Forum Replies Created
-
AuthorPosts
-
HLS
ParticipantThere was recent guidance from the Department of The Treasury, FDIC, OTS and other agencies regarding Subprime Lending. The “Final Guidance” applies directly to any institution that is under their thumb. In general this is directly banks that lend their own money, with deposits that are covered by FDIC insurance.
It probably does not apply to those who broker loans or hope to sell them off on Wall Street.
I believe that any BANK could have a BANC division so these regulations wouldn’t apply. Crazy loophole.There will always be someone willing to take a risk at some rate, so crazy leneding won’t disappear completely.
The potential losses in the next 36 months are staggering, but much of the risk is already spread out upon the global economy.There probably will be institutions that will fail and need a federal bailout ala Lincoln Savings Days. There are pension funds and other major funds that will collapse.
The aftermath could be 1930’s like and further separate the rich from the poor. The middle class is shrinking.
The “Final Guidance” (Until the revision!)
http://www.fdic.gov/news/news/press/2007/pr07055a.htmlParticipantThere was recent guidance from the Department of The Treasury, FDIC, OTS and other agencies regarding Subprime Lending. The “Final Guidance” applies directly to any institution that is under their thumb. In general this is directly banks that lend their own money, with deposits that are covered by FDIC insurance.
It probably does not apply to those who broker loans or hope to sell them off on Wall Street.
I believe that any BANK could have a BANC division so these regulations wouldn’t apply. Crazy loophole.There will always be someone willing to take a risk at some rate, so crazy leneding won’t disappear completely.
The potential losses in the next 36 months are staggering, but much of the risk is already spread out upon the global economy.There probably will be institutions that will fail and need a federal bailout ala Lincoln Savings Days. There are pension funds and other major funds that will collapse.
The aftermath could be 1930’s like and further separate the rich from the poor. The middle class is shrinking.
The “Final Guidance” (Until the revision!)
http://www.fdic.gov/news/news/press/2007/pr07055a.htmlParticipantThe appraiser wouldn’t value the home at $1M JUST BECAUSE that was the agreed upon price.
You are correct that they don’t value the furniture.Buyers have no idea what the property is really worth today. There are cases where an offer is made, but the property doesn’t appraise for the “agreed upon price”
Unless buyer comes in with cash, it’s a dead deal.On a purchase,lenders lend based on lower of appraised value or purchase price.
On a refi, they will lend on appraised value, (even if higher than purchase price)
There are lenders that will consider a cash out refi one day after closing on a purchase loan.ParticipantThe appraiser wouldn’t value the home at $1M JUST BECAUSE that was the agreed upon price.
You are correct that they don’t value the furniture.Buyers have no idea what the property is really worth today. There are cases where an offer is made, but the property doesn’t appraise for the “agreed upon price”
Unless buyer comes in with cash, it’s a dead deal.On a purchase,lenders lend based on lower of appraised value or purchase price.
On a refi, they will lend on appraised value, (even if higher than purchase price)
There are lenders that will consider a cash out refi one day after closing on a purchase loan.ParticipantPersonal property must be deducted from the “selling” price, to reach the true purchase price.
Lenders don’t lend on personal property.
Purchase loans are based on appraised value, with a max of the purchase price.In above example, if the appraisal was $900K you would need financing based on $900,000K. You would have to pay $100,000 separately for the personal property, and may have to pay sales tax on top of that!
(If appraisal was higher than $900K, you could juggle)On a purchase, the appraiser will review the purchase contract.
No lender “requires” 80% LTV. Depending on doc type, credit score and reserves, 100% financing is still possible.
IF the home appraised for $1M, the personal property could be included, HOWEVER it should not be listed on the purchase contract.
Property tax should be based on the value of the home.
(not the personal property)Also, when buyers ask for a seller concession for closing costs etc, as long as the property appraises at the higher amount, lenders will accept a max of 3% or 6% depending on the loan program. That will result in a higher selling price, and property taxes will be based on the total purchase price, as the property did appraise for that.
ParticipantPersonal property must be deducted from the “selling” price, to reach the true purchase price.
Lenders don’t lend on personal property.
Purchase loans are based on appraised value, with a max of the purchase price.In above example, if the appraisal was $900K you would need financing based on $900,000K. You would have to pay $100,000 separately for the personal property, and may have to pay sales tax on top of that!
(If appraisal was higher than $900K, you could juggle)On a purchase, the appraiser will review the purchase contract.
No lender “requires” 80% LTV. Depending on doc type, credit score and reserves, 100% financing is still possible.
IF the home appraised for $1M, the personal property could be included, HOWEVER it should not be listed on the purchase contract.
Property tax should be based on the value of the home.
(not the personal property)Also, when buyers ask for a seller concession for closing costs etc, as long as the property appraises at the higher amount, lenders will accept a max of 3% or 6% depending on the loan program. That will result in a higher selling price, and property taxes will be based on the total purchase price, as the property did appraise for that.
ParticipantI’m not sure that “Genius” George understands what a median is, and that it is a meaningless number. Certainly not an accurate indication of strength or weakness.
Like the rest of the media, they spout the figure like it means something…
Sad that they don’t want to quote the accurate indications.When I was in Drivers Ed, I learned to drive around the median 😉
ParticipantI’m not sure that “Genius” George understands what a median is, and that it is a meaningless number. Certainly not an accurate indication of strength or weakness.
Like the rest of the media, they spout the figure like it means something…
Sad that they don’t want to quote the accurate indications.When I was in Drivers Ed, I learned to drive around the median 😉
ParticipantNYC & SF BAY areas don’t have the vacant land that we still have to build on.
In those areas, you either tear down and rebuild OR you build up.
When the dotcom stocks imploded, amazingly the property market didn’t tank in the bay area.
South of San Fran, a 4 bedroom, 3 bath, 2500 Sq Ft, 40 year old home is in excess of $1 million, and the market isn’t soft. You don’t buy in that area with a minimum wage job!As discussed, the affordability issue around here will be a major factor to the continuing adjustment of what’s correct, and the market should be flat for a good while once it gets to that level, just like the good old days.
I don’t think that you compare this drop with the 1990’s.
The last drop didn’t have the mass amount of exotic loans and 100% financing that now exists.Even with down payments, people were upside down…There should be multiples of the losses sustained 12 years ago, and that lasted several years.
This “correction” should last longer. Seems that most of us agree on that.ParticipantNYC & SF BAY areas don’t have the vacant land that we still have to build on.
In those areas, you either tear down and rebuild OR you build up.
When the dotcom stocks imploded, amazingly the property market didn’t tank in the bay area.
South of San Fran, a 4 bedroom, 3 bath, 2500 Sq Ft, 40 year old home is in excess of $1 million, and the market isn’t soft. You don’t buy in that area with a minimum wage job!As discussed, the affordability issue around here will be a major factor to the continuing adjustment of what’s correct, and the market should be flat for a good while once it gets to that level, just like the good old days.
I don’t think that you compare this drop with the 1990’s.
The last drop didn’t have the mass amount of exotic loans and 100% financing that now exists.Even with down payments, people were upside down…There should be multiples of the losses sustained 12 years ago, and that lasted several years.
This “correction” should last longer. Seems that most of us agree on that.ParticipantIt’s not blaming. They are just doing their jobs and filling a market need. It’s clarifying what the chain of command is. There are layers and layers of regulations.
There should have and could have been regulations from the top which would have prevented a housing bubble from happening. It’s not rocket science.
Easy 100% financing should have never existed. It was an accident waiting to happen. It turned the American dream into the American nightmare for some, but did allow others to get their foot in the door of home ownership. It allowed the bubble to get huge in our area.
Many people don’t know what they are “investing” in.
Millions are blindly “investing” via retirement funds, some into MBS and hedge funds and CDO’s.
Today’s High Yield Bonds were called “Junk Bonds” in the 1980’s. Many got rich while many others lost. Genius marketing.Many are fooled with a false sense of security with their “investment” statements. It goes in cycles. Some people win at the expense of others.
It’s a game of musical chairs, there aren’t enough chairs for everone to be a winner.
ParticipantIt’s not blaming. They are just doing their jobs and filling a market need. It’s clarifying what the chain of command is. There are layers and layers of regulations.
There should have and could have been regulations from the top which would have prevented a housing bubble from happening. It’s not rocket science.
Easy 100% financing should have never existed. It was an accident waiting to happen. It turned the American dream into the American nightmare for some, but did allow others to get their foot in the door of home ownership. It allowed the bubble to get huge in our area.
Many people don’t know what they are “investing” in.
Millions are blindly “investing” via retirement funds, some into MBS and hedge funds and CDO’s.
Today’s High Yield Bonds were called “Junk Bonds” in the 1980’s. Many got rich while many others lost. Genius marketing.Many are fooled with a false sense of security with their “investment” statements. It goes in cycles. Some people win at the expense of others.
It’s a game of musical chairs, there aren’t enough chairs for everone to be a winner.
ParticipantIn any falling market, there are always buyers who buy ONLY because it is cheaper now than it was. They are afraid of missing out.
When NASDAQ dropped from 5000, there were buyers and sellers all the way down to 1300.
Some individual stocks dropped 95% or more.
Some people forget OR don’t know the pain.
There are only 2 emotions in any market, which are FEAR & GREED.Every market cycle brings a new group of people who have never experienced a cycle before.
Those who survived the 1930’s depression had a different perspective for the rest of their lives than any generation that came afterwards. It comes with experience.
Many people today didn’t experience the 1990’s correction of real estate. This is their first cycle.
Builders build. Lenders lend.
If regulations required a 10% down payment, there never would have been a bubble.There are billions of dollars available. There is an unlimited desire for above market returns. The demand and availability of money won’t ever stop.
There are hundreds of millions of dollars being withheld from paychecks that are invested in retirement funds and pension plans.
These funds are fueling the stock market by people who don’t understand the risks that they are taking, The EXACT same risks that people didn’t understand when they were inflating the housing bubble.It is a greater fool theory and legaliazed pyramid scheme, that will make some people rich and others poor.
People are in a trance looking at their statements, not realizing that paper profits disappear. Home equity disappears too, but many refuse to accept that.As long as people blindly do what they are told is the “right thing to do” there will be potential to get rich for all.
The problem arises when a reality check kicks in, after irrational exuberance has taken place.IF there is a stock market crash, which is possible at some point, the government will step in afterwards and spend hundreds of millions of dollars funding committees and waste 5 years to determine what caused it.
It’s what they are doing right now with the mortgage mess.
Completely common sense lending requiring down payments probably won’t happen. As long as there is willing exposure to risk, based on a higher return, insanity will reign.
Underwriting guidelines have already changed, based on government guidelines that should have been in place all the was along.
I’m in the lending industry. I deal with this every day.
ParticipantIn any falling market, there are always buyers who buy ONLY because it is cheaper now than it was. They are afraid of missing out.
When NASDAQ dropped from 5000, there were buyers and sellers all the way down to 1300.
Some individual stocks dropped 95% or more.
Some people forget OR don’t know the pain.
There are only 2 emotions in any market, which are FEAR & GREED.Every market cycle brings a new group of people who have never experienced a cycle before.
Those who survived the 1930’s depression had a different perspective for the rest of their lives than any generation that came afterwards. It comes with experience.
Many people today didn’t experience the 1990’s correction of real estate. This is their first cycle.
Builders build. Lenders lend.
If regulations required a 10% down payment, there never would have been a bubble.There are billions of dollars available. There is an unlimited desire for above market returns. The demand and availability of money won’t ever stop.
There are hundreds of millions of dollars being withheld from paychecks that are invested in retirement funds and pension plans.
These funds are fueling the stock market by people who don’t understand the risks that they are taking, The EXACT same risks that people didn’t understand when they were inflating the housing bubble.It is a greater fool theory and legaliazed pyramid scheme, that will make some people rich and others poor.
People are in a trance looking at their statements, not realizing that paper profits disappear. Home equity disappears too, but many refuse to accept that.As long as people blindly do what they are told is the “right thing to do” there will be potential to get rich for all.
The problem arises when a reality check kicks in, after irrational exuberance has taken place.IF there is a stock market crash, which is possible at some point, the government will step in afterwards and spend hundreds of millions of dollars funding committees and waste 5 years to determine what caused it.
It’s what they are doing right now with the mortgage mess.
Completely common sense lending requiring down payments probably won’t happen. As long as there is willing exposure to risk, based on a higher return, insanity will reign.
Underwriting guidelines have already changed, based on government guidelines that should have been in place all the was along.
I’m in the lending industry. I deal with this every day.
-
AuthorPosts