, transferred to a state school, got into an Ivy League medical school, then residencies/fellowships at the top instuations in the country and to this day lives relatively modestly. He has had to buy into a partnership, pay off several hundred K in debt on his education and raise a young family. He’s about 40 now and under your model still would be unable to buy a home despite earning about $500K per year. He has none of the issues you listed and has busted his butt to get where he is which is at the top of his highly specialized medical specialty. He deserves a good quality of life, no make that a great quality of life and no one will convince me otherwise. [/quote]
I’d be careful with use of the word “deserve” in this context. If you take a look around the world and are honest with yourself about your abilities, it’s pretty clear that most people in the U.S. have it far better than they “deserve.” Now, this is all relative, of course. You could argue that these other folks (in developing countries) are getting less than they deserve. My point is that on a relative basis, almost everyone in our country (and arguably Western Europe) gets far more than they “deserve.” Consequently, it would be hard to convince me that anyone actually “deserves” this great quality of life that you’re talking about. It’s merely something that by the luck of the draw happens to be available to a very small minority of folks on the planet. But it is in no way “deserved.” I certainly don’t deserve the standard of living that I enjoy. I’m just one lucky bastard and damn glad that I wasn’t born in Bangladesh.
[quote=sdrealtor]
They dont refuse to retire the debt, it is just so MASSIVE that it takes years to do so. The debt is bigger than most peoples mortgages and these guys knock it out in 10 years or less rather than the 30 years for a mortgage. I’m not saying they shouldnt be fully underwritten but rather they should have the leeway not to put 20% down as you would require in every case. They are good credit risks, certainly much better than a worker be who is one or two missed payments away from poverty.
[/quote]I hear what you’re saying here, but to take the other side… these are also fairly financially savvy folks. Just the sort of folks who might buy a big house (taking on the large mortgage implied) and walk away from it if prices declined. I’m not suggesting that you approve of this sort of behavior. I’m merely saying that if the recent crisis has taught us one thing it’s that you better have a margin of safety on that collateral… because a helluva a lot of folks (along the entire economic spectrum) don’t give a rat’s ass about meeting a payment obligation if they can legally avoid it.
Participant[quote=paramount]Fortunately the mortgage market – 90% or more of which are funded by the gov’t doesn’t work the way hard liners interested in gentrification would like it to.[/quote]
It’s rare that I see a veiled ad hominem attack and a straw man argument all rolled up into one sentence. So, congratulations. Sound underwriting has nothing to do with gentrification.
I will assume that since you avoided addressing my charge of hypocrisy in my previous post that you’ll concede the point.
[quote=paramount]
Low down payment does not equal sub prime.[/quote]Another straw man argument. No one said it did. And, for the record, “sub prime” loans can be soundly underwritten. In recent years folks simply chose not to do that.
Participant[quote=paramount]Fortunately the mortgage market – 90% or more of which are funded by the gov’t doesn’t work the way hard liners interested in gentrification would like it to.[/quote]
It’s rare that I see a veiled ad hominem attack and a straw man argument all rolled up into one sentence. So, congratulations. Sound underwriting has nothing to do with gentrification.
I will assume that since you avoided addressing my charge of hypocrisy in my previous post that you’ll concede the point.
[quote=paramount]
Low down payment does not equal sub prime.[/quote]Another straw man argument. No one said it did. And, for the record, “sub prime” loans can be soundly underwritten. In recent years folks simply chose not to do that.
Participant[quote=paramount]Fortunately the mortgage market – 90% or more of which are funded by the gov’t doesn’t work the way hard liners interested in gentrification would like it to.[/quote]
It’s rare that I see a veiled ad hominem attack and a straw man argument all rolled up into one sentence. So, congratulations. Sound underwriting has nothing to do with gentrification.
I will assume that since you avoided addressing my charge of hypocrisy in my previous post that you’ll concede the point.
[quote=paramount]
Low down payment does not equal sub prime.[/quote]Another straw man argument. No one said it did. And, for the record, “sub prime” loans can be soundly underwritten. In recent years folks simply chose not to do that.
Participant[quote=paramount]Fortunately the mortgage market – 90% or more of which are funded by the gov’t doesn’t work the way hard liners interested in gentrification would like it to.[/quote]
It’s rare that I see a veiled ad hominem attack and a straw man argument all rolled up into one sentence. So, congratulations. Sound underwriting has nothing to do with gentrification.
I will assume that since you avoided addressing my charge of hypocrisy in my previous post that you’ll concede the point.
[quote=paramount]
Low down payment does not equal sub prime.[/quote]Another straw man argument. No one said it did. And, for the record, “sub prime” loans can be soundly underwritten. In recent years folks simply chose not to do that.
Participant[quote=paramount]Fortunately the mortgage market – 90% or more of which are funded by the gov’t doesn’t work the way hard liners interested in gentrification would like it to.[/quote]
It’s rare that I see a veiled ad hominem attack and a straw man argument all rolled up into one sentence. So, congratulations. Sound underwriting has nothing to do with gentrification.
I will assume that since you avoided addressing my charge of hypocrisy in my previous post that you’ll concede the point.
[quote=paramount]
Low down payment does not equal sub prime.[/quote]Another straw man argument. No one said it did. And, for the record, “sub prime” loans can be soundly underwritten. In recent years folks simply chose not to do that.
Participant[quote=ctr70]
FHA and VA have never had super high default rates. So it’s a myth that real estate “used to be” 20% down back in the day or it needs to be 20% down. FHA has never been 20% down and it’s been around since 1934.
[/quote]Actually it’s NOT a myth that SFRs “used to be” 20% down.
Found it: http://online.wsj.com/article/SB10001424052748703312904576146532935600542.html
“The median down payment hovered around 20% in the late 1990s and began to creep downward in 2001… It fell as low as 4% in the fourth quarter of 2006, and in some markets came close to zero.”
So, yes, while you’re correct that FHA (and VA) loans were never 20% down… the FHA portfolio is currently a disaster (I can’t speak to the VA portfolio), so… perhaps they should have tightened up during this past cycle. Also, FHA and VA loans have historically been a small part of the market relative to Fannie and Freddie. F&F loans are the “norm.”
So, for the vast majority of the borrowing public, 20% down was the norm during the ’90s… and it sunk down to 4% by 2006. You’re simply wrong here.
Participant[quote=ctr70]
FHA and VA have never had super high default rates. So it’s a myth that real estate “used to be” 20% down back in the day or it needs to be 20% down. FHA has never been 20% down and it’s been around since 1934.
[/quote]Actually it’s NOT a myth that SFRs “used to be” 20% down.
Found it: http://online.wsj.com/article/SB10001424052748703312904576146532935600542.html
“The median down payment hovered around 20% in the late 1990s and began to creep downward in 2001… It fell as low as 4% in the fourth quarter of 2006, and in some markets came close to zero.”
So, yes, while you’re correct that FHA (and VA) loans were never 20% down… the FHA portfolio is currently a disaster (I can’t speak to the VA portfolio), so… perhaps they should have tightened up during this past cycle. Also, FHA and VA loans have historically been a small part of the market relative to Fannie and Freddie. F&F loans are the “norm.”
So, for the vast majority of the borrowing public, 20% down was the norm during the ’90s… and it sunk down to 4% by 2006. You’re simply wrong here.
Participant[quote=ctr70]
FHA and VA have never had super high default rates. So it’s a myth that real estate “used to be” 20% down back in the day or it needs to be 20% down. FHA has never been 20% down and it’s been around since 1934.
[/quote]Actually it’s NOT a myth that SFRs “used to be” 20% down.
Found it: http://online.wsj.com/article/SB10001424052748703312904576146532935600542.html
“The median down payment hovered around 20% in the late 1990s and began to creep downward in 2001… It fell as low as 4% in the fourth quarter of 2006, and in some markets came close to zero.”
So, yes, while you’re correct that FHA (and VA) loans were never 20% down… the FHA portfolio is currently a disaster (I can’t speak to the VA portfolio), so… perhaps they should have tightened up during this past cycle. Also, FHA and VA loans have historically been a small part of the market relative to Fannie and Freddie. F&F loans are the “norm.”
So, for the vast majority of the borrowing public, 20% down was the norm during the ’90s… and it sunk down to 4% by 2006. You’re simply wrong here.
Participant[quote=ctr70]
FHA and VA have never had super high default rates. So it’s a myth that real estate “used to be” 20% down back in the day or it needs to be 20% down. FHA has never been 20% down and it’s been around since 1934.
[/quote]Actually it’s NOT a myth that SFRs “used to be” 20% down.
Found it: http://online.wsj.com/article/SB10001424052748703312904576146532935600542.html
“The median down payment hovered around 20% in the late 1990s and began to creep downward in 2001… It fell as low as 4% in the fourth quarter of 2006, and in some markets came close to zero.”
So, yes, while you’re correct that FHA (and VA) loans were never 20% down… the FHA portfolio is currently a disaster (I can’t speak to the VA portfolio), so… perhaps they should have tightened up during this past cycle. Also, FHA and VA loans have historically been a small part of the market relative to Fannie and Freddie. F&F loans are the “norm.”
So, for the vast majority of the borrowing public, 20% down was the norm during the ’90s… and it sunk down to 4% by 2006. You’re simply wrong here.
Participant[quote=ctr70]
FHA and VA have never had super high default rates. So it’s a myth that real estate “used to be” 20% down back in the day or it needs to be 20% down. FHA has never been 20% down and it’s been around since 1934.
[/quote]Actually it’s NOT a myth that SFRs “used to be” 20% down.
Found it: http://online.wsj.com/article/SB10001424052748703312904576146532935600542.html
“The median down payment hovered around 20% in the late 1990s and began to creep downward in 2001… It fell as low as 4% in the fourth quarter of 2006, and in some markets came close to zero.”
So, yes, while you’re correct that FHA (and VA) loans were never 20% down… the FHA portfolio is currently a disaster (I can’t speak to the VA portfolio), so… perhaps they should have tightened up during this past cycle. Also, FHA and VA loans have historically been a small part of the market relative to Fannie and Freddie. F&F loans are the “norm.”
So, for the vast majority of the borrowing public, 20% down was the norm during the ’90s… and it sunk down to 4% by 2006. You’re simply wrong here.
Participant[quote=ctr70]Correction…lending has not gone back to the 90’s…it’s gone more back to the 1970’s!
Fha has been around since the 1930’s and is 3.5% down and has had low default rates. VA is 100% and been around since post WWII and has had low default rates. FHA are full income documentation throughly underwritten loans. You can not even begin to compare it with the toxic stuff that was happening from 2002-2007.[/quote]
You sure about that? This chart is 1 1/2 years old, but the story it tells is an UGLY one for FHA loans:
http://seekingalpha.com/article/170759-performance-of-fha-loan-portfolio
That’s a full-fledged disaster, so I have no idea where you’re getting your information. Inquiring minds would like to know.
[quote=ctr70]
And contrary to popular belief, the toxic loans were Wall Street products for the most part (not Gov loans Fannie, Freddie, FHA, VA). The underwriting guidelines were created by Morgan Stanley, Merril Lynch, Credit Suisse and JP Morgan & they created a secondary market for those loans. [/quote]Ok, so… those multi-hundred billion dollar losses that We the People are currently eating on Fannie/Freddie loans aren’t real? Those came from Wall Street? While I agree that Wall Street was responsible for a lot of the real dreck… the GSEs clearly underwrote a helluva a lot of bad loans that are generating big losses that We the People are going to be eating for a while.
[quote=ctr70]
FHA and VA have never had super high default rates.[/quote]Yeah, right up until this cycle…
[quote=ctr70]
So it’s a myth that real estate “used to be” 20% down back in the day or it needs to be 20% down. FHA has never been 20% down and it’s been around since 1934.[/quote]The average down payment for a SFR loan steadily declined from the early-90s through 2007. (And, again, FHA is its own disaster currently.) I’ll find a graph.
[quote=ctr70]
What we are doing here is classic “throwing the baby out with the bathwater”. Lending standards are OVER-correcting in my opinion. For example, I know a guy with $5 million in the bank but could not show income on his tax returns so he can’t get a conventional loan even with 40% down. He has to buy cash. Now that is plan stupid. [/quote]This sounds very suspicious. If he’s got “$5 million in the bank” and otherwise sound finances, then he can explain away his tax return. This happens all the time, particularly with real estate investors who often have huge net worths and cash flow but very little in the way of taxable income. If this guy can’t get a loan, then (1) he’s hiding something, (2) he’s not particularly clever, or (3) he’s getting bad advice. I simply don’t buy that he’s some victim because I see folks like this all the time who don’t have the problem you’re describing.
[quote=ctr70]
I think 5% down and throughly underwritten FULL income documentation loan is plenty.[/quote]In a world of defaulting-is-a-business-decision (which I’m betting you support)… I think you’re smoking crack. But we can agree to disagree.
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