[Deal Hunter]

Debt to income ratios cannot be considered in a vacuum in today’s credit market. I work in loan advocacy (mostily in loan mods for now) and in commercial lending. There has been a MAJOR shift in approval considerations away from income/debt ratios.

This is counter-intuitive as FICO and property values are in such flux that a lender should depend on the fundamentals such as income/debt ratios in approving the loan. However, this is just not what I am seeing in the market.

FICO continues to be the top consideration with property value as a close second. My theory is that the banks and lenders have relied so heavily on FICO and LTV to determine the INTEREST RATE at which to lend that they just plain don’t know how to value a loan on any other criterion.

Originators, unless they carry their own loans, must still package loans to be sold to Wall Street. Wall Street has yet to give originators new qualifiers, so it’s business as usual at the mortgage desk. A quick approval comes with low LTV and high FICO. Debt/income ratios are all over the place even within the same lending institution.

For example: A recent loan mod I worked on with Countrywide approved a loan with the borrower being 36% negative each month after new payment arrangements. This was on a FICO of 710 and LTV of 95%. Find the logic in that one.

[Deal Hunter]

Ah, there’s the rub. There’s no such thing as a free market. There hasn’t been in this country since the creation of the Federal Reserve. Why is it that when the government does a stimulus it is socialism countering captialism, but when the Fed lowers the rate it’s OK?

Not allowing markets to correct on their own is counter to capitalism whether it’s done by congress or the Fed lowering rates. You see, there’s no difference to me whether over leveraged homeowners are allowed to stay in their homes – the asset itself has lowered in value, so what is truly being lost is potential interest profit to the bank and equity wealth to the homeowner. The parallel with an individual homeowner is exactly that to the simultaneous fiscal and monetary stimulus done on the large scale. Both are “phantom” wealth/debt that when eliminated translates directly into cash MOVING hands.

Finally, you really hit the nail on the head about why the market cannot be allowed to act freely now. Too many pensions, 401ks and trillions in paper assets are tied up in the shadow banking system. And make no mistake, I am far more cynical than you about all of this.

[Deal Hunter]

Ah, there’s the rub. There’s no such thing as a free market. There hasn’t been in this country since the creation of the Federal Reserve. Why is it that when the government does a stimulus it is socialism countering captialism, but when the Fed lowers the rate it’s OK?

Not allowing markets to correct on their own is counter to capitalism whether it’s done by congress or the Fed lowering rates. You see, there’s no difference to me whether over leveraged homeowners are allowed to stay in their homes – the asset itself has lowered in value, so what is truly being lost is potential interest profit to the bank and equity wealth to the homeowner. The parallel with an individual homeowner is exactly that to the simultaneous fiscal and monetary stimulus done on the large scale. Both are “phantom” wealth/debt that when eliminated translates directly into cash MOVING hands.

Finally, you really hit the nail on the head about why the market cannot be allowed to act freely now. Too many pensions, 401ks and trillions in paper assets are tied up in the shadow banking system. And make no mistake, I am far more cynical than you about all of this.

[Deal Hunter]

Ah, there’s the rub. There’s no such thing as a free market. There hasn’t been in this country since the creation of the Federal Reserve. Why is it that when the government does a stimulus it is socialism countering captialism, but when the Fed lowers the rate it’s OK?

Not allowing markets to correct on their own is counter to capitalism whether it’s done by congress or the Fed lowering rates. You see, there’s no difference to me whether over leveraged homeowners are allowed to stay in their homes – the asset itself has lowered in value, so what is truly being lost is potential interest profit to the bank and equity wealth to the homeowner. The parallel with an individual homeowner is exactly that to the simultaneous fiscal and monetary stimulus done on the large scale. Both are “phantom” wealth/debt that when eliminated translates directly into cash MOVING hands.

Finally, you really hit the nail on the head about why the market cannot be allowed to act freely now. Too many pensions, 401ks and trillions in paper assets are tied up in the shadow banking system. And make no mistake, I am far more cynical than you about all of this.

[Deal Hunter]

Ah, there’s the rub. There’s no such thing as a free market. There hasn’t been in this country since the creation of the Federal Reserve. Why is it that when the government does a stimulus it is socialism countering captialism, but when the Fed lowers the rate it’s OK?

Not allowing markets to correct on their own is counter to capitalism whether it’s done by congress or the Fed lowering rates. You see, there’s no difference to me whether over leveraged homeowners are allowed to stay in their homes – the asset itself has lowered in value, so what is truly being lost is potential interest profit to the bank and equity wealth to the homeowner. The parallel with an individual homeowner is exactly that to the simultaneous fiscal and monetary stimulus done on the large scale. Both are “phantom” wealth/debt that when eliminated translates directly into cash MOVING hands.

Finally, you really hit the nail on the head about why the market cannot be allowed to act freely now. Too many pensions, 401ks and trillions in paper assets are tied up in the shadow banking system. And make no mistake, I am far more cynical than you about all of this.

[Deal Hunter]

Ah, there’s the rub. There’s no such thing as a free market. There hasn’t been in this country since the creation of the Federal Reserve. Why is it that when the government does a stimulus it is socialism countering captialism, but when the Fed lowers the rate it’s OK?

Not allowing markets to correct on their own is counter to capitalism whether it’s done by congress or the Fed lowering rates. You see, there’s no difference to me whether over leveraged homeowners are allowed to stay in their homes – the asset itself has lowered in value, so what is truly being lost is potential interest profit to the bank and equity wealth to the homeowner. The parallel with an individual homeowner is exactly that to the simultaneous fiscal and monetary stimulus done on the large scale. Both are “phantom” wealth/debt that when eliminated translates directly into cash MOVING hands.

Finally, you really hit the nail on the head about why the market cannot be allowed to act freely now. Too many pensions, 401ks and trillions in paper assets are tied up in the shadow banking system. And make no mistake, I am far more cynical than you about all of this.

[Deal Hunter]

What they are all missing is the fundamentals of capitalism. Consumption drives the captialisitic economy. So, some sort of debt cancellation HAS to happen. Whether it is a borrower bail out like the one being proposed above or a bank bail out like the one BofA is requesting, money freed up from debt will go back into hands of consumers to be put toward consumption and thereby reanimating the stagnant economy.

As unglam and undesireable a bail out sounds to us all, one cannot ignore the fundamentals of the American economy and that 70% of it is driven by consumption. So, as much as we want to teach foolish buyers and greedy banks a lesson, we can’t properly do it without scrapping capitalism.

It’s horrible, but like war, debt cancellation is great for business.

[Deal Hunter]

What they are all missing is the fundamentals of capitalism. Consumption drives the captialisitic economy. So, some sort of debt cancellation HAS to happen. Whether it is a borrower bail out like the one being proposed above or a bank bail out like the one BofA is requesting, money freed up from debt will go back into hands of consumers to be put toward consumption and thereby reanimating the stagnant economy.

As unglam and undesireable a bail out sounds to us all, one cannot ignore the fundamentals of the American economy and that 70% of it is driven by consumption. So, as much as we want to teach foolish buyers and greedy banks a lesson, we can’t properly do it without scrapping capitalism.

It’s horrible, but like war, debt cancellation is great for business.

[Deal Hunter]

What they are all missing is the fundamentals of capitalism. Consumption drives the captialisitic economy. So, some sort of debt cancellation HAS to happen. Whether it is a borrower bail out like the one being proposed above or a bank bail out like the one BofA is requesting, money freed up from debt will go back into hands of consumers to be put toward consumption and thereby reanimating the stagnant economy.

As unglam and undesireable a bail out sounds to us all, one cannot ignore the fundamentals of the American economy and that 70% of it is driven by consumption. So, as much as we want to teach foolish buyers and greedy banks a lesson, we can’t properly do it without scrapping capitalism.

It’s horrible, but like war, debt cancellation is great for business.

[Deal Hunter]

What they are all missing is the fundamentals of capitalism. Consumption drives the captialisitic economy. So, some sort of debt cancellation HAS to happen. Whether it is a borrower bail out like the one being proposed above or a bank bail out like the one BofA is requesting, money freed up from debt will go back into hands of consumers to be put toward consumption and thereby reanimating the stagnant economy.

As unglam and undesireable a bail out sounds to us all, one cannot ignore the fundamentals of the American economy and that 70% of it is driven by consumption. So, as much as we want to teach foolish buyers and greedy banks a lesson, we can’t properly do it without scrapping capitalism.

It’s horrible, but like war, debt cancellation is great for business.

[Deal Hunter]

What they are all missing is the fundamentals of capitalism. Consumption drives the captialisitic economy. So, some sort of debt cancellation HAS to happen. Whether it is a borrower bail out like the one being proposed above or a bank bail out like the one BofA is requesting, money freed up from debt will go back into hands of consumers to be put toward consumption and thereby reanimating the stagnant economy.

As unglam and undesireable a bail out sounds to us all, one cannot ignore the fundamentals of the American economy and that 70% of it is driven by consumption. So, as much as we want to teach foolish buyers and greedy banks a lesson, we can’t properly do it without scrapping capitalism.

It’s horrible, but like war, debt cancellation is great for business.

[Deal Hunter]

As righteous as that position is, “they” will still get their bail out and you will still end up paying for it. Well, if only we could refuse to pay our taxes and by that route refuse to bail out the banks. Then, we could really teach those “geniuses” a lesson.

I read this article and recalled what one of my clients told me about “walking away.” She said that the government was going to do all it can to bail out the banks, the brokers and the many homeowners who bought homes beyond their means. As a taxpayer, she is contributing to the bail out and therefore feels justified in walking away from her upside down mortgage. She figures it’s her money in the end anyway.

I’m not so quick to put all the blame on homeowners. Banks who approved the loans and sold them off as derivatives also refuse to deal symmetrically with the consequences of home price decreases. If you have a pension fund that invested in these derivatives, you got walked out on by the banks when they wrote-down their assets in mortgage backed securities.

[Deal Hunter]

As righteous as that position is, “they” will still get their bail out and you will still end up paying for it. Well, if only we could refuse to pay our taxes and by that route refuse to bail out the banks. Then, we could really teach those “geniuses” a lesson.

I read this article and recalled what one of my clients told me about “walking away.” She said that the government was going to do all it can to bail out the banks, the brokers and the many homeowners who bought homes beyond their means. As a taxpayer, she is contributing to the bail out and therefore feels justified in walking away from her upside down mortgage. She figures it’s her money in the end anyway.

I’m not so quick to put all the blame on homeowners. Banks who approved the loans and sold them off as derivatives also refuse to deal symmetrically with the consequences of home price decreases. If you have a pension fund that invested in these derivatives, you got walked out on by the banks when they wrote-down their assets in mortgage backed securities.

[Deal Hunter]

As righteous as that position is, “they” will still get their bail out and you will still end up paying for it. Well, if only we could refuse to pay our taxes and by that route refuse to bail out the banks. Then, we could really teach those “geniuses” a lesson.

I read this article and recalled what one of my clients told me about “walking away.” She said that the government was going to do all it can to bail out the banks, the brokers and the many homeowners who bought homes beyond their means. As a taxpayer, she is contributing to the bail out and therefore feels justified in walking away from her upside down mortgage. She figures it’s her money in the end anyway.

I’m not so quick to put all the blame on homeowners. Banks who approved the loans and sold them off as derivatives also refuse to deal symmetrically with the consequences of home price decreases. If you have a pension fund that invested in these derivatives, you got walked out on by the banks when they wrote-down their assets in mortgage backed securities.

[Deal Hunter]

As righteous as that position is, “they” will still get their bail out and you will still end up paying for it. Well, if only we could refuse to pay our taxes and by that route refuse to bail out the banks. Then, we could really teach those “geniuses” a lesson.

I read this article and recalled what one of my clients told me about “walking away.” She said that the government was going to do all it can to bail out the banks, the brokers and the many homeowners who bought homes beyond their means. As a taxpayer, she is contributing to the bail out and therefore feels justified in walking away from her upside down mortgage. She figures it’s her money in the end anyway.

I’m not so quick to put all the blame on homeowners. Banks who approved the loans and sold them off as derivatives also refuse to deal symmetrically with the consequences of home price decreases. If you have a pension fund that invested in these derivatives, you got walked out on by the banks when they wrote-down their assets in mortgage backed securities.

[Author]

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